Ad market to drop by 8.3% in 2020: IPG Mediabrands’ Magna

The local ad market will drop by 8.3% this year, according to IPG Mediabrands’ investment unit, Magna.

Ros Allison

The announcement:

Australia’s advertising market will decline by -8.3% this year to total $15.4bn (US$10.7 billion) according to Magna, IPG Mediabrands’ media investment and intelligence division. The report on Australian ad spend is part of a Magna Global Study on market expenditure across the world in 2020.

The 8.3% decline will be a result of linear ad spending declining by -17%, but digital advertising spend will remain robust, shrinking by just -2% and that strength will come primarily from social (+5%), video (+3%) and search (-2%).

Digital represents a huge 64% of total Aussie ad budgets, one of the highest global ratios and as with many countries and regions, brands in Australia have prioritised channels that support ecommerce in terms of spending cuts as the COVID recession set in.

Brand advertising that targets consumers higher in the funnel has been weaker than direct advertising. Weakness in digital advertising will come from static banners (-17%) and other digital advertising (-18%). In 2021, digital will rebound by +11% to surpass two thirds of total Aussie advertiser budgets.

Linear advertising formats will experience a -17% decline in spending in 2020. They combine to represent just over 1/3 of total budgets. Television advertising revenues will decline by -12% to represent just 19% of total budgets. In addition, while the Tokyo Olympics weren’t expected to generate a major increase in market spend this year, postponing the Games to next year is another setback for the industry.

Australian TV viewing spiked during the Covid shut-down. Viewing time increased by 15-20% and as life returns to normal so has viewing, which now has a small premium year on year. Other linear formats have suffered even more declines. Radio will shrink by -15%, print will shrink by -29%, and out of home will shrink by -19% in 2020.

“This is unsurprising given the decline in mobility exhibited by Australian consumers as a result of COVID shutdowns and consumer fears,” said Ros Allison, Head of Group Performance at Magna Australia. “Transit mobility peak declines were in early April, with consumers showing 70% less movement than they did in 2019. Mobility has increased recently but remains 40% below 2019’s levels.”

Australian lockdowns mostly began on March 16 with different rules depending on the severity of the impact in each Australian state. Restrictions weren’t as severe in Australia as they were in many countries as work from home wasn’t strictly mandated even for non-essential businesses. As Australia emerges from COVID-related restrictions, the subsequent economic rebound will be significantly impacted by how fast Chinese demand and Chinese construction projects resume, as much of Australia’s non-tourism economy is driven by China.

By industry, Australian advertising spend will be weakest in travel (-20%), auto (-18%), and appliances (-10%). Relative strength, on the other hand, will come from personal care (-1%), as well as Pharma (-3%), Food & Beverages (-3%), and Telecom (-3%).

In 2021, Australian advertising spending will increase by +6.9% to reach AUD16.4bn, slightly below the 2019 totals (which won’t be surpassed until the end of 2022).

Source: Magna media release


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