The AdNews end of year Perspectives, looking back at 2023 and forward to next year.
2023: The comedown
The best way to explain 2023 was like a hangover.
Good times flowed in the two years prior and the ad market demonstrated unexpected resilience in the face of the pandemic. Discretionary spend was flowing and the categories that provide the backbone of the ad market were seeing steady and significant growth. Bank accounts of Australian households were more stacked than ever, even in the face of future demand being pushed forward and unprecedented purchases across large household and luxury items. TV bucked years of revenue challenges to grow. Digital channels continued to grow. This was a period of relative abundance.
The earliest sign of the comedown came as the industry began to slowly awaken in January of 2023.
The usual bleary eyes seemed a lot more bleary than usual. The normal return to work malaise was accompanied by a more unsettling phenomenon - dramatically slowing ad spend. The pain in January wasn’t one a few panadols and a McDonalds run would fix - it was less hangover and more long-term ailment.
The symptoms persisted.
The year-on-year decreases weren’t surprising when they continued to sustain across the year. The pullback in government spend post Morrison were part of it, sure, but the decreases in consumer products, technology, consumer electronics etc were the real drivers.
Most of the reasons behind the ad slowdown were not controllable by the advertising industry. The slowdown in household purchases was inevitable when so much demand had been compressed into the years prior. There’s only so many couches/washing machines/pizza ovens/new bikes etc that one can purchase in a short period of time. Interest rates crunched household budgets, eating both into what were plentiful savings and then eating into month to month spend. Share markets turning on the largesse of technology businesses compelled them to cut staff and slash opex. Advertising was an easy cut as a lot of the tech sectors advertising activity was one of indulgence rather than necessity.
2024: The rebuild
Ultimately at some point we pull ourselves out of the fog. Discomfort is the fuel of opportunity. 2023 has been an uncomfortable one. We have seen the industry contract. We’ve squeezed more out of less. Hard decisions have been made to get through the immediate term.
Every holding company bar one has seen share price decreases for the year. The majority of the top of the top are uncomfortable too.
Our clients in Australia are uncomfortable.
Selling things is harder than it has been, on top of that you have input cost increases, margin pressure and for listed businesses, a pretty dour ASX.
I’m optimistic this collective discomfort will lead to breakthrough thinking. It has to.
The alternative is not that appealing – it’s more of what we saw this year. Revenue declines and all the pain that comes with that. The joy squeezed out of an industry most people work in because they believe in it.
What would be breakthrough thinking?
It sounds trite but it’s much more collective energy and discipline in linking what we do to helping our clients sell more stuff.
Research time and time again demonstrates CEO’s and CFO’s number one priority by a wide margin is profitable revenue growth. Gartner released survey results in October echoing the same priorities for 2024. You can bet this will be the same for 2025. And 2026. And beyond.
We have the right people. It’s how we use this asset
The largest talent issue the ad industry has had is around holding onto good talent. We have no shortage of good people who join the industry and want to build a career, the issue we have faced is holding onto them and convincing them advertising and marketing offers more than the alternative.
The advertising and marketing industry need to build an environment where personnel can be fungible.
Advertising has by design become more specific and specialised, which has led to more roles than ever before and more component human parts to deliver a client solution. It also creates big challenges around utilisation and cost recovery as you have a lot of component parts that can do one ortwo things really, really well, but the demand for these skills is not consistent.
A more fungible workforce would require all of us to be broader in skills, but it would mean for clients a smaller more connected team to deliver work.
A wider acceptance of a fungible workforce would create a deeper level of skills within our teams, more development opportunity and better economics.
Alongside building a more fungible workforce, this industry needs to put more focus, and spend, into training.
We as an industry bemoan short term client activities like allocating ad spend to profit and loss expense line item but do the same for anything not tangible and able to be amortised. Training is a classic example of this, it’s something that builds the value of our most critical asset (people - the only asset we as agencies monetise generally) but often margin realities compress our ambition in this area. At the same time, we face pressure on recoverable fees, challenges around perception of value, challenges around retention.
2023 has been uncomfortable.
Let’s not waste the feeling. It would be amazing to channel this into innovation and action that transforms our industry for the next decade. This is what excites me. And it’s exactly what will make me more excited than ever to return and go around once again in 2024.
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