Digital Horizons

Brand News: How Economic Pressures Are Shaping 2024 Advertising Strategies

• James Walker & Brian Hastings

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How are rising interest rates and macroeconomic pressures reshaping the advertising landscape? Uncover the complexities behind the slowing growth of advertising revenue in 2023 with insights from PWC's 2024 entertainment and media outlook. Join us as we dissect Lauren McNamara's revealing article on umbrellacomau, exploring how the cost of living and lower consumer spending are influencing advertising strategies. As agency owners with hands-on experience across various industries, we bring our unique perspectives on what businesses can expect in a post-COVID world.

Discover the dramatic shift from traditional media to digital channels and its far-reaching implications. We unpack the data showing a steep decline in traditional media's share of advertising revenue in Australia—from 60% in 2013 to just 20% in 2023. This significant transition is altering the advertising game, with businesses channeling their budgets into digital marketing to seize their market share. Tune in to hear our hot takes on what this means for the future of advertising and media, and how businesses can navigate these evolving trends.

The Digital Horizons Podcast is hosted by:

James Walker - Managing Director Walker Hill Digital
Brian Hastings - Managing Director Nous

Speaker 1:

Welcome to Digital Horizons, and today we are back with Brand News.

Speaker 2:

Yeah, love Brand News. Keeps me in the know, keeps me trying to research stuff. But I'm starting to realize not that much exciting stuff is happening from one day to the next in the marketing environment, but there is still a lot of information out there, a lot of stats out there that are bubbling up when we do look into brand news. One thing that I wanted to cover off is the macroeconomic pressures. How is that impacting advertising spend? So there's an article on that. We've got one more to run through. So let's jump into it. Get our hot take as agency owners. Sounds like fun, all right, all right. Here's the first one. This is on umbrellacomau by Lauren McNamara.

Speaker 2:

Advertising revenue rate slows as macroeconomic pressures continue. This is in a PWC 2024 entertainment and media outlook. So a little bit more of a deeper dive into that. I'm just going to go through the top lines here. There was growth. It was still growing In 2023, it was up 2.8% year on year. This is advertising spend, while a content boom is expected to come in 2025, according to PWC's 2024 entertainment and media outlook, revenue rose to 62.3 billion in 2023, compared to $60 billion in previous years. So the long and the short of this article is the growth is slowing. It's still growing, but it's down. And what are the causes of this? What are we seeing? They're basically attributing it to macroeconomic pressures, the cost of living, lower consumer spending, especially in retail. Yeah, that's leading to this decline.

Speaker 1:

Oh, interest rates as well. I mean that's all impacting it, right?

Speaker 2:

Yeah and look, we're going to not pretend to be an economic review podcast, but we do have a contact and access and a hands-on sort of finger on the