The pain, pressure and opportunity in the latest media agency booking numbers

Chris Pash
By Chris Pash | 5 April 2023
Credit: Diana Polekhina via Unsplash

Standard Media Index (SMI) numbers for February showing a fall of  8.5% in ad spend are a reflection of the general economy, a caution among advertisers as they watch for the next move in consumer confidence.

The fall was exaggerated by being compared to a bumper month last year boosted by government commercials for COVID related communication and by the broadcast of the Beijing Winter Olympics.

The underlying decline was 5.5%, taking government bookings out. 

Standouts are OOH (+17.9%) and cinema (+50.9%), putting a smile on the faces of media planners. 

And over the first eight months of the financial year, bookings are up 1.5% on the same period in 2022.

Ben Willee, general manager and media director, Spinach: “Fascinating times in adland at the moment. Clearly consumer confidence has taken a hit and that is impacting the ad market.

“We expect the monthly data to bounce around a little while the market settles from the highs of 2022.

“There’s still plenty of conflicting signals but the good news is unemployment is low and the RBA appears to be taming the inflation tiger.

“Right now, global economic trends are the biggest danger to the advertising market in Australia.”

Media analyst Steve Allen, Pearman’s director of strategy and research, says there's lots of distortions in the numbers including beign compared to the run up to Federal Election, Beijing Winter Olympics.

However, this February result continues the steady decline off a 2022 high

“More months like this to come, though a little surprising this month's decline was there and thereabouts to January and the last two months of 2022 all around double digit declines," says Allen.

“March will gain small relief from NSW Election, but the pattern for 1H 23 is set it seems.

“Our present forecast for 2023 Total Media sector, +2.95%, is definitely under real pressure.

“The most concerning indicator in all of this trending, is that brand campaigns, particularly associated with Television and Video extensions, is clearly where the overall market has strongly declined.

“Brand campaigns build future markets, so declines in this do not bode that well for coming months, and Advertiser sentiment.

“TV executives are already talking their book for the second half of 2023. On this, and forwards, we would be very cautious indeed about that.

“A disappointing February, with more declines to come.”

smi february 2023 govt spend supplied

Daniel Cutrone, head of media, Avenue C, says we are beginning to see signs of the broader economic downturn hit Australian advertisers most notably across February 2023 onwards.

“SMI ad spend data is showing February YoY and comparisons to pre-COVID (2019) numbers are both back, which we have not seen for three years," he says.

“A potential softening of the ad market presents new opportunities for advertisers who are able to take advantage of a less cluttered environment and win eSOV against their competitive set. This is a pattern that we have seen before, with early adopters receiving the best returns.

“Outside of Print, Linear TV is experiencing the largest declines of any other channel over the past 3 months (Dec ’22 – Feb ’23) witnessing advertising spend declines of 16%; largely attributed by the reduction of Government spending. Meanwhile traditional radio which has previously been immune to economic factors is also seeing double digital declines over the same period (Dec ’22 – Feb ’23).

“Outdoor is expected to persevere through the tougher times, as digital screens become the driving force for advertisers trading short and offers greater creative flexibility at pace to a broadcast audience.”

Paul Wilkinson, head of commercial, Half Dome, described the numbers as sobering.

"At least when viewed without the context of 2022’s record-break numbers," he says. "Regardless, an overall YoY decline of 8.6% is not insignificant.

“The market’s sobriety is further exacerbated when viewing numbers by channel: video down 16.2%, audio down 8.1%, digital (standalone) down 5.1% and news media down 27.3%. Painful reading for some, no doubt.

“However, the theme of this year’s SMI figures to date is one of context, which is important when entering a period of apparent decline, such as where we currently appear to find ourselves.

“The first piece of context is the 50% drop in government ad spend YoY. When removed from the analysis, we can see that the total market decline reduces to 5.5%. Still significant, but not as unnerving. What stands out here is the sheer scale of government spending in February 2022 and the fact it was large enough to move the entire market by over 3% points!

“Next, noting the Winter Olympics took place in Feb 2022, this will no doubt be partly to blame for a large portion of the fall in video spends YoY.

“The final point of context is the abnormally high overall spends across the first half of 2022. February, for instance, was the highest-grossing February since 2016.

“Through this lens, the state of the market is one of normalising rather than absolute decline. Further YoY declines are likely, particularly for H1 2023, with the real test to be seen in H2.”

Ben Shepherd, Chief Investment Officer dentsu ANZ, says the government investment rebase continues to impact the market, but it’s not the whole story.

"There’s a wider issue here which revolves around advertising budgets being clipped more broadly which is evident across declines across almost all categories," he says.

“We know there is a strong case for the maintenance or increase of ad spend in challenging economic periods, but this message is seemingly not landing in a way that is maintaining past investment levels.

"We in the industry have a great opportunity and responsibility to really find a way to make this message cut through and find creative ways to stimulate demand in market.

“Sentiment would suggest that these declines will carry through winter, although it wouldn’t be a surprise to see money return to video in particular at the expense of channels such as out of home.

"The current situation with out-of-home up 11.9% and video down 16.2% doesn’t look to me like something that will sustain. Look to video to bounce back through investment moving from other areas into video.”

Julia Lake, strategy director, The Pistol, says the SMI’s ad spend tracking is evidently tracking downwards in response to growing economic uncertainty and declining consumer confidence.

“However, past experiences tell us that the brands that thrive, and even accelerate in similar times, are those that continue to invest in an integrated media strategy, with a focus on building the relationship with their customers," says Lake.

“This is especially so for those brands that focus on long-term brand building and creating value beyond monetary gains - which over time translates to positive brand sentiment and preference when consumers are back in market and ready to spend.

“Likewise, across our clients, we’re seeing a shift in focus towards owned assets to reduce the reliance on paid media channels and enrich the customer experience, which may also be impacting media investment.”

Chris Parker, CEO, Awaken: “Last year we saw an advertising market buoyed by government spending and many industries bouncing back, driving record media investment as consumers spent at a level that would cause the RBA to enact historic lifts.

“In 2023, we have seen a stabilisation of media spending from the government groups, which is showing a true representation of how our market has been growing.

"For our clients, certain verticals have felt the change in consumer spending and are being optimistically cautious in the final quarter of the financial year, while other industries have not felt the economic impact that has been forecast.

“With government advertising spending at a more reasonable level, it paints a picture that out-of-home and cinema are the favourites of planners.

“The SMI data shows an increase of auto spending by 16.9%. With 9,000 cars stuck in quarantine and delivery times blowing out, it will be interesting to see if the current auto momentum continues as waiting for a new car becomes a norm for some manufacturers and a point of difference for others.

“The end to this financial year is going to be fascinating as inflation drops and the RBA holds rates (hopefully).”

Joseph Pardillo, Ryvalmedia Managing Director: “As the Australian economy remains buoyant, most categories are continuing to spend to drive awareness and sales. Coming out of the pandemic, has seen a reduction in government spend while other categories remain steady in growth.

“While interest rates have risen, some household spending will come under scrutiny and advertisers will need to work extra hard to earn consumers' share of wallets. Some brands may hold back spending to focus on core events, sale periods, or brand advertising, meaning timing of some client spending may get shifted around based on market priorities.

“Overall, the Australian economy will remain robust, with steady advertising spend and category growth across several sectors.”



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