When the recession finally hits, Australia’s marketers will not survive
Australia’s world-record winning run of recession-free economic growth has to end at some point. When it does, advertisers and marketers will be the first to notice, writes Jason Rose.
If you work in the advertising and marketing industry, I would like you to stand up right now and just say thank you. No matter how hard your day has been, no matter what disasters engulfed you, I want you to take a moment to genuinely express how grateful you are.
Why is that?
Because Australia has recently set a new world record, and for once it doesn’t involve a 50-metre swimming pool or a yard glass. We have just enjoyed the longest ever run of successive quarters of economic growth without a recession – 103 quarters or 26 years.
That means that if you started working in advertising and marketing at any time after 1991, you have never experienced the impact of a recession on what is traditionally the most sensitive industry to an economic slowdown.
I believe that this good fortune also carries with it an enormous risk for the industry, because an entire generation of agency owners and managers have never had to survive an economic slowdown. All their skills and experience have been developed in benign economic times.
That’s not to say that times have necessarily have been easy. The industry has certainly faced a range of challenges from digital disruption to far more savvy clients. However, those challenges are minor compared to a recession when the consumer economy literally goes backwards.
Everything you read about entrepreneurship today is about growth. Every second profile on LinkedIn uses the term growth hacker.
That’s all fine when times are good. But what happens in a downturn? How equipped is everyone to deal with a shrinking economy when no-one is spending, customers aren’t paying their bills and suppliers are yelling down the phone for payment? It’s tough.
My fear is that agency management today are like boxers who have only ever learnt how to throw punches on a back-pedalling opponent but have never learnt defence. They’re in for a big surprise when they come up against an aggressive opponent who fights back.
And don’t be fooled into thinking that today’s marketers are more aware of the long-term risks to a brand of cutting budgets in a recession. They’ll still do it. That was certainly the experience in the UK in the aftermath of the GFC.
Marketers feared losing their jobs far more than they feared losing future market share. Indeed, perhaps they too lacked the experience of previous generations of marketers and panicked far more than their predecessors might have.
The other great concern is that I regularly speak to people in agency land and it’s scary how many independent shops can (secretly) teeter on the brink of insolvency from one month to the next even in these relatively gentle economic times. They are disasters waiting to happen in a true downturn.
Now, I don’t want to sound like a doomsayer. That’s not the point. I just think it’s important that agencies recognise that despite the occasional news stories about poor consumer confidence, tough retail conditions and so on, they have been living through a period of unprecedented growth.
Agencies need to absolutely continue focusing on growing their businesses. However, they also need to dedicate time to considering their vulnerabilities to an economic downturn and developing and implementing strategies to minimise those vulnerabilities.
After 26 years of unbroken economic growth, I am reminded of the quote by the world’s greatest investor, Warren Buffett: Only when the tide goes out do we see who’s been swimming naked.
When the tide goes out in the local marketing services industry, I hope there’s not too much bare flesh on show.
Jason Rose is co-founder of marketing services investment company Ambient Ventures and an associate director of corporate advisory firm Concept Financial Services Group.
Not sure what planet you’ve been on for the last 9 years. Post GFC marketing has been a constant sh1t sandwich of endless budget cuts and restructures.
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Cheers, Fraser.
I take your point and I certainly wasn’t trying to suggest that times have necessarily been easy for marketing services companies but rather that they have the potential to become much tougher.
I remember reading a book once about selection for the elite SAS regiment. The candidates were tasked with completing a gruelling march over many kilometres of harsh terrain.
Many dropped out along the way through injury and exhaustion. A few got to the anticipated finish line, relieved they’d finally made it, only to be told that they had to march a further X kilometres.
Instantly, a bunch of guys, having thought they’d put up with the worst of it, crumbled and pulled themselves off the course. A few, however, pushed on and were told only a few hundred meters into the new task that it was over.
A long-winded way of saying that no matter how tough things may seem, they can always get tougher and that only those with the deepest reserves of resilience will ultimately make it.
Jason.
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SAS parable? LMFAO.
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If you shared that anecdote on Linkedin with something off Google images you’d get north of a thousand likes.
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If you dig a little harder, you will find the longest running expansion of GDP was by the Japanese economy post WW2.
Australia’s GDP has only been lifted by record migration, actual wages growth is at recession levels.
If you’re going to wade into an economic debate, reading more than MSM may help.
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On the plus side: when the recession comes we can go and do meaningful work elsewhere and stop creepily tracking everyone and hounding them to buy stuff they don’t want.
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Given the huge proportion of budget spend going to Facebook and Google these days, any future downturn will quickly show up in their revenue.
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Fair enough.
It was widely reported in the media that Australia had chalked up something of a record when it came to uninterrupted economic growth, though I do acknowledge your real wages comment.
Having said that, I remember the last true downturn in the late 1980s / early 1990s. The jobs market was smashed. Countless people defaulted on their mortgages and lost their homes. It was an ugly time and a lot of people took a very, very long time to recover.
However uninspiring aspects of the economy may be at present and may have been for a while, I honestly don’t think they compare with where things have been in the past.
Jason.
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A very generic article that doesn’t really articulate any new learnings or deliver usable advice from it.
How did this one make it through the Mumbrella filter?
— The issue discussed here is applicable to any business, if nobody is buying the goods or services of the business you supply to, for sure they are going to cut their expenditure with you…. unless you are a good marketer who prevents them from losing business… then you are worth keeping.
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Your handle is too long to use as part of a salutation…
What I was trying to do was provoke some thought and discussion rather than fear monger. I also actually don’t offer any services that would benefit from the topic of discussion.
I was inspired to write the article after meeting an agency owner who confided in me just how precarious his financial position was from month-to-month. You certainly wouldn’t know it from the outside looking in. They appear downright successful
The scary part for me is that he had months where he could barely pay his staff so imagine if times turned really nasty. His shop would fall over very quickly and tens of people would be out of a job.
Sure, there is an element of the generic in that concern but advertising and marketing have traditionally been the first area CFOs slice when the economy deteriorates.
Maybe next time it will be different. Maybe the next serious recession is another 26 years away. I hope so. Either way, it’s probably worth considering and discussing.
In terms of practical advice, I believe the key to risk management isn’t in the individual measures that can be taken to mitigate risks. Rather, it’s in opening your mind to the potential risks that might be out there that you probably haven’t considered.
Jason.
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Hi Jason, Completely agree with you. Not too many people remember the last recession and with the amount of debt being racked up its only a matter of time before the economy slips.
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Intentional ad revenue will probably stay the same wont it? It is a necessity and companies will want to be appearing for potential sales. I would forecast a plunge in large production heavy advertising. TV ad’s as an example. Large print ad’s. Very costly and not very trackable to ROI. We shall see, however after the last GFC we saw a lot of the for-mentioned activity.
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Jason you are right. Reading of the
Great Depression and GFC, this is so
How it will happen a small fire, gets bigger , gets out a control, panic and
desperation and loss. ‘A bit dramatic ‘
but for people to ignore, the same warning signals, that are reappearing
and dispel it as a blip on the radar, that
can’t happen again are deluded and need to read economic downturn in past .
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What’s awaiting moderation? Mean
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