Magna Predicts 2.9% Ad Growth in Australia for 2018
December 11, 2017: Australian advertising revenues are expected to grow by +2.9% to AUD $16 billion in 2018 according to the latest forecast from Magna, the media intelligence and investment division of IPG Mediabrands Australia.
Magna’s most recent forecast, issued this week, sees 2018 growth lower than 2017’s expected full-year performance of +3.2% and also below Magna’s prior forecast for 2018 of +4.3%. Taking a longer view on industry growth, Magna expects total ad spend to see a +3.8% five-year compound annual growth rate (CAGR), about half the pace seen in previous years.
“The International Monetary Fund has reduced Australian growth expectations to +4.2% on a nominal GDP basis, down from prior expectations of +5.3% growth,” said Magna Australia managing director Victor Corones. “This is a combination of both lower real GDP and lower inflation, both of which result in a headwind to advertising spending”.
Corones added; “Whilst forecasts appear initially dampened, The Commonwealth Games and several State Elections are potential growth levers across the year for several media sectors. A Federal Election currently pegged for 2019 also has the potential to move earlier and fall into 2018.”
Sectors such as travel, automotive and retail are expected to grow in 2018; particularly retail as the Australian market awaits the impact of Amazon’s launch. One ad-spend sector Magna expects to contract in 2018 is real estate as activity cools from pace seen in 2017.
Magna’s assessment of macroeconomics affecting future media adspend include:
- Growth in household debt continues to rise
- Inflation outstripping wage growth makes it tougher for households to service growing debt.
- Whilst unemployment rates appear to be improving, under-employment (those that are unemployed and/or seeking more employment) continues to be a watch out as households seek to maintain or improve their quality of living.
- Consumer Retail spending in third quarter 2017 was flat year-on-year with no significant signs of recovery.
It is no surprise that digital remains the driver of ad revenue growth in Australia and is expected to increase by +10% in 2018 to reach AUD $9 billion. Australia remains one of the most advanced digital advertising economies globally, with the 4th highest digital share of media spend expected in 2018, at 57% of total budgets. Previously this sector experienced growth of +19.1% CARG (2012-2017). It is important to remember that as the digital base of spend grows larger, growth rates will naturally decline.
Search is predicted to increase +7.7% in 2018. This growth will be fuelled by an increase of new features and innovation, such as location-based search, shopping feeds and integration of search features in more devices giving advertisers more opportunity to connect with customers. However, diversification of Social Media through players like Facebook, SnapChat and Pinterest are expected to place pressure on the growth of Search.
Social media is expected to see continued growth in ad spend of +18.1%. The rise of news feeds, diversification of social platforms and increased mobile usage are seen as key drivers in 2018.
Total digital display investment is expected to remain close to flat.
Across the total digital eco-system mobile will attract close to 54% of spend. By 2022 Magna predicts mobile will account for as much as 72% of all digital ad spend in Australia.
Screen video advertising, which includes linear, catch-up and video streaming services, is expected to see +2.0% growth in 2018 and +1.9% five-year CAGR. Video is by far the standout performer, expected to see +21.7% growth in 2018 and +17.8% five-year CAGR. Linear TV is expected to see -4.0% in 2018 and -6.0% contracted CAGR. This is partly, a reflection of how TV networks are shifting their business model into newer revenue streams, such as streaming, that are currently classified under Digital.
Magna’s report says that linear TV’s greatest challenge is how best to diversify revenues while continuing to protect the dominant revenues of their broadcast services.
“The clock is ticking on this scenario,” said Corones. “As consumers continue to seek out content across multiple devices and platforms linear TV channels face audience declines, which in turn is driving inflation for this medium. The concept of clients paying more for less is always challenging even for such a powerful and dominant medium such as linear TV.
He added, “All three major commercial TV networks spoke about their digital streaming capabilities in their up-fronts going into 2018, particularly as connected TV apps start to deliver audiences at scale. This lays an important foundation for new revenues so getting the consumer and experience right are critical.”
Magna’s report says that out-of-home (OOH) ad spend is expected to see growth of +6.6% in ad spend in 2018. With Digital OOH expected to increase by +15% and account for close to half of ad spend within this sector. Traditional OOH is forecast to remain flat. Measurement verification will be a key focus particularly in digital OOH for 2018.
Radio growth is pegged to +1.0% year-on-year growth.
Finally, print continues to see precipitous declines, and expectations for 2018 are for contraction rates worse than -20% for both magazines and newspapers.