Alfie Lagos, director, LexLab, looks ahead to the state of the market for the rest of the year
The Australian economy undeniably has the flu at the moment, with multiple indicators pointing towards a challenging year ahead. Market contractions are expected from Q1 through Q3 of CY 2024.
Insolvencies are up 22% year-on-year, court actions have surged by 45%, and unemployment is on the rise.
The latest NAB and ANZ sentiment reports suggest that the worst may be yet to come.
Historically, business sentiment has been more resilient compared to consumer sentiment, but recent months have seen even business confidence bow to the mounting economic pressures.
The Realities of Our Industry
The advertising industry is feeling the pinch. According to the latest IAB data, 2023 saw a meagre 3.7% growth in ad spend, the lowest in a decade if we exclude the COVID-19 anomaly of 2020.
As we move further into 2024, the trend doesn’t seem to be improving. Consumers are spending less, and businesses are becoming increasingly cautious with their advertising budgets.
This cautious approach is reflected in the shift towards more measurable and accountable advertising channels.
The Outlook
Looking ahead, the combination of stubborn inflation targets, rising unemployment, increasing insolvencies, and a relatively neutral Federal Budget suggests that the economic malaise will persist through most of 2024. Overleveraged businesses may face tough decisions, potentially leading to staff cuts or closures. This environment calls for a strategic reallocation of advertising budgets, with a focus on efficiency and measurable outcomes in preparation for a hopeful upswing in the final quarter.
Where’s the silver lining?
Despite the grim outlook, opportunities do exist for those willing to seize them. The next quarter will be challenging across the industry, but it’s also a time for strategic repositioning. We can expect to see a significant shift in ad spend from traditional channels like TV and print towards more addressable and emerging media, such as digital audio, CTV, SVOD, programmatic out-of-home, as well as retail media.
This period of economic uncertainty is an opportunity for bold and confident brands to capture market share. Now is the time for brands and agencies to stand out and let the world know what makes them unique. Research by industry experts like Ehrenberg-Bass and IAB consistently show that maintaining or even increasing advertising spend during economic downturns is crucial for long-term brand success. Brands that continue to invest in advertising and innovate their strategies will be well-positioned to grow their share of the market during these lean times.
Final Thoughts
With the global economy in turmoil, daring brands will seize market share through strategic media investments, while cautious competitors shrink into obscurity.
In summary, while the broader economic conditions are undoubtedly challenging, they also present a unique opportunity for forward-thinking brands. By shifting focus to more measurable media channels and maintaining a strong advertising presence, brands can navigate these tough times and emerge stronger, ready to capitalise on the eventual market recovery.
References
- External Administrators Surge (Jan 2024):
- NAB Business Survey (April 2024):
- ANZ Business Outlook (April 2024):
- IAB Ad Expenditure (2023):
- P&G and Coke’s pandemic performances prove it: You don’t cut ad spend in a crisis:
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