Advertising spend is running flat, just staying slightly positive in a slow market.
The big question is whether or not the Reserve Bank interest rate squeeze appears to be working on the economy to stop spending and subdue inflation and how much influence is that having on advertising?
The May SMI (Standard Media Index) numbers show a 6.8% drop in ad spend as measured by media agency bookings.
This comes with a hard comparison against the same month last year with a $41.2 million fall in political party category ad spend and a $12.4 million hit from government.
The Labor government has reined in government advertising since taking office last year
Discounting the disappearance of government spend, underlying market growth was 0.1% in May.
Media analyst Steve Allen, director of strategy and research at Pearman, still sees the year hitting a positive note despite a slow media market.
“We remain with our annual forecast of ever-so- slight growth by year end, though that is definitely under pressure,” he says.
“The reason we remain forecasting slight positive territory, is that consumer spending is so far remaining buoyant … well up until May ABS Retail Sales.
“Today’s RBA announcement (interest rate decision) could change our view, as another (likely) rate rise, we think will put the brakes on most consumers (this is after all what the RBA is trying to do).”
Paul Wilkinson, Half Dome's head of commercial, says the latest numbers show a resilient market.
"On face value, a -6.8% reduction in ad spend suggests a bleak environment in ad land," he says.
"However, when we exclude government and political investment, underlying ad spend has remained largely flat year on year at +0.1%, highlighting the resilience of the Australian ad market and in turn painting a relatively optimistic picture, especially when viewed within the context of the current economic climate.
"The unprecedented scale of government and political ad spend in H1 2022, combined with a high level of demand across the market overall, led to record-breaking investment levels, leading to a challenging corresponding period in terms of reported numbers.
"Conversely, the latter half of 2022 saw a somewhat normalised market, so the real test comes over the next six months. Considering the June '23 forward pacing, which sits at 87% vs June '22, excluding digital, I remain positive whilst acknowledging we will likely face unforeseen challenges."
Nick Mudoch, managing partner at independent Yango, says he’s been asked by several people in the last two weeks: How are you finding the market?
“My gut feel response has been it feels like it's going sideways,” he says.
“There are categories that are doing OK and others that are hurting. On an individual agency level, the make-up of your client list is going to determine how you’re seeing things right now.
"As is usually the case, ad spend is a pretty good barometer of the state of the overall economy, and growth is slow or non-existent and may even slide into negative territory in the second half of this year.
“The adjusted SMI growth figure of 0.1% seems to back this up, however I still feel year-on-year comparisons are still not telling the full picture with the boom and bust cycle of the last few years skewing it as an accurate pointer.
“Let’s hope the Australian market holds up over the next 6-12 months, although it's going to be a challenge while the RBA continues towards its goal of curbing consumer spending.
“They might just get what they want, and you’d think that would have to have a negative effect on ad spend."
Jane Combes, national head of strategic investment and partnerships, OMD, says the normalisation of the market is crucial when looking at any year on year revenue figures, whether that is special events, COVID impacts or elections.
“We know from experience that these have a huge impact on bolstering the market in certain years and months, and need to be taken into consideration in subsequent years when analysing the health of the market, if we want a true representation of what’s going on," says Combes.
“With the normalisation this year, we are seeing flat figures and demand is healthy in pockets.
“It’s great to see the confidence of the market, particularly in key mediums and sectors that have had a tough few years.
“The market is undoubtedly continuing to challenge the media, advertisers and agencies as audiences continue to fragment and attention is harder to capture, but demand continues to be seen, creating healthy competition for all.”
Tom Cumberworth, head of partnerships, Rufus powered by Initiative, says the May SMI data underpins the robustness and resilience of the Australian market.
"Despite the tumultuous start to the year, May looks to have green shoots of reacceleration into the second half of 2023, with growing optimism as a number of highly competitive key categories continue to drive the demand," Cumberworth says.
"OOH certainly looks to be one of the benefactors, driven by the sustained product and measurement innovation, with premium high impact formats greatly sought after within competitive category sets where exclusivity and salience is paramount in a cluttered market.
"Forward planning and a proactive approach to upfront laydowns to secure key inventory and avoid avails issues, is becoming a requirement which needs to be balanced with the necessity to remain agile and flexible as market conditions continue to evolve."
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