This first appeared in the March/April edition of AdNews. Subscribe here to make sure you get your copy.
In 2020, the COVID-19 pandemic hit advertising spend hard, shrinking traditional media revenue further. We speak to media agencies for their thoughts on how, and when, the sector will recover.
During the recent senate committee hearing on the news media bargaining code, Senator Alex Gallacher asked the government whether it was using the piece of legislation to try to save a sinking ship.
Gallacher was questioning how effective the code, which forces Google and Facebook to pay certain news publishers for their content, would be in boosting the sustainability of Australian journalism if the government itself has been shifting advertising dollars from traditional channels to search and social.
“Given the size of the government’s advertising spend, haven’t you been complicit in defunding those organisations by moving to other methods of advertising anyway?” Gallacher asked a representative from the Department of Treasury.
“[The government] has been chasing a more efficient spend, which presumably has moved from print media to digital media or Facebook or Google or whatever. Is that true?...
“If you’re doing what everybody else is doing, what are we doing here? Trying to save the Titanic that’s sinking?”
When the pandemic hit, advertising on traditional media which is more costly and less flexible than digital, was the first to be cut. This pressure caused record declines in some sectors and as the industry emerges from the worst of COVID-19, media buyers predict various levels of recovery for different channels.
The pandemic hit meant that media agency bookings, as recorded by Standard Media Index (SMI) figures, would slump by a record 40.4 per cent year-on-year to reach $345.6 million in May. It was not until November, after 26 months of consecutive declines, that the market saw growth, up 8.3 per cent. In December, the growth was at 2 per cent.
Media buyers are split on how quickly channels will recover, with many predicting none will reach pre-pandemic levels this year.
“We don’t believe [traditional media advertising] will return this year, not until international travel resumes,” says Sandbox Media head of strategy and digital James Sparkes. “Considering main players in the travel space spent close enough to $550 million in traditional media in 2019, of which more than $250 million was newspapers — close to 20 per cent of their revenue.
“Print will be hit the hardest and take the longest to recover. Also coupled with News Corp Australia closing 100 papers, it leaves a lot of the smaller players with nowhere to play.
“These smaller players will have to turn to low cost of entry alternatives – digital, Facebook, social and then ultimately, as they reach a point of saturation or diminishing returns on those channels, will have to turn to traditional media to get the reach they need. The shift towards digital consumption occurred throughout the lockdown as consumers were given the opportunity and time to explore digital media in greater depth.”
Craig Cooper, chief investment officer at Carat Australia, says that while media companies will likely return to pre-pandemic levels they will be operating differently.
“Most media companies in Australia will return to pre-pandemic revenue levels,” Cooper tells AdNews.
“But it will be at different stages by channel and it’s more than likely these businesses will not operate in the same way as pre-COVID-19.”
There is a divide on which channels media buyers think will recover better than others, with TV, out-of-home, and radio pinged as the ones to return to pre-pandemic levels the quickest.
TV performed strongly during the pandemic with a healthy boost to audience numbers, a pattern seen across all media channels excerpt out-of-home. However, this didn’t translate to revenue flowing as brands tightened their budgets in an uncertain economy. In the worst of the pandemic, TV fell 35.6 per cent in May, according to SMI figures.
According to ThinkTV, the total TV industry, which includes regional and metro free-to-air, subscription TV and broadcast video-on-demand (BVOD), was down 10.7 per cent for the full year to reach $3.45 billion in advertising. However, there were early signs of recovery with total TV up 0.5 per cent in the six months to December to reach $1.96 billion.
Cooper says the increase for metro linear TV, 0.6 per cent for the six months to December last year was impressive.
“For a channel that has seen consistent decline for at least five years, to record growth during a pandemic year is quite unmatched — and the early indicators for 2021 is that this trend is set to continue,” he says.
Media agencies note a demand from clients to return to traditional channels as business and consumer confidence begins to lift.
“Our clients have been itching to get their traditional broadcast channels back into the mix and we can already see the effect of adding in that top awareness layer,” Enigma Media managing director of media Justin Ladmore tells AdNews.
“Sometimes when a media plan has 100 per cent digital media there is a sense of not being seen. We switched the traditional media back on and we appeared again.”
But media buyers highlight that while there is a notable rise in TV bookings, they are mostly coming at discounted prices introduced at the start of the pandemic when demand tumbled.
