Advertising spend in Australia closed the June financial year on a firm note in the face of a sometimes short term and chaotic market.
Ad spend, as measured by media agency bookings, was down just 0.2% to $8.8 billion in the year to June with underlying growth, stripping out the impact of government spend, up 2.2%.
However, SMI (Standard Media Index) numbers show June down 5.5% and 5.4% over the three months to June or -2% ex government and political party ad spend.
Media agency commentators are upbeat.
Pia Coyle, PHD Sydney MD, says it’s heartening to see how strongly the market closed out the financial year with so many channels in growth.
“Consumers and therefore clients are trepidatious about the economic outlook, so the day to day market trading feels short term and sometimes a little chaotic, as brands decide how and when to spend their budgets in the wake of interest rate rises and high inflation,” she says.
“It’s positive to see that whilst there is a lot of uncertainty, we are still investing at levels never before seen, meaning that we are all choosing to see green shoots, rather than being too conservative in the face of declining consumer confidence. Bring on a big last six months of 2023.”
Nick Murdoch, managing partner, Yango, says advertising is a lumpy business at the best of times.
“However, the last few years have been on steroids,” he says.
“The 2023 SMI result illustrates the difficulties in planning and managing any business that is dependent on advertising spend and revenue at the moment, it's not for the faint hearted.
“The downward trend in FY23 H2 alongside macro economic issues suggest the back half of the calendar year will continue to be subdued but with some green shoots appearing.
“Perhaps we can look forward to some sort of normalcy returning in 2024, but I wouldn’t bet on it.”
Ken Lam, chief investment officer iProspect, sees resilience in the market.
“With total ad spend only back 2% across last financial year, despite the fact we’ve been talking about economic uncertainty in what seems like forever caused by 12 successive rate rises until recently, goes to show the strength of the Australian market in bouncing back from COVID,” says Lam.
“Whilst out-of-home is the clear standout with 24% increase in ad spend across last 12 months, digging deeper into the numbers there’s a clear story in the continuing shift into converged channel approach with TV and Radio spend declines mostly offset by greater volume into Digital Video and Audio, which will be further fueled by recent launches of new hybrid audience measurement across both channels.
“Looking ahead, despite the RBA putting rates on hold this month, June SMI numbers as well as consumer and business confidence remain fragile so we will continue to see a two-speed market with a number of categories like retail already planning ahead for the critical sales period across November and December, whilst a large percentage of advertisers continue to plan and book short term which will impact forecasts for the September quarter.
“However with Q3 being a huge quarter in the Australian sporting calendar, it presents a great opportunity for advertisers to gain greater SOV and market share with a balanced Brand AND Performance approach by priming customers ahead of the more cluttered sales and Christmas period in Q4.”
David Lee, media director at The Pistol says there has been a noticeable stabilisation in government and political party spending over the past 12 months, leading to minimal impact on our year-on-year ad spend figures by the end of the financial year.
“The second half of the year experienced only a marginal 0.8% decline, signalling that the broader market is showing signs of levelling off.
“A closer examination of individual channels reveals a continuing growth trend in digital media channels. This growth reflects the ongoing transformation in consumer behaviour, with the industry adjusting to meet their demands for data-driven and personalised experiences.
“One particularly noteworthy development has been in outdoor media, which has not only recovered but surpassed pre-covid ad revenue levels.
“The latest data from the OMA highlights that more than 64% of all outdoor media revenue is now digital. Additionally, the IAB's findings indicate that an increasing number of agencies, about 83%, are programmatically buying digital out-of-home.
“As we move forward, advertisers and agencies must continue to embrace innovation and leverage the power of digital platforms to engage audiences effectively.”
Paige Wheaton, Initiative’s chief partnerships & investment officer, says June, despite the broader market narrative showcasing a concerning economic outlook, represents a small shining light with a stronger than anticipated end of financial year result showing an increase in ad demand of 2.2% and a small shortfall of 0.2% in total ad spend.
“What was most pleasing to see this month was the market dominating year on year growth of Outdoor ad spend and for the first time in years, exceeding pre-COVID level investment,” says Wheaton.
“As an agency, we’re excited about this because on paper it translates to a return of market norms and more robust marketplace to trade within; but in reality the gains have been achieved through a market wide transformation and an increased need to approach growth via significant advancements in technology. This is the natural evolution in play that indicates that in tough times, innovation follows.”
Victoria Budge, managing partner, Claxon, says it's reassuring to see a relatively modest dip in agency ad spend given the backdrop of rising living costs.
“This suggests a potential shift in mindset following lessons leftover from the COVID era – recognising that halting activities during economic uncertainties could lead to greater costs for brands over time,” she says.
“That being said, we are noticing an increasing emphasis on cost-effectiveness among certain clients. Fortunately, not at the expense of robust strategic approach to planning as we know that low-cost advertising doesn’t necessarily promise a stronger ROAS.
“As the pace of inflation moderates, we’re anticipating a resurgence of media spend in the later part of the year and for the focus on advertising to be pulled back to performance over CPM.”
Dave Levett, managing director, Murmur, says advertisers have reasons to be cautious, but optimistic about the domestic economy even in the face of inflationary pressures and the rising cost of living.
“It's no surprise that Outdoor and Digital Video have seen the biggest YoY growth in advertising expenditure as Brands invest in these mediums to increase their share of voice in market and deliver gains for Brand Recall and Brand Recognition,” says Levett.
“Advertisers in two particular categories are wanting to capitalise on growing consumer confidence and momentum.
“Travel & Automotive continue to see heavy investment having bounced back after being two of the hardest hit industries over the past few years.
“International tourism has continued its recovery as domestic travel has already exceeded pre-pandemic levels, while international visitor expenditure is expected to exceed pre-pandemic levels in 2024.
“Similarly, the automotive industry continues to grow as their industry year-to-date sales soar more than 4% higher than the same period last year.”
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