Can Australia's strong ad spend trajectory continue?
- 06 October, 2021 15:40
Australia’s robust advertising expenditure in the face of continued Covid-19 disruptions might feel remarkable to some, but it’s no surprise to media industry thought leaders. And many agencies reporting a record-breaking year as a result.
The combination of strong economic performance, consumer savings, a sense of having been there, done that and light at the end of the tunnel are all playing their part in buoying Australian advertising expenditure in 2021.
According to the latest Standard Media Index (SMI) figures for August, Australian ad spend continues to break records and was up 26.6 per cent year-on-year to $692 million for the month. This was also 11.9 per cent higher than 2019 figures and saw ad spend for the first eight months of 2021 up by 1.2 per cent, or $62 million above the same pre-Covid period in 2019. It’s also just $40 million off the highest-ever SMI recorded result for this period in 2018.
While at first glance the figures do indeed feel “remarkable”, managing partner of media agency Hatched, Adrian Roeling, is one of many unsurprised by the flurry of advertising activity occurring right now.
“The strong rebound in advertising is not too surprising given the continual improvement in the performance of the economy and the hope creeping into the community,” he told CMO. “Like savvy investors, savvy marketeers bet on a combination of short, mid- and long-term indicators. All are improving and some are as healthy as they’ve ever been.”
Roeling pointed to the ASX, which has been at an all-time high since April 2021, as one such indicator. Another is GDP growth, which proved extremely strong in the June quarter, driven by strong domestic consumption. What’s more, Australia’s Terms of Trade are at record levels and the property market is booming, he said.
“Additionally, according to Westpac’s consumer sentiment, last month saw our two biggest states, which are still in lockdown, maintain a positive level of confidence. In fact, NSW actually climbed by 5.3 per cent to 106.4,” Roeling noted.
“Brands are capitalising on this positivity in a market emerging from lock-down with consumers ready to spend.”
Speaking to CMO on behalf of the independent media agency sector, IMAA general manager, Sam Buchanan, agreed continued growth in ad spend is no surprise to the association’s members. He noted many independent media agencies are experiencing record-breaking years as a result.
While many marketers faced budget cuts and panic in the early days of the Covid-19 pandemic, a sense of ‘been there, done that’ is triggering less knee-jerk reactions or pulling of campaigns this year.
“This is unlike the lockdowns of 2020, where the global pandemic was new and never before experienced, everyone faced an uncertain and unknown future, which saw an almost immediate response from clients cutting back their spend and cancelling campaigns,” Buchanan said. “We saw industry wide impact. What we didn’t know then, we know now, which is the speed at which the Australian economy and client and consumer confidence bounced back. This time around it’s been more business as usual and while some campaigns have been postponed, none have been cancelled.”
Managing Partner at The Wired Agency, David Kennedy-Cosgrove, pointed to similar ad spend patterns in countries ahead of Australia for Covid-19 vaccinations and who are actively now living with the virus, such as the US and UK.
“As the UK economy set a path back to normality, ad spend rose 30 per cent,” he pointed out. “Smart marketers, like Qantas, know that now is the time to build their brand and share of voice ready for when the economy opens back up.
“If predictions of revenge spending are true, why wouldn’t you want to be prepared to capitalise on this before your competition does?”
With the exception of the couple of hardest hit sectors that we know continue to struggle, such as travel and tourism, latest SMI ad spend figures show the majority of industries rebounding. Even the automotive sector is showing signs of increases ad spend as stock levels return to normal, and there aren’t many who doubt domestic tourism will snap back once borders are finally open.
Spinach media director and general manager, Ben Willee, also highlighted stats from the Australian Bureau of Statistics showing Aussies have about $230 billion in savings sitting in their bank accounts.
“This, plus low unemployment, is leading to high consumer confidence,” he said. “Our own research shows people are keen to get spending with clothing and health and wellbeing high on the list followed by homewares, furnishing and appliances. All this is buoying ad spend.”
