SMI AU: Early 2019 Market Ad Spend Analysis for the AANA

By Jane Ractliffe,
Managing Director, Standard Media Index AU/NZ

 

A PERFECT storm has infected Australia’s media Agency market in early 2019, plunging the market into a sea of red as advertising demand from our national marketers falls to the lowest point ever recorded at the start of a calendar year.

Numerous factors are contributing to this situation, but it’s also worth noting the market had a high benchmark to beat given that at this time last year it was at a record high.

But although there was a high hurdle in place a series of unexpected factors have combined to ensure last year’s results were not only unable to be matched but were also clearly unobtainable.

Arguably the downturn started with the removal of Malcolm Turnbull as Prime Minister in August last year, with that move badly affecting business confidence which had a direct knock-on impact on advertising demand.

As the growth chart below shows, August 2018 was the last month of any significant uptick in advertising demand. Positive demand then fell to 1.4% in August and has been on a downward trend ever since.

 

SMI: Monthly Advertising Growth Trends Chart

 

Standard Media Index, which publishes the combined ad spend of our media Agency partners to accurately track national marketer advertising demand, has not seen such a prolonged decline in its 12 years of Agency data.

Jane Ractliffe, SMI’s AU/NZ managing director, said last year’s market was buoyed by the Winter Olympics broadcast but also a 56% increase in spending from the Domestic Banks category as the Financial Services Royal Commission began its hearings.

Other finance-related categories also took the cue to increase their media investment at that time, with March quarter ad spend for the Insurance category growing 8.8% and ad spend for the Other Financial Services category (credit unions, overseas banks, credit cards etc) lifting 20.2%.

So it’s unsurprising that for this March quarter ad spend for Domestic Banks is back 12.9%; the Other Financial Services category has reduced its spending by 21.9% and the market’s fourth largest category of Insurance is back 4.6%. The overall impact on the broader market of these declines is underscored by the fact that each of these categories are within the list of the 11 largest categories in the market.

Most media groups also attribute the softer market to a credit squeeze which has resulted from the Royal Commission, with credit terms significantly tightened by all major financial instititutions as their lending criteria came under the spotlight.

The reduction in credit has had a negative impact in many sectors of the economy, making it more difficult, for example, for many to purchase cars while also affecting house prices which in turn leads to an overall decline in discretionary consumer spending.

And clearly that’s also hurting national marketers, with the pessimism fanning out to non-financial product categories which are now also contributing to the softer advertising market.

For example, outside of the finance market SMI is reporting large declines in March quarter media investment from other top ten categories such as Food/Produce/Dairy (back 19.7%), Retail (back 2.9%), Gambling (back 6.6%) while the largest category of Automotive Brand has pulled back its ad spend by 4.1% this quarter.

The impact of this lower demand on the media industry has been immediate, with all major media reporting lower March demand an an underlying basis.*

 

 

Among the major media trends we’re seeing, the most unexpected decline is in the Digital media where total booknigs are so far back 9% with most of the decline centred on news/content websites (with those bookings affected by programmatic ad spending which is not able to be recorded to them) but also the programmatic market itself.

So far in the March quarter programmatic bookings are back 12.3% (this includes all bookings via Agency trading desks and also through independent demand side platforms) and even over the nine months of the financial year-to-date programmatic ad spend is back 0.3%.

We’re not yet sure why this market has stagnated, but it maybe that concerns around the placement of programmatic ads on unsafe websites could finally be affecting advertising demand to this sector. Or maybe it’s just the case that like all other parts of the Digital landscape, programmatic has finally settled after a strong period of growth to achieve 19% of all national marketer Digital ad spend?

Among the other major media, Outdoor – which was the fastest-growing media last year – has best managed to limit the declines with its total bookings back just 1% this quarter, while TV and Press were most affected by last year’s financial services windfall and TV also significantly benefited from last year’s Winter Olympics broadcast.

In terms of the future, it’s hard to predict how the market will perform in coming months but at least for April we know the market will be hurt by the timing of Easter near the middle of the month (last year it was the end of March/early April).

SMI is working with our Agency partners to provide a top-level view of forward demand with the imminent release of Forward Pacings to the market, which will also be availabe for all our larger product categories for the future three months.

But in the short term, the key swing factor will be the Federal election and how well the newly elected Government is received by business leaders and the marketing community.

Higher business confidence is directly correlated to higher advertising growth, so let’s hope whichever party is elected can quickly unite the business community and gain their confidence.

 

·         Note SMI has removed Government category ad spend to normalise the data for the absence of Federal Government ad spend (the Government moved to the only large Agency not included in the SMI ad spend pool, Mediabrands, in July 2018).