Why digital ad spend growth is flatlining

Chris Pash
By Chris Pash | 31 May 2023
Credit: Mockup Graphics via Unsplash.jpg

The drop in growth in digital ad spend is a result of brands being cautious in an uncertain economic climate, according to industry insiders.

And this year the market isn't jumping as high as the same March quarter in 2022 when advertising was booming as Australia threw off the constraints of the pandemic.

Total digital advertising spend fell 0.8% to $3.426 billion in the 2023 March quarter, according to data released in the IAB Australia Online Advertising Expenditure Report (OAER) prepared by PwC Australia.

The same three months in 2022 recorded an 18.5% increase.

And, according to the SMI (Standard Media Index), digital ad spend was down almost 5% in march, adjusting for the impact of lower government spend. 

Kellyn Coetzee, national head of media & analytics at Reprise, says the result is unsurprising.

“We have witnessed a consistent trend across the marketing landscape and our clients’ budgets,” Coetzee says.

“Towards the end of last year we predicted we would be facing a financial headwind. From a macro level, these challenges stem from the ongoing Russia-Ukraine conflict, China lockdowns (hurting manufacturing and supply chains), consumers under mounting financial strain; escalating energy and  gas prices, interest rate increases, hikes in the cost of products / services, and so much more. Inflation remains high and expected to rise further.

“Then in the media landscape, we’ve observed continued audience fragmentation, technology, and proliferation of streaming services, allowing people to control and evolve their consumption habits and most significantly, CPM inflation across various channels increasing at alarming rates.

“We’re now seeing the results of those predictions.

“However, it is not all necessarily doom and gloom. Many comparisons are being drawn against 2022, a year that witnessed unprecedented growth compared to previous years., and while digital is still growing, the pace of growth is not quite as aggressive as before, but growth, nonetheless.

“The publishers that manage to defy the trend are those that are able to demonstrate the profitability of every dollar spent. This is precisely why, we place great value on digital diversification of our partners, but also work closely with them to establish and substantiate their value across the entire marketing funnel.”

Simon Gellibrand, Half Dome's head of digital, says there is no surprise that online growth is flattening/slightly decreasing in quarter March 2023 following a strong March 2022 quarter.

"What is interesting is the growth of Audio (13% increase) and especially podcasts, which is up 20% YoY. This speaks to the post-COVID increase in commute and travel time available to consumers, and also aligns with the Travel category now in the top 5 sectors, with advertising for domestic and international travel targeting Australians who are back travelling again.

"There is also a shift in channels that are driving growth, such as Video (8% growth YoY) and Search (2%), versus a decline in general display at 3.9%.

"We expect this trend to continue, especially in the Travel market, and the growth of Search and Video, which are driving great outcomes for our client base."

James Hudson, head of media at Digitas Australia, says brands, as media investment starts to flatten, must use this as an opportunity to focus on all the measures and tactics available to drive greater efficiency in their media spend.

“Have they sorted their cookie-less strategy? Do they have a Conversion Rate Optimisation (CRO) strategy in place?” he says.

“Are they using dynamic creative across their campaigns? Have they invested properly in SEO and content? Are they evolving their CRM approach?

“This focus will enable them to continue to drive growth in a flat investment market.”

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