Media Sector Praying For End-of-year Growth Spurt In Ad Spend: SMI

Australia’s media sector will be hoping newly buoyant product categories combined with further gains from categories reporting strong growth at the end of 2016 will ensure the media agency advertising market delivers growth after a tough 2017 calendar year.

In the first eight months of this calendar year, Australia’s media market is tracking 2.5 per cent (or $113.4 million) below the level achieved in the previous eight-month period, according to Standard Media Index (SMI).

However, most of that decline is due to the lack of federal election-related ad spend, and if the figures were normalised for government ad spend, the total would be back a lesser 0.3 per cent to $4.3 billion.

Even so, for the market to grow above last year’s total requires further investment from some key product categories.

SMI Australia/NZ managing director Jane Schulze said SMI’s product category database shows the back-end of 2016 was notable for particularly large growth in ad spend from the food/alcoholic retail and credit card sectors.

“The food/alcoholic retail category really drove the market’s growth at the back end of 2016 by investing an extra $34.8 million in advertising in the fourth quarter alone,” she said.

“In 2017, we can see that category is already the fastest growing in dollar terms, but the level of overall investment is less, with the sector increasing ad spend by $29.7 million over the whole eight months of this year.

“That means the category has to more than double the level of dollar growth for the whole year thus far to even begin to reach the growth levels seen in the fourth quarter of 2016.”

In the food/alcohol retail category, TV captured the lion’s share of ad spend from these marketers, gaining an extra $14.8 million in ad bookings, while outdoor’s ad spend from this category grew by $7.7 million and digital’s spend grew by $7.4 million.

And it may be that the credit card market is this year replicating a similar investment scenario to that seen in 2016.

So far this year, its ad spend is back 3.2 per cent on the same eight months last year, so it looks to be preparing for a final end-of-year advertising push as it did last year, Schulze noted.

“In the fourth quarter of 2016, the credit card category was the second-fastest growing after food/alcoholic retailers, with its actual ad spend lifting $12.2 million – or by 53.1 per cent – from the year-ago quarter, with the bulk of that extra investment being directed to the digital, which was up $6 million, and television media, up $5.6 million,” she said.

“But for the first eight months of the year, its ad spend is back 11 per cent, so if that pattern recurs in 2017, it will ensure another strong burst of media investment at the end of this year.

“If these trends continue, television, digital and outdoor will be looking at a windfall in the final quarter of 2017 for both categories.”

Schulze said the categories of discount stores/ online retailers, micro/small cars and auto insurance also followed the same pattern, reporting significant declines in ad spend in the first eight months of the year, only to report huge fourth-quarter growth.

“Discount stores/online retailers reported a 38 per cent fall in ad spend in the first eight months of 2016, but it’s clear the marketing budgets were being saved for a strong fourth-quarter push, as in that later period total ad spend soared 25.8 per cent,” she said.

“And on an even grander scale, the micro/small car market had reduced 2016 CYTD ad spend by 5.4 per cent before growing its market budgets by 96 per cent in the fourth quarter.”