The financial storm is easing but ad spend finished down 8.2% in the 2009 calendar year, writes Peter Cornelius.
There’s no doubt that a direct by-product of the GFC was the negative impact on most ad spends that affected all media and resulted in difficult trading conditions. The impact was most severe in the first half of 2009.
By late 2008, as the downturn surfaced, most of Australia’s marketing sectors were imposing cutbacks in overheads, staffing and advertising. With some exceptions, as outlined in Nielsen’s Top Media Advertisers Report, many advertisers cut media spend across their product portfolios. Particularly impacted by these cutbacks were those companies involved in “GFC vulnerable” categories such as Motor Vehicles, Telecommunications, Insurance and Finance.
Despite the emergence of positive economic indicators in Australia later in the second quarter of 2009, an extremely volatile, short-term media bookings climate prevailed. It appeared that ad spend would lag behind any economic upturn, with many industry observers predicting a flat second half.
Although more positive results began to emerge in the second half of 2009, particularly the final quarter, there is no doubt it was one of the toughest and most volatile media environments for many years. As a result of 2009’s “media recession”, most main media recorded results well below the previous year’s annual growth levels.
Based on Nielsen’s estimates of media spends across all media sectors it measures, total overall media spend was down by 8% to 9% year-on-year. However, 2009 was the first year in recent times that ad spends have declined, so this could be a correction or a reality check, forced on our economy by the GFC.
Major advertising categories
The vast majority of advertisers decreased spend across their product portfolios, particularly among the big spending categories.
There are 39 major categories that make up all ad spend in main media, of which only seven recorded growth. However, it is the top 10 major categories that are a barometer to advertising’s wellbeing. Last year they accounted for 71 cents of every media dollar spent in Australian media. With only the seventh-ranked Food recording growth – up 8% – the top 10’s results were an accurate reflection of the parlous state of advertising for most of 2009.
Obviously “GFC vulnerable” categories were hit the hardest, such as second-ranked Motor Vehicles, down 16%; sixth-ranked Real Estate, down 17%; eighth-ranked Communications, down 17%; ninth-ranked Media, down 17%; and 10th ranked Insurance, down 11%.
However, Australia’s largest category Retail, which accounted for more than 22 cents of every ad dollar, finished just 1.5% down year-on-year to $2.1 billion. No doubt the Rudd Government’s stimulus packages instilled confidence among retailers, who advertised aggressively to attract consumer sales.
Against the downward trend, and in addition to Food, strong increases were recorded for 11th-ranked Government, up 6%; 18th-ranked Non-Alcoholic Beverages, up 18%; and 19th-ranked Gambling & Gaming, up 10%.
Other categories to weather the worst of the downturn and register only modest declines were third-ranked Entertainment & Leisure, down 4%; fifth-ranked Travel &
Accommodation, down 3%; and 13th-ranked Toiletries & Cosmetics, down 4%.
On a more positive note, many of these big spending categories are predicted to increase their spends this year on the back of a considerably improving economic forecast.
Australia’s top advertisers
The top 25 advertisers accounted for 22 cents of every main media ad dollar spent in 2009. The sectors with the most representatives in the top 25 were Retailers (5), FMCG (4), Finance (4), Governments (4) and Telecommunications (3).
Stepping up two positions was second-ranked Woolworths, increasing its main media advertising by 2% to $141 million. Commonwealth Government moved up one position to fourth, up 4% to $129 million, as did fifth-ranked Nestlé/L’Oréal, up 6% to $122 million.
Other positive results were noted for eighth-ranked Unilever, up 34% to $74 million, lifting from 24th position in 2008, and 14th-ranked Myer, with a strong 14% increase to $62 million, up from 26th position.
Despite some strong performances, the full impact of the GFC was reflected in the fact that 17 of Australia’s Top 25 advertisers reduced activity year-on-year.
A substantial fall in spend was recorded for top-ranked Wesfarmers, down 8% to $210 million. Harvey Holdings was the third-ranked advertiser group, dropping one spot despite only a minimal decline of 1% to $138 million. Other major decreases were noted for sixth-ranked Telstra Corp, down 42% to $101 million; ninth-ranked Government NSW, down 22% to $74 million and 10th-ranked Suncorp Group, down 13% to $74 million.
When will the recovery come?
Our economy continues to perform solidly, with a number of rate increases by the Reserve Bank introduced to avoid an inflationary
bubble, improved employment statistics and high levels of consumer and business confidence.
The Australian dollar continues to hover around 90 cents to the US$ and our key trading partners, China and India, are performing strongly.
Despite all the positive indicators, advertising activity is still very much in recovery mode. However, the early months of 2010 indicate real growth year-on-year and the rate of recovery is encouraging.
The full Nielsen report contains many examples of companies that went against the trend and advertised through the tough times to gain a competitive advantage as the economic climate improves. However, the challenge for most advertisers who cut-back their presence in 2009 will be how to win back consumers to their brands in a more competitive environment. <
Peter Cornelius is managing director Pacific media at The Nielsen Company.
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