The cost of living crisis and how the RBA might respond has been making marketers jittery. In February, ad spend dropped by 6 per cent year-on-year, according to the latest Guideline SMI figures. Linear TV has taken the brunt of the battering, with spend in February down nearly 13 per cent year-on-year.
Australian companies are slowing down their investment in advertising as the cost of living crisis and economic uncertainty cloud spending decisions.
In February, ad spend was down by 6 per cent compared to a year ago, continuing a soft start to the calendar year.
As the US, Canada and Chinese ad markets grew in February, Australia’s declined led by drops in news publishing (down 20.6 per cent), total video (down 12.3 per cent) and cinema (down 9.6 per cent).
Magazines (down 4.4 per cent), audio (down 3 per cent) and standalone digital (down 3 per cent) proved more slightly more resilient, while investment in outdoor remained flat.
The only areas of growth were performance-led activity; social media bookings grew by 5.9 per cent and programmatic bookings increased by 4.7 per cent.
Guideline SMI APAC managing director Jane Ratcliffe said the market had forecast softer bookings until Easter, with demand likely to pick up in the second half due to the Paris Olympics and the Albanese Government’s tax cuts.
Thomas Macerola, the Sydney head of investment at Zenith Media, told B&T that marketers are cautious due to economic uncertainty, in particular whether the Reserve Bank of Australia would ease or tighten fiscal policy.
“Looking at 2024, we’re probably starting to see a lot of the Australian businesses are looking at their books and being a bit more cautious to start the year, and seeing how things pan out,” he said.
“Other markets went harder and faster much earlier on monetary policy than Australia… therefore we have seen some of the effects a bit later than the US, Canada and elsewhere.”
Atomic 212 CEO Claire Fenner told B&T that it is difficult to compare Australia’s ad market with other countries, and that it is too soon to raise the alarm bells.
“We typically see stronger growth in spend in the middle part of the calendar year, heading into and through winter, and this uptick in demand generally increases following Easter and Q1,” she said.
“There are also key events this year, such as the Olympics, that may be shifting investment into later quarters. I do think it’s too early to sound the alarm on reduced ad spend, as there is no consistent trend over the last eight months of data in this financial year, with the average decline 2 per cent.
TV’s ‘new norm’
When total TV figures are broken down, linear TV accounts for the lion’s share of investment and is the major contributor to the channel’s decline, down 12.9 per cent.
This continues an ongoing trend. In 2023, ad spend in linear TV, as recorded by the SMI, dropped by 13.9 per cent, which was partially offset by a 30.6 per cent growth in BVOD inventory.
Macerola said the drop in linear TV money is unlikely to return to previous levels, and could even be exacerbated as more SVODs, such as Amazon Prime and Paramount+, flood the market with ad inventory.
“I think that this is becoming the new norm,” he said. “The biggest challenge that the linear television model has is that it’s hard to reach 16 to 39 year olds.
“We saw that Pepsi has actually walked away from linear TV and is focusing primarily on digital channels. Will this become the norm? I don’t think so, but we will probably see a shift in the strategy around how you approach content across linear television.”
Fenner agrees, saying that outside of major events to stimulate growth, there will continue to be a decline in linear TV investment.
“BVOD investment hasn’t offset these declines, and I think it is too simplistic to expect it to be a like-for-like shift of investment from linear TV into BVOD as the marketplace is so much more complex than the historical TV landscape. Across our client base, we’re seeing total linear and BVOD investment hold relatively stable, with measurement to back up the continued performance of these channels for our clients.”
She believes Pepsi’s move away from linear TV, as reported by B&T in March, is unlikely to be the last brand to move away from linear TV.
“I think it would be naive to think that we won’t see more brands shifting spend away from linear TV, but we probably also don’t talk about scenarios where brands move away from other channels entirely or brands shifting budget into linear TV,” she said.
“I also think decisions like this aren’t driven entirely by channel dynamics but are largely driven by the brand’s specific context so it’s not indicative of an impending trend for a particular channel.”
The question is whether Nine, Seven and Paramount 10 are able to syphon linear TV leakage across their networks of assets. In February’s figures, there has been a year-on-year decline in digital TV video of 3.8 per cent. Comparing individual months in isolation can be fraught as various factors can influence investment decisions, but Macerola says there is no doubt that where advertisers traditionally would view BVODs as an alternative to linear, the addition of ad tiers in SVODs will place pressure on large Aussie broadcasters.
“You have Amazon Prime and Paramount+ later in the year. Some advertisers might be setting aside some of their AV budget for new opportunities that potentially come into play a bit later this year,” Macerola said. “More entrants in the market is going to place additional pressure on the likes of Seven and Nine.”
Reaping the reward
Linear TV’s audience challenge is benefiting other channels, including the likes of YouTube, TikTok and out of home.
Although the year-on-year investment in outdoor remained flat in February, the channel has been a star performer for over a year; in 2023 ad spend soared by 15.1 per cent.
Macerola believes outdoor is benefitting from linear TV’s audience challenges because it is a mass reach channel that can target younger eyeballs with short turnaround times.
Advances in technology have led to outdoor becoming an alternative to linear TV in some campaigns rather than a complimentary channel.
“Programmatic out of home is a hot topic at the moment but only represents about 4 per cent of trading in the category. Once they’ve got that all set up in the way that really gives a significant benefit to advertisers, there’s no reason out of home couldn’t see another rise in revenues come through,” he said.
Should newsbrands eye TikTok?
Last year news publisher revenue declined 14.4 per cent, largely fuelled by a 17.3 per cent drop in newspaper advertising. February’s figures are even more bleak; newspaper ad spend was down 23.6 per cent, and digital news dropped 14.2 per cent.
As newsbrands advertising slides, social media advertising investment is on the rise, with bookings up by 5.9 per cent, a figure that is likely to be much higher if direct bookings between advertisers and platforms are taken into account.
The structural challenges facing newspapers have been around for years, and may be further compounded by Facebook’s decision to switch off its news tab and walk away from news content deals with publishers.
Perhaps news brands should be turning to TikTok as a way of engaging with readers, especially younger ones.
“In our latest Imagine panel, we have found that the majority of Gen Z is consuming news content on TikTok,” Macerola said. “Whether we agree with that as media professionals, that is the reality of where young people consume news and this presents a structural challenge for newspapers.”
On the rise of TikTok, Macerola added: “We are definitely seeing TikTok become more of a staple in our clients’ social media plans. It is one of, if not the, strongest platforms if you want to reach a Gen Z audience.
“Although it’s still relatively new, we anticipate there’s probably going to be growth there.”
Fenner said that all media channels will continue to have a role to play in spite of tough economic headwinds, and that no single channel should be a ‘winner’ or ‘loser’.
“Marketers are increasingly looking for measurement solutions that help to identify the return on ad spend and drivers of marketing effectiveness of their channel mix and each particular channel,” she added.
“The more pressure that we see on advertising budgets, the more critical this data is to support the continued investment overall and also to determine the most effective allocation of budget across channels, based on proven performance.”
