Analysis

The new adspend figures don’t look good

BY Tim Burrowes

April 4, 2023 11:57

Welcome to a midweek update from Unmade. Today, we dig into this week’s new adspend numbers from Standard Media Index.

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The fall in adspend is more complicated than Covid

Digital art: Midjourney | Prompt: A bonfire of transistor radios and TV sets

So how bad was the latest set of monthly Standard Media Index numbers?

If you compare them to last year, pretty bad. If you compare them to other years then also pretty bad.

The data from SMI covers agency spend in February. SMI’s business model is built around selling its best data, so it doesn’t share actual dollar amounts in its monthly releases, just percentage movement. That means the monthly release requires a certain degree of interpretation to work out what’s going on.

It’s also worth bearing in mind there are always variables. Last February was at a point when pre-election government ad spend was booming, and marketers were still normalising their strategies after Covid.

However, the indisputable fact is that agency adspend in February this year was down by 8.5% compared to February 2022.

The trend lines are still disrupted, with a crash during Covid, then a bounce back after lockdowns ended.

By looking back at the last six years of releases for February from SMI, more of a picture begins to emerge.

Agency adspend grand total (February):

2018: +7.6%
2019: -8.3%
2020: -5.3%
2021: -2.8%
2022: +3.3%
2023 -8.5%

The first, most obvious, thing is that this February’s fall is not fully explained by it being compared to a good year in 2022. The overall trend has been one of decline that started long before Covid. Those 2019 and 2020 falls happened before lockdowns began.

Let’s dig into some of the media channels I’d consider healthiest, starting with TV, both linear and digital.

Agency adspend – television / video (February):

2018: +5.3%
2019: -11.4%
2020: -1.6%
2021: +8.8%
2022: -7.1%
2023: -16.2%

That suggests that TV revenue for this February was sitting at roughly 80% where it was five years ago. Not that pretty. I suspect that Nine took a disproportionate share of that February spend thanks to the strength of its ratings, which would have made things even tougher on Seven and Ten.

Radio isn’t quite as bad, but still down on five years ago. Like TV, radio went backwards this February:

Agency adspend – radio / audio (February):

2018: +8.8%
2019: -2.4%
2020: +5.4%
2021: -8.9%
2022: +3%
2023: -8.1%

That may also help explain why Southern Cross Austereo’s share price is so far into the doldrums. If the company had given any previous profits guidance, it would likely have needed to reissue it by now. It’s not going to be a pretty half. Probably not for HT&E either.

Next, outdoor. Even with the setbacks of the first year of Covid, outdoor is still a growth medium.

Agency adspend – outdoor (February):

2018: +29.1%
2019: -2.1%
2020: +1.5%
2021: -22.3%
2022: +7.5%
2023: +11.9%

And the unhappiest story comes from magazines where the medium has shrunk so much there are far fewer advertising outlets.

Agency adspend – magazines, print and digital (February):

2018: -23%
2019: -11.1%
2020: -16.2%
2021: -42.2%
2022: -9.4%
2023: +6.6%

This February’s 6.6% growth is the only time the magazine sector grew its revenue in the years we’re examining.

All of it came as the sector (by which we mainly mean Are Media) finally began to grow its digital revenues. Off a low base, digital revenues were up 62.9%, even as print ads fell another 6.9%.

The news business is similarly tough, with numbers also down since 2020 because there are fewer local news outlets:

Agency adspend – news media, print and digital (February):

2018: -19.4%
2019: -12.6%
2020: -11%
2021: -12.8%
2022: +1.2%
2023: -27.3%

What’s perhaps most worrying for newspapers is that this year’s fall is both in print ads (down 24.9% – ouch), and digital advertising (down 31.8%!) – and that’s before Scire enters the market. No wonder subscription revenue is so important for news.

Intuitively, the advertising market is yet to hit bottom. Much of the economic pain of interest rates still lies ahead for consumers, as fixed interest loans drop off in the coming months.

For the ad industry, the pain has already begun.