The latest forecasts indicate that it will take until 2022 for ad spend to match the level reached in 2019 before the pandemic took a large hammer to economic growth.
PwC’s Australian Entertainment and Media Outlook 2020-2024 indicates advertising revenue will fall 11.31% to $14.9 billion in 2020.
The decline is mainly from pandemic-driven changes to consumption behaviour and the evolving appetite of advertisers for more measurable media investment.
PwC forecasts, depending on the route of recovery, that advertising will not get ahead of 2019 figures until 2022. But a lot depends on a series of factors, including the timing of a vaccine, and whether lockdowns are needed ahead.
The latest from PwC fits with forecasts by research house Venture Insights, which says ad spend won't return to 2019 financial year levels until 2022. But ad spend is expected to grow strongly after that, picking up 4% each year to 2024.
And according to Magna, IPG Mediabrands’ media investment and intelligence division, ad spend will rise next year but won't get back to 2019 levels for two years.
Natasha Pelly, senior investment analyst, Publicis Media Exchange, says PwC’s is a more conservative forecast than anticipated at Publicis.
“However, we are aligned that there are many factors that could influence ad spend recovery over the next two years,” she says.
“Part of this conservatism is driven by PwC’s assertion that ad-free models are more appealing to younger consumers who view ads as an annoyance, and are willing to pay for a better user experience. As such, they forecast consumer revenue will overtake ad revenue.
“While the success of subscription VOD services over the pandemic is undisputed, historical norms would suggest that over time, the ‘rule of three’ will probably emerge ... of the plethora of subscription services available, only a select few will stand the test of time.
“The fact remains that consumers have a finite amount of money and time to spend on subscription services. It is not going to rise exponentially, nor do we believe it will spell the death of ad-funded content.
“Media networks have worked incredibly hard to improve online user experience, as well as investing significantly in local content, local news, and local sport. ‘Traditional’ media still offers an unrivalled opportunity for mass reach, and advertisers will not abandon this lightly.
“Perhaps unsurprisingly, PwC has also forecast a defaulting to advertising placements that have a ‘short-term, direct and attributable’ link to sales. In this regard, we agree that although this is likely, it is not necessarily favourable in the long term.”
Pia Coyle, national head of investment, Ikon Communications, says it is tempting to say, given the unforeseen tightness of the market in this last quarter of 2020, that the industry will bounce back into 2021 to pre COVID levels.
“However, we are seeing in most cases, clients’ budgets not returning to 2019 levels – in most cases, they are not far off, granted, but they are not exceeding either,” she says.
“The tipping point that means we won’t return to growth in 2021 is actually the categories that have a long road ahead of them as we rebuild – Travel, Movies, Auto etc.
“These categories will still be in decline in 2021, and that, coupled with the slight reduction in client budgets overall will mean that next year is a year of consolidation, not growth beyond our pre-covid reality.”
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