Ad spend, long seen as the canary giving early warning of economic swings, is breaking records as the media sector leads Australia out of the pandemic dip.
Forward data shows the strong run continuing, helped by a federal election campaign soon, with a confident advertising market resulting in a scramble for inventory.
Ben WiIlee, Spinach general manager and media director: “It’s often argued that advertising is a leading indicator for the broader economy.
“Looking at the current economic fundamentals (low interest rates, high employment, and high household savings) it’s no surprise the advertising market is hotter than a jalapeno’s armpit.”
Ad spend, as measured by media agency bookings analysed by SMI (Standard Media Index), hit $8.6 billion in calendar 2021, up $1.6 billion on 2020 and $550 million on pre-pandemic 2019.
And there’s more ahead. WiIllee: “2022 is going to be a fascinating year, lots of events that drive the market (Olympics, Federal and Victorian Election).
“If we don’t see too many curve balls from COVID and inflation, we expect 2022 to continue to grow albeit at a more modest rate.”
Steve Allen, Pearman's director of strategy and research, is forecasting 2022 to be another year of increase, 6% or more, mainly within Internet/Digital/Online, which is now 65% of total market investment.
Some categories will see small drops from the recovery year in 2021.
Allen: “Biggest percentage growth will be Cinema (based on perhaps an optimism there will be no further outbreak or waves of COVID). Radio and outdoor are still recovering lost ground.”
The outlook by Pearman fits with analysis by global forecasters. Dentsu last week put Australia ad spend growth at 6.1% in 2022 after a 17.6% jump in 2021.
The forecast is better than Zenith's 5% in 2022, about equal to GroupM's 6.2%, and below MAGNA Global's +10%.
Paul Wilkinson, head of commercial, Half Dome: “I think ad revenue is an interesting barometer for the strength of business confidence and the economy, but more than that, it gives us insight into consumers' media consumption habits as ultimately advertisers’ spend by channel follows the audience.
“At its core, advertising is about creating value, whether that value is in terms of sales or building a brand.
“The fact we have seen such growth in ad spend, despite the backdrop of a second year of COVID, showcases business confidence and the strength of the economy as we – hopefully - move out of the COVID era. This can only be a good thing as we head into 2022.
“And the change in the profile of advertiser spends, with the leap in digital investment is a stark reminder that, among many other things, COVID has expedited the inevitable shift in audience consumption from traditional media into digital.
“All media channels are embracing this shift; the growth of BVOD, outdoor is now programmatic and rich with audience data, radio listening is now streamed more and more, podcasting keeps growing and growing – the list goes on.
“What this means is we need a true meeting of minds – it’s not about digital or traditional first – it requires us all to work together and learn from each other to create seamless marketing and comms ecosystems, that drive the best value for all.
“It’s an exciting time, bring on 2022.”
Pia Coyle, managing partner, Avenue C: "The positive trajectory continues for the Aussie ad market, which is great to see. Most channels have well and truly bounced back, with all but a few categories lagging behind.
"Advertisers are in many cases still grappling with the effects of COVID beyond (but directly related to) ad spend, like supply chain issues, lack of candidates to fill roles, and volatility in consumer trends, so there is still a feeling that we need to push ahead more quickly with planning to ensure we are getting the very best campaigns away.
"The next three months will see some clients play catch up to re-adjust to the speed of the market which is clearly not slowing."
Consultant Kathryn Williams of Kmint, with a CFO viewpoint: “Smart agencies are focused on developing revenue pipelines to provide absolute clarity of how and when the surge in ad spend will impact their business.
“Training account handlers to know the numbers and feed them into a consolidated pipeline is a KMint service I enjoy delivering – the account handlers know what’s going on, and with all eyes on the prize, there is pure relief for the business owner, who can go forth and focus on what they do best – strategic growth.
“Cash management also remains a priority during rapid growth, if not more so due to the amount of cash flowing through the agency.
“Astute businesses seek financial oversight of their figures, to ensure that their fiduciary responsibilities are being met. Sadly, I have seen agencies without this Chief Financial Officer perspective, face grave times where they wonder where all the money went, and it’s often too late for me to help them.