Trendsetting
As to emerging trends in terms of what brands are wanting to buy media-wise, Buchanan noted growing demand for newer channels such as connected TV, broadcast video on-demand (BVOD) and more widely, digital video. Digital also continues on an upwards trajectory, with even more focus on ROI and return on ad spend (ROAS) driving demand.
“Our members were not surprised to see such an impressive result for the Olympics,” Buchanan continued. “Locked down audiences in some major markets, a strong performing Aussie team and relatively good time zone all delivered for Seven and its sponsors. Nine and Seven will continue to jostle in the run home to the year.
“Across digital channels, digital video [BVOD, CTV], digital audio [Spotify, LiSTNR], online and digital out-of-home will continue to grow due to their measurement ability and creative flexibility.”
With NSW and Victorian constituents stuck at home over the last few months, Willee has also seen advertising dollars going to where the audience is. TV and digital media have clearly reaped most of the benefits.
In August, digital media captured 37 per cent of advertising market, up from 30 per cent two years earlier. As well as transparency of results, Roeling said digital's strong ability to drive ecommerce, customer experience, capture customer data and facilitate a sale have all strengthened its appeal.
“For most brands, 2021 has been about generating attention, building deeper relationships with customers through personalisation, and driving sales through ecommerce which is part of the reason why digital continues to surge ahead,” he said.
“But make no mistake, there's plenty of pent-up demand for other channels such as out-of-home so we can expect to see a pretty quick upswing in that direction once we're all allowed outside again,” Willee added. “There's going to be a recalibration of spend across the industry, but there's no doubt we'll continue to see decent spending into the new year.”
When it comes to the brands bolstering media coffers, one trend Kennedy-Cosgrove pointed to was “digital endemic companies”, or those who became publicly listed in recent times, hungry for growth. Examples include AfterPay, SquareSpace, HiPages and Bumble. According to a recent report by GroupM, the median revenue rise for digital endemic companies is expected to reach 45 per cent in Q2, while their Q2 sales and marketing spend doubled.
“All of these have crossed from targeted brands to mass brands who need advertising to scale growth,” Kennedy-Cosgrove said.
More broadly, he pointed to brand building as a major driver for ad spend’s robustness.
“We’re finally waking up to the need to build our brands, and that takes investment. For too long Australian brands enjoyed the luxury of little outside challengers or competition,” Kennedy-Cosgrove said.
“The digital endemic companies have changed that, coming in hot and disrupting quickly. So our big, iconic, legacy Australian brands are shifting focus from short-term direct response comms to long-term brand building comms that protect them.”
Wired clients, as a consequence, have become more open-minded in their approach to a broader channel mix, according to Kennedy-Cosgrove.
“YouTube, Facebook and Instagram are no longer social channels, they’re now mass reach media. This has made way for more specialist interest channels like Twitch, Reddit and Pinterest, where budgets are being tested and optimised to target specific audiences,” he said.
Is ad spend growth sustainable?
But the question remains: Is this just a 2021 phenomenon, or will ad spend continue to grow in 2022?
For Willee, a looming Federal Election before the end of May 22, a Victorian Election in November 2022, along with iconic sporting tournaments such as the FIFA World Cup, Winter Olympics and Commonwealth Games indicate “advertising is gearing up for a big year”.
Buchanan is equally convinced more growth is on the way, even as he took a more conservative view overall of market conditions.
“Some factors, however, such as interest rate rises could affect consumer confidence and ultimately ad spend,” he said. “Our latest Pulse Survey among members found 88 per cent of IMAA agencies will experience growth in the next 12 months, with more than 60 per cent of those anticipating growth of between 10 per cent to 30 per cent.”
Roeling is also anticipating a strong finish to this year and things to continue into 2022. “However, pre-Covid, the advertising market was cooling, so once conditions normalise further, we’d expect the advertising market to soften towards the back end of 2022,” he said.
“If the global economy continues its course - with no new variants, economic collapses or political unrest - then I believe we can continue to see similar growth for the remainder of 2021 and into early-2022,” Kennedy-Cosgrove added. “However, I wouldn’t expect that growth to continue at such a feverish rate as we had into Q2 2020, it’ll likely level-out and return to normality.”
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