Magna report: Australian ad economy to grow 2.5% in 2019; digital adspend growth matures, dips to single figures for first time since 2001

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Magna report: Australian ad economy to grow 2.5% in 2019; digital adspend growth matures, dips to single figures for first time since 2001

Australia’s media advertising economy is predicted to grow by +2.5% in 2019 – slower than 2018’s +5.3% performance – to reach AU$17.0 billion. The new forecast has been issued by IPG Mediabrands’ media intelligence and investment division Magna.

 

The new Magna data also predicts Australia ad expenditures will increase by +3.4% in 2020 to reach AU$17.6bn, as we remain one of the most advanced advertising economies in the world and with the second-highest ratio of ad-spend per capita of AU$723 per year.

Economic confidence has dipped recently as a result of low manufacturing figures, concerns around the pace of trade and any impact of potential international trade wars. There is also a deflationary residential property market and low wage growth. Real GDP expectations in 2019 are reported at +2.1%, with CPI at +2.2% for nominal GDP of +4.3%. In 2020, real GDP will accelerate to +2.8% but inflation will decrease, keeping nominal GDP steady. Should there be any further slow-down we would expect further effect on the advertising market.

Magna says digital advertising now accounts for a massive 60% of brand budgets, the sixth highest share globally. Concurrently, digital media is so mature in terms of usage and spend that growth rates are starting to plateau. The digital market however continues to shift to more mobility in device usage with approximately 60% of digital revenues expected across mobile devices. 75% of digital revenues are expected to be through mobile devices by 2023.

Says Victor Corones (above), managing director, Magna Australia: “We expect total digital ad spend to grow by +7.5% in 2019, the first year of single-digit growth since 2001. 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.

Digital growth is driven predominantly by Video (+16.1% YoY), Social (+11.9%) and Search (+6.5%) with Search overall accounting for 45% of all digital ad spend.

Magna’s data says linear television revenue will shrink by -4.7% this year, the sixth consecutive year of decline. Linear TV audiences in Australia are shrinking by approximately -10% per year, partly due to the rapid rise of Video on Demand. Whilst we are seeing a decline in linear TV, the accelerating growth in Broadcast Video on Demand Services (BVOD) will deliver a close to flat market for the TV networks.

The linear TV market has also come under pressure from SVOD services. Netflix has been in the Australian market for four years and has more than 10 million subscribers. Other SVOD players are also experiencing double digit growth in audience levels, albeit off a relatively small base.

The introduction of Virtual Oz (VOZ*) measurement through Oztam is now expected to be in market in 2020 and this should bolster the Free to Air Networks’ total revenues.

Australian linear TV has one of the lowest market shares worldwide at less than 20% of total advertising. Despite this lower share TV is clearly still the strongest driver of brand awareness in this market.

In 2019 Magna sees an increase in the number of sporting telecasts on linear television. Many being telecast on the smaller digital networks. An increased focus on women’s sport is also noticeable across network schedules as is the increase in US-based sports such as the NBA and NFL. These new events are not yet significantly impacting on overall TV revenues. However sport is seen as a key component to the networks overall strategy to retain live audiences.

The next big sporting event that could significantly move the adspend needle is the 2020 Summer Olympics in Tokyo.

This year’s Federal Election had only a mild effect on the advertising market, with Clive Palmer’s reported $60 million campaign the only bump of real significance during the period. The election appears to have somewhat masked an underlying weakness in the market.

Magna’s data also sees Print media, as with most mature advertising markets, coming under continued pressure. Newspaper advertising spend will decrease by -13.5% this year and Magazine performance will be at -17%. Terrestial radio is stable at +1% growth year-on-year. Out-of-Home will grow +4.9% this year, weaker than last year’s +9.4% performance, but still robust compared to the rest of offline media formats. Digital OOH will grow the fastest, but not to the degree that it has in past years due to a slowdown in conversions of classic format OOH sites to digital.