“Confidence in the revenue figures allows business owners freedom to make decisions around resourcing investment, supporting infrastructure to manage the growth, and be quick enough to do a deal and seize opportunities when they arise.”
Dusanka Dimovski, head of client services, Frontier Media: “The CY2021 ad spend data should put a shoot of confidence in the advertising industry with the record-breaking expenditure in 2021.
“It’s no surprise that digital has seen the highest level of annual spend due to the trading conditions COVID has presented. Overall, it’s positive to see growth in digital as it continues to play such an important role in the media mix.
“All embracing, it’s great to see both traditional and digital channels progressively growing in ad spend and its reassurance the advertising market is stronger than ever.
“The year ahead also presents a positive picture with clients in full force with their marketing budgets and demand in media higher than ever before.”
Angela Feruglio, director, Seed: “The 49% growth on 2019 media spend supports the pressure we all felt securing paid inventory in many channels across the year.
“This was particularly evident in quarter four with many advertisers booking early to secure premium placement for the Black Friday and Christmas retail periods.
“Last minute deals were replaced with the necessity to book immediately or simply lose out. The market gave us a taste of the 2022 trading conditions.
“And with Federal and State elections speckled throughout this year, it’s going to get as bullish as a Craig Kelly and Clive Palmer fight for a seat.”
Sam Buchanan, general manager, IMAA: "The 2021 SMI data which shows record ad spend for the year, and with early indications in 2022 there's no sign of the growth in spend slowing, demonstrates confidence among advertisers and a belief in investing in their brands.
“This should provide a spring in the step for our economic outlook this year, depending of course on any rise in interest rates due to the increasing inflation, the improved job market and the incredibly buoyant housing market.
“The challenge for advertisers will be the ongoing supply chain issues to meet growing consumer demand. IMAA members are also confident for the year ahead, with 85% expecting their businesses to grow.
"It was also no surprise to see the surge in digital spend as COVID accelerated consumers' uptake of all things digital - and medic channels are responding with BVOD TV, programmatic out-of-home, radio streaming and podcasts - which are all seeing rapid growth. That growth however should not be at the expense of ‘traditional’ media, as both complement each other to deliver ROI."
Simon Reid, national head of partnerships, Initiative: “We knew the local ad market would be breaking records … it was merely just a question of by how much. Each quarter was delivering significant growth YOY which isn’t surprising given what 2020 delivered us.
“The real barometer was always 2019 and the numbers looked strong from May and really took off in Q3 as the nation opened up and consumer confidence was high. There are still some channels such as radio and OOH that I believe are undercooked compared to 2019, so expect that to correct itself across 2022, but overall a great finish to the year.
“We are operating in an extremely confident market and forward pacing’s are strong, overlay that with the pending Federal Election cash injection and Winter Olympic Games we are primed for another bumper year.”
Natasha Pelly – media analytics director, Publicis Media Exchange (PMX): “It has been very encouraging to watch the significant ad spend growth we saw in Q4 2020 continue into Q4 2021.
“We perhaps expected some ‘levelling off’ after the market had recovered to pre-pandemic levels, but if anything, growth has accelerated. It’s a positive sign for our industry as we move into 2022, and one that will likely prompt us to revise our market forecasts upwards.
“As the pandemic’s accelerating impact on digital media spend is set to continue, our focus will be on ensuring we can plan, measure and analyse newer channels, like digital audio, in the same way we hold linear channels to account.”
Marelle Salib, national head of investment for OMD Australia: “The 2021 media market investment levels come as no surprise given the demand has been surging for the better part of the last 12 months.
“Current demand levels are expected to continue into 2022 and potentially not soften until May, post the anticipated Federal Election.
“Federal government and political parties will dominate the market across all channels from February through to April, especially across news environments.
“Demand and inflation across major broadcast channels will need to be managed by clients and agencies through forward planning, longer lead times, agility in market and consideration of how to leverage premium content and inventory. This will connect brands and consumers in a meaningful way rather than fighting for inventory.”
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