“TV demand in March this year is like what we would only typically expect to see in the latter months of the year,” Media Merchants media director Justine Butler tells AdNews.
“As to how much that demand is delivering revenue, it’s likely moderate as advertisers lock in at 2020 discounts that are well below pre-pandemic levels. So I think we’ll see a normalisation of this as positions move and demand eases as a result”
Justine Butler at Media Merchants expects TV to be back by the middle of this year. “But that will differ by network as I think Seven suffers still from the Olympics and cricket wreaking havoc to their revenue and schedules,” she says.
“Nine will dominate. Ten and Foxtel hold their own. OOH and radio I think will need to wait till the back end lifts of 2021 to feel they are truly back.”
TV networks, particularly Nine, have tried to increase their revenue by taking on tech giants Facebook and Google.
In its upfronts last September, Nine revealed its partnership with Adobe to launch Audience Match, which will help brands match their customer data with the network’s 13 million registered users.
Nine chief sales officer Michael Stephenson described the deal as making Nine the “premium alternative” to Facebook and Google, but media buyers are less convinced.
Butler says that while Nine’s data play is on the right path, it is yet to gain scale of advertisers behind it.
“Vital to the question of how long, or if, TV can sustain this growth or deliver on the promise to take back dollars from the tech giants — this will all be heavily reliant on the quality of content,” he says.
“The continued impacts facing production, and an onslaught of new, big budget content from Netflix, Apple and Amazon, who seem intent on taking both TV and cinema audiences, will pose a longer-term threat that the FTA networks have to find a solution to for true growth.”
Anthony Ellis, managing director of Publicis Media Exchange, says Nine’s Adobe deal represents a big step.
“The ability to leverage in a meaningful and tangible way the data from their 13+ million sign-ups is compelling, but advertisers will need to see more proof points/case studies before they jump in feet first,” Ellis tells AdNews.
Carat’s Craig Cooper thinks that taking ad dollars back from the tech giants probably isn’t at the top of the list for networks now.
“It was deprioritised in light of the growing concern around COVID-19, as most media companies fought to survive,” he says. “Given 2021 has already brought challenges, such as the Australian Open shifting a month, and uncertainty around the Olympics, we doubt this will be a focus for 2021.
“However, there may be some organic spend shift from the Facebook family of apps, given the growing concern around the privacy data of WhatsApp, and thereby mass migration to competitor Signal, and the highly contentious iOS 14 upgrade, which will see a substantial shift in the ability to track, and target, consumers from Apple devices.”
Another area that Nine has previously targeted is small-to-medium businesses (SMBs) with the rollout of its 9Voyager in 2019. 9Voyager offers businesses a self-serve buying platform, which is similar to what’s already available on digital platforms such as social media.
But there are doubts on how much small businesses can realistically spend on broadcast in the current economy, particularly when Google and Facebook offer lower cost-of-entry barriers.
“I think it’s unlikely — cost of entry remains a problem along with direct viability on results,” Ellis says on SMBs increasing their advertising on traditional channels.
On the other hand, Butler says the discounts offered last year which got SMBs into traditional channels could actually help to keep them there in the future.
“Many were able to access media at heavy discounts in 2020 which saw them see results they are now desperate to continue,” she says. “It will remain to be seen how long they can do so should publishers start shifting the needle too much on rates.”
Additionally, Sparkes says that any increase from SMBs on traditional channels will have to come from additional spend, not at the expense of Facebook and Google.
“Unless SMBs start seeing diminishing returns/increasing cost on the Google and Facebook ad dollars it’s going to be hard to take the dollars away,” he says. “It would need to come from a place of extending the reach — the ‘want more customers, tell more people’ approach.”
One standout in TV is BVOD. According to the Think TV report, while Total TV was down 10.7% last year, advertising on BVOD was up 40% for the full year, but still makes a small share of the revenue at $21.6 million.
“BVOD continues to be the shining light for the TV networks, with double digit growth for the past few years, even within the pandemic,” Cooper says. “We should expect this to continue in 2021.”
Enigma Media’s Justin Ladmore says that an unexpected factor contributing to BVOD’s growth this year is that clients themselves have had the chance to use it more during the pandemic. However, the agency is finding that most BVOD spend is coming out of TV budgets.
