SMI - Brands squeeze advertising spend as they stretch budgets thinner

Chris Pash
By Chris Pash | 3 May 2024
Credit: Christian Wiediger via Unsplash

Advertising spend is staying stubbornly weaker in Australia as brands stretch budgets thinner in an uncertain economic environment hurting consumers.

The latest SMI (Standard Media Index) results show spend, as measured by media agency bookings, falling 6.6% in March.

And the slide continues. Data released to SMI subscribers, but not made public, show bookings for April lower than usual. Forward bookings for May are also down.

Television was down 14.6% in March, weaker than most market forecasts of around a fall of 13% for the six months to June.

Cinema was up 46% and outdoor media 0.5%. For the March quarter, outdoor is reporting record ad spend (+1.4%), digital (+2.7%) and cinema (+8.4%).

Tom Rankin, general manager, Mediahub, said it's positive to see strong growth in smaller channels such as cinema and out-of-home.

“However one of the big volume issues is linear television, with investment continuing to leak out at a similar rate to 2023,” he said. 

“In the same way Australians are looking for cheaper alternatives in their shopping baskets, advertisers are looking for better efficiencies in media schedules. 

“With audiences continuing to decline in key linear TV demographics, the agency landscape is shifting towards total TV as well as new SVOD entrants to deliver some of those efficiencies. 

“With some budgets falling, it has never been more important for clients and agencies to deliver measurable effectiveness and ROI as part of their marketing program.”

Rankin said it was likely macro market caution will continue until the RBA moves on interest rates. 

Ben Willee, general manager and director of Media at Spinach, hopes the boffins at the Reserve Bank of Australia have got it right.

“I don’t need to read the Reserve Bank report telling me that real disposable income (which is the income left over after tax and interest payments), adjusted for inflation, has declined by 5.5% since early 2022, the largest decrease observed in around three decades’ to know that consumers are hurting,” he said. “That’s because I’m hearing ‘cost of living pressures’ every other five minutes in the media.

“It’s a hard balancing act between taming inflation and sending people broke.”    

Emilia Chambers, head of strategy, The Pistol, said the latest SMI data s nodding to two key trends that are driving this year; the re-emergence of brand importance and value of understanding the consumer journey.

"The fall in ad demand is not surprising; many brands are still cautiously spending while we all wait with bated breath to see how the economy is going to fare over the coming months, especially brands that have products or services considered discretionary which have taken the biggest hit as consumers cut back on spending," she said. "Add an early Easter into the mix and I don’t think the drop is cause for alarm.

"But what is interesting is that of all channels, especially outdoor and cinema, are sitting pretty with YoY growth. While digital is still very much holding its position as a growth channel, the prominence of more traditional, upper funnel channels in outdoor and cinema, shows a shift I have been talking to clients about since we emerged from the pandemic: the importance of brand.

"These two channels, especially cinema, are storytelling channels. They’re large format, attention grabbing and have the ability to tell a deeper story than what some other channels can.

Brands are investing in these channels not only for brand building but to ensure that they’re showing up throughout the consumer journey.

"Outdoor and digital are the two channels that can be highly impactful for brands that understand their consumers’ journey and touchpoints. Both have the ability to target consumers in different environments, both on the go and in a static setting. We’re talking commuting, shopping, exercising; moments that aren’t lean-back but can be highly impactful if you’re reaching the right consumers with a message that resonates with them in the moment.

"I’m still a big believer that the winners of 2024 will be the ones who are consumer centric and invest in their brand. The lower spending is a sign of the times we’re in, but the trend in brand building and consumer led activations is not something that should be overlooked."

Daniela Rocchi, head of investment, Sydney, Initiative, said the March SMI data paints a nuanced picture of the advertising sector, revealing both challenges and pockets of resilience amidst economic headwinds.

A notable 6.6% decline in overall ad spend reflects the broader sluggishness in GDP growth and subdued household consumption, Rocchi said.

"However, amidst this sobering backdrop outdoor media reports a record Q1 in ad spend," she said.

"The cinema and outdoor channels stand out as beacons of strength, boasting a remarkable 46% year-on-year increase and 0.5% respective. This surge underscores the enduring appeal and effectiveness of these mediums, even in these uncertain times.

"Yet, caution looms among marketers as they navigate uncertain terrain. The modest lift of over $5 million across government and auto categories in March, alongside growth seen in only 35% of categories, such measured responses reflect the industry's awareness of economic headwinds and its approach to expenditure."

Nick Murdoch, managing partner, Yango, said it's hard to put a positive spin on the numbers if your business revolves around advertising spend.
"After a full quarter of negative growth, it's  pretty clear that declining ad spend in Australia is a trend," he said.
"The combination of macro-economic policies and inflation are slowly grinding the economy down, consumption is falling and so are profits.
"A clever man once told me advertising spend mirrors the state of the economy and until we see growth in consumer spending and company profits, ad spend is likely to remain flat; modest growth would be a good result in the short term."

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