The relentless grind of a weak economy against advertising spend

Chris Pash
By Chris Pash | 5 June 2024
 
Credit: Katherine Hanlon Via Unsplash

Advertising spend has weakened further, bumping against the roadblock of an uncertain economy. 

Spend, as measured by media agency bookings, was 5.6% weaker in April, continuing a soft market into the calendar year's second quarter.

This puts the fall so far this calendar year at just under 2%. 

The SMI (Standard Media Index) numbers for April show reduced demand across major media. The decline for TV was -10.4%, radio -5.7%, outdoor fell -1.5% and digital -2.4%.

More of the same, said media analyst Steve Allen at Pearman, describing the market as “relentless and really bloody awful”. 

“We, the media and advertising Industries, are in a very difficult, THE most challenging, period in a decade or more,” he told AdNews.

“No single cataclysmic event precipitating this. Just the slow inevitable grind of getting inflation under control through crimping consumer spending, and the cost-of-living crunch. 

"No one medium is travelling with growth. Nearly all media types are losing revenue, including, really for the first time, the whole of digital. And outdoor pretty much stopped in its tracks.

“Paris Olympics will not dig us out of this but will be a very temporary stimulus.”

Allen’s current reforecast, downward, is for a flat 2024, just limping into positive territory.

The second half is predicated on RBA getting inflation under control, thus giving consumers more confidence in the future and managing their cost-of-living crunch. Of course tax cuts will be one of the catalyst for changing consumer, and thus marketers, outlook. However another month or two of this until we turn the proverbial corner.

Nick Grinberg, head of strategy at Next&Co, said the decreasing ad spend is mirroring the overall state of consumer confidence. 

“It's expensive to live life at the moment for the average person and advertisers are reflecting this at the moment with reduced ad-spend in the market,”: he said.

“Hopefully we get to see some economic positivity in the back half of the year that may reverse this trend.”

Daniel Cutrone, managing partner, Media, Avenue C, said the prevailing economic conditions in Australia have had a discernible impact on advertising expenditure, as evidenced by the latest data from SMI. 

“We are currently witnessing a year-to-date decline of -2% compared to the figures from 2023," he said.

“Remarkably, this trend highlights a dual-paced economy not only in terms of Australian consumer spending but also across various media platforms.

“The most recent numbers reveal a notable acceleration in declines among ‘traditional media channels’ such as linear TV, broadcast radio, out-of-home advertising, and publishing, experiencing a downturn of -8%. Conversely, digital channels have demonstrated resilience, showing a growth of 6% despite prevailing economic challenges.

“As we approach the new financial year, the difference between these two economic courses is expected to widen further. This trend is particularly evident within live sports broadcasting, where accessibility is increasingly shifting towards digital-exclusive platforms. Notably, events such as Olympics coverage across Stan, T20 on Amazon Prime and EURO 2024 on Optus Sports demonstrate this transition towards digital channels for sports consumption.”

Rob Wall, managing director, Love Media, said the numbers are showing what we are all living.

“As we hear often at times like these, it's a great time for clients to strengthen their brand's connection with their audience, and those that do, will win the race when we see more positive economic change,” said Wall.

Gavin Chew, head of media, Orange Line, said the numbers show what we are already seeing anecdotally, that 2024 continues to be a year of lower ad demand, paralleling what’s happening at a macroeconomic level.

“While it may be tempting for advertisers to save budget for when consumer spending bounces back up, we are still seeing strong performance from clients who understand that marketing budget is an investment in current and future demand, which will give them a head start for when consumers do loosen the purse strings,” he said.

“Consumer confidence is starting to come back up, and spending will inevitably follow suit.   Advertisers who are investing now will be reaping the rewards in six months’ time.”

Tom Cumberworth, Rufus - Head of Investment, said the year to date decline of just 1.9% implies that underlying demand remains stable. 

“Early year forecasts of a reacceleration in H2 may need to be reviewed as economic growth in Australia remains subdued, with inflation and higher interest rates continuing to weigh on demand, however with the expectation that from late 2024, growth is anticipated to pick up gradually as inflation declines and the pressures on household incomes start to ease,” said Cumberworth.

“With evolving market dynamics at play as both audiences and investment continues to migrate from traditional to digital, increasingly we are seeing a combined approach utilising both short and long-term planning and investment strategies, ensuring our clients can secure presence in key in-demand inventory whilst also maintaining a level of agility to capitalise on short-term opportunities, which is reflected in the lateness currently seen in market.”

 

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