“We definitely see BVOD investment increasing this year,” he says. “The biggest driver for the adoption of BVOD on media plans last year — apart from the increase in audiences — was the fact our clients were starting to use the BVOD platforms themselves at home as they were hungry for more TV content.
“They experienced it for themselves and could see their brand up there. For us, the majority of this BVOD spend will come from allocated TV budgets.”
A surprising trend that emerged during the early days of lockdown was the increase in radio listening despite travel time, the main listening environment for radio, being eliminated for most Australians.
According to industry body Commercial Radio Australia (CRA), 72 per cent of Australians were listening to as much, or more, radio during the pandemic in April. Where and how people were listening changed, with 33 per cent listening more at home, where we were all confined during the lockdowns, while listening at work remained stable. While 23 per cent of people say their in-car listening was down, 18 per cent reported listening to more than before, as social distancing reduced travel via public transport.
But again, this increased audience didn’t translate to more advertising.
In May, radio was down 55.8 per cent in media agency bookings. But by October there were signs it was starting to climb although it was still down compared to the same time the year prior. Deloitte data showed that revenue for metropolitan commercial radio fell 28.15 per cent to $130.402 million in the September quarter compared to the same three months the year prior. The recovery for radio this year is less certain compared to other channels.
“Radio had an interesting 2020,” says Cooper. “Their audience actually went up as audiences were in lockdown but revenue was quick to disappear during the second and third quarter. This may have caused knee-jerk spend shift decisions at the beginning of the COVID-19 outbreaks, but is more likely to have been a reduction in most retail campaigns, which is a primary source of revenue for radio networks.
“With the explosion in podcast, streaming and audio consumption, the growth potential for the audio channel may be driven by these digital channels. 2021 should see minimal to moderate revenue growth but it’s going to be 2022 when we see any significant rebound.”
Again, media buyers predict that a drag on radio businesses’ revenue would be the discounted prices networks offered during the depths of the pandemic.
“Radio and OOH will take longer to return to pre-pandemic levels but we will see it this year,” says Butler. “They are possibly still atoning for the huge discounts used to stimulate spend in 2020, so while inventory is moving this year, it’s well under market. But this will shift as we continue to regain normalcy in our daily media habits and they prove the audiences to justify a shift on rates.
“We’d have to say BVOD and digital audio, including podcasts, are the big winners from 2020 and while the significant upswings in audiences have eased during December and January, these channels are now firmly on the radar for clients who may not have even considered them 12 months ago.”
Out-of-home’s struggles during 2020 was the most unexpected given it was one of the strongest performing sectors before the pandemic hit. But in May last year, the sector fell 71.1 per cent in media agency bookings. In July, it was revealed that the industry lost 65 per cent of its net media revenue for the second quarter of 2020, reaching $82.1 million, down from $234.6 million the same time the year prior.
By December, there were signs of recovery as the nation started moving around again and therefore being exposed to more
billboards. Media agency bookings were down 38.4 per cent in December but most industry insiders don’t expect a return to pre-pandemic levels until next year.
“Out-of-home is another outlier,” says The Media Store head of investment Paul Wilkinson. “There are a number of factors that will remain a challenge in this space: use of public transport, retail visitation, CBD footfall, etc. I believe the outdoor market will have strong demand for specific ad formats, however others may continue to remain a challenge.”
The outdoor sector is largely dependent on restrictions easing throughout the year, but another key factor in its growth will be its ability to instil confidence in transparency.
“2021 should see year-on-year growth but it’s unlikely to be consistent with 2019 levels,” says Cooper. “While mobility is slowly returning, a key factor holding back growth for the OOH industry is the current audience measurement (MOVE) not able to take into account Digital OOH reach, due to share of voice, with advertisers being 1 in 6, or 1 in 10, rotations.
“This has resulted in inaccurate OOH reporting due to growth of digital transformation and while a refreshed measurement system is in progress, it will not be released till at least 2023.”
Third-party verification business Veridooh says the shift to digital will help boost confidence in the medium. The business works with agencies such as Omnicom Media Group to measure metrics such as length, share of voice and exposure time for their campaigns.
“With the absence of overseas travel and people returning to normal ways of moving about their cities, the OOH industry is
ideally placed to bounce back in 2021,” says Areef Vohra, Veridooh commercial and partnerships director.
