Digital ad spend growth dips to single figures for first time in 18 years

Digital ad spend is set to grow by 7.5% this year, the first time growth has been in the single figures since 2001. The latest forecast has been issued by Magna, IPG Mediabrands’ media intelligence and investment division.

Magna also predicts local ad spend will grow by 2.5% this year (less than half of 2018’s 5.3%) to $17bn, and 3.4% in 2020 to $17.6bn.

MD Victor Corones

“We expect total digital ad spend to grow by +7.5% in 2019, the first year of single-digit growth since 2001,” said Magna Australia’s managing director, Victor Corones.

“Digital spending growth had already started to slow in the first few months of 2019, as it has in many other mature markets, despite the May federal election.”

Slowing digital growth

Digital growth is driven by video (+16.1% year on year), social (+11.9%) and search (+6.5%). Search accounts for 45% of all digital ad spend.

According to the forecast, digital advertising accounts for 60% of brand budgets, the sixth highest share globally. However, it is also maturing, leading to plateauing growth rates. Approximately 60% of digital revenue is expected to be across mobile devices. That figure is expected to jump to 75% by 2023.

Magna said the results reflect Australia’s position as one of the most advanced advertising economies globally, with the second-highest ratio of ad spend per capita of $723 per year.

However, it noted the impact of lowered economic confidence on the ad market, citing “low manufacturing figures, concerns around the pace of trade and any impact of potential international trade wars”, along with the property market and low wage growth. Magna said that, should the economy slow down further, this will continue to effect ad spend.

Election “masked” market weakness, especially in TV and print

Magna said this year’s federal election had a “mild effect” on the market. Clive Palmer’s $60m ad spend was “the only bump of real significance”, which in turn “somewhat masked an underlying weakness in the market”.

This weakness is reflected especially in linear TV revenue and print, it said.

TV revenue is set to drop by 4.7% this year, its sixth consecutive year of decline, with Australian audiences shrinking by around 10% each year. In Australia, TV has one of the lowest market shares in the world at less than 20% of total advertising, but it’s still the strongest driver of brand awareness locally, the report said.

BVOD is experiencing accelerated growth however, which Magna said will restore the TV market to flat, however SVOD services like Netflix will continue to put the market under pressure.

OzTAM’s VOZ measurement is set to launch in 2020, which Magna expects will boost free-to-air networks’ total revenues.

Magna noted an increase in sporting telecasts on linear TV and an increased focus on women’s sport and US-based codes such as the NBA and NFL. While these aren’t having a significant impact on overall TV revenues, sport is a key part of networks’ strategy to retain live audiences. The Tokyo 2020 Olympics is the next big sporting event that could significantly push the ad spend needle up.

Print, the most mature ad market, continues to face pressure, with newspaper ad spend set to shrink by 13.5% this year and magazine spend by 17%.

Radio is stable, with 1% growth year on year, while out-of-home will grow 4.9% this year (weaker than last year’s 9.4% growth, but strong compared to other formats). Digital OOH will experience the fastest growth, but not to the same degree as in previous years, since the transition from traditional OOH sites to digital has slowed.


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