Australia’s top 50 advertisers rode high on the back of positive economic conditions in the first half of the 2007-08 fiscal year. But successive interest rate hikes, record fuel prices and a slowing real estate sector hit consumers in the hip pocket in early 2008. Australians went into damage control to offset the impacts of the United States sub-prime crisis fallout and this was reflected in spending by Australia’s largest advertisers.
In the face of growing economic uncertainty, media booking across most sectors slowed considerably as major advertisers contracted their advertising spending.
The Commonwealth Bank of Australia underwent the most drastic cuts to its ad spend, according to Nielsen Media Research’s TheTop Media Advertisers report for the fiscal year 2007-2008, which compares the top 50 advertisers’ spend to the previous fiscal year. Despite regular TV ads and the infamous introduction of the work produced by Goodby, Silverstein & Partners, the CBA scaled back its advertising dollars by an estimated 30.7% year-on-year to $35-40m, slipping 18 spots on Nielsen’s report to 35th position.
Mark Buckman, chief marketing officer at the CBA, declined to comment on the reason for the drop, but said: “These figures do not include digital and direct marketing spend.”
While Nielsen figures do not include digital and direct spend, however, global events could be having their effect on the finance sector, according to OMD’s managing partner for trading Peter Horgan. “There has been some reasonably unexciting news in the sector from a PR perspective – credit crunches and sub-prime crises,” he said. “Finance has a delicate PR and advertising tightrope to walk at the best of times. The sector news or performance has not been good here or internationally.”
ANZ was the top spending bank, though its spend decreased 0.3%. Also in the finance sector Suncorp reduced spend 8.6%, while National Australia Bank increased its spend 24.5%.
Other notable decreases were FMCG giant Procter & Gamble which slid from 11th to 17th position having cut its spend by an estimated 11.8%. Kellogg's’s slipped nine spots to 38th position after cutting its spend by 13.9% and Honda Australia finished nine spots lower than last fiscal year in 49th position, following a 9.3% decrease in ad spending.
And while a bear market unfolded in 2008, Nielsen Media Australia managing director Peter Cornelius says media spending results delivered better than expected for the full 12 months.
“Overall, main media spending finished with an estimated 5% expenditure growth compared to the previous fiscal year,” he says.
The Coles Group, owners of Coles Supermarkets, Kmart, Target and Liquorland, overtook the Federal Government to become the biggest spender in the last financial year. It increased is advertising spend by 12.6% year on year to $175-180m.
As Nielsen forecast in 2007, the Rudd Government began fulfilling its election promises by pulling back ad spending substantially. This meant that after major Howard government spending in the second half of 2007, activity diminished to the extent that total ad spending in the fiscal year finished down 1.0% on the previous 12 months.
With the exception of the Federal Government, Victorian Government and ninth-ranked Suncorp Group, seven of the top 10 advertisers all showed overall double digit increases.
In fact, there were just four of the top 20 main media advertisers recording downturns in main media spends and another two, Toyota Motor Corporation and Queensland Government posting flat or under 1% increases year-on-year.
At the forefront and impacting overall ad spend trends was retail, by far the largest category with more than 20% share of overall main media spending. With an estimated spend increase of 8.4% year on year, retail exceeded $2bn in media spending for the first time.
Steve Tindall, director of Maxus Retail, explained why retail spend was not feeling the pinch of economic slowdown: “In economies that are in slowdown the big retailers’ advertising funds have a high degree of protection as they are able to squeeze their suppliers harder for additional support as the manufacturers dependency on these retailer increases.”
OMD’s Horgan said: “When retail sales are under pressure due to discretionary expenditure and consumer confidence those with the deepest pockets tend to prosper because they can keep advertising, keep their message out there, keep discounting. And it is also a time when smaller challenger brands don’t quite have the resources to play in that space.”
Among the other major categories, second-ranked motor vehicles and third-ranked entertainment and leisure had solid performances, increasing their shares by 9.2% and 8.8% respectively. “Motor has been growing well over double digits over the past four years,” says Horgan. “The compound growth has been quite remarkable. It is now easily the second largest category and doesn’t seem to be slowing. There are just so many launches – you generate a lot of news by having constant new product innovation.”
Travel and accommodation, real estate and recruitment all recorded strong double digit growth. But the latter two were substantially influenced by Nielsen’s increase in monitoring of classified ads from July 2007.
In recent weeks, fuel price drops and a halt to interest rate rises came as good news for both consumers and business sector.
However, Cornelius says it is still premature to use these initial positive as an indicator of recovery.
“Main media advertising spending for the remainder of calendar 2008 appears likely to unfold as more conservative than was the case in the very buoyant calendar 2007,” he adds. n