“This is spearheaded by the continued trend of increased investment in Digital OOH and innovative creative executions.
Never before have insights and measurement been so important to planning and proving delivery. Tighter budgets will mean
more emphasis on ROI and with that a greater focus on accountability and transparency, which DOOH can now deliver through products such as independent verification.
“These new levels of intelligence will garner greater client trust in the medium. And with this trust advertisers will become more willing to divert investment to DOOH from other channels where ad fraud, brand safety and lack of measurement is an issue. This will also deliver better collaboration from demand side, supply side and verification businesses.”
James Sparkes at Sandbox Media says that outdoor players have had to rapidly adapt during the pandemic to be more flexible.
“The outdoor industry in general, they obviously have one of the biggest deficits to claw back but have been the most proactive medium post-pandemic, spruiking their wares and shiny new toys,” he says. “The retail space has been a great one to watch during the pandemic with shopping being an essential service, SMI data shows the entire outdoor category declined by 44 per cent, Shopper Media Group, being entirely retail focused, only saw declines of 3.4 per cent.
“Shopper Media Group, VMO, Cartology and Ooh!Media have all been very vocal in showcasing their relevance during the pandemic and with clients seeing results from these channels they will continue to support throughout 2021.”
Publishers, particularly Nine and News Corp Australia, made headlines over the government’s news media bargaining code which recently passed parliament and will see Facebook and Google pay publishers for their content.
Analysts at Goldman Sachs expect the code will bring in tens of millions of dollars for publishers. The payments from Google and Facebook will be a reprieve as media buyers expect publishing to be one of the media channels to struggle the most in its recovery, with Justine Butler at Media Merchants saying that unless publishers dramatically change their tactics they won’t ever reach pre-pandemic levels.
The payments from Google and Facebook will be a reprieve as media buyers expect publishing to be one of the media channels to struggle more in the recovery, with Justine Butler at Media Merchants saying that unless they dramatically change their tactics they won’t ever reach pre-pandemic levels.
“I’m sad to say I believe print and cinema will continue to fight an uphill battle,” she says. “It never helps when there are mass closures of regional titles and most audiences have now well and truly moved to online formats which offer news and entertainment at speed and scale.”
Philippa Noilea-Tani, national head of investment at Wavemaker, also thinks print is unlikely to return to pre-COVID-19 levels.
“However, it’s critical to understand that audiences have not disappeared, they have shifted,” she says. “The importance of newsworthy content and quality journalism from trusted sources has never been greater, for both consumers and brands, and it remains an effective channel. Publishers, not channels, who can demonstrably prove return on investment (ROI) will win.”
During the pandemic, Butler says that print, OOH and cinema likely lost money to TV and digital.
“Categories such as retail, gambling and FMCG are feeding growth in spends, but money is also being shifted from more niche areas of OOH, print and cinema into the likes of TV and digital,” she says.
“Growth in spend is from advertisers stimulating spending, so until people start spending again on holidays, travel and leisure, and interest rates remain low, this should continue.”
Looking ahead, general manager of investment at IPG Mediabrands’ Magna Nick Durrant says clients are still focusing on media that can drive immediate sales uplift and then looking at building out more traditional branding media.
“Advertising dollars are likely to mirror audience changes as this is where there is greatest impact,” he tells AdNews.“However, we are also seeing more investment into the market as a whole, indeed within Mediabrands we can already see more investment than we did in 2019.”
He adds it’s hard to compare different media sectors as competitors.
“The roles they play within individual media plans are very different. Search is not substitutable with BVOD, for instance,” he says. “Obviously one area they compete is digital video but this is also an area growing rapidly so it is difficult to say one is winning. However, a key area of strength with local players is their ability to work collaboratively and nimbly with agency partners as they are not beholden to global roadmaps. It is evident this is likely to be revenue positive in the short to medium term.”
As Australia continues to handle the pandemic with relative success, and the rollout of the vaccine is underway, the positive impact this will have on traditional media spend is highly anticipated.
“The economic indicators show Australians’ disposable incomes have risen, in some cases quite sharply, during the past 12 months,” says Durrant.
“There are strong arguments for any category that is not directly impacted by current restrictions to increase their investment in advertising. We will undoubtedly still see some depressed categories, for example, tourism. However, they are few and the current demand in the market would indicate the recovery is general in nature rather than limited.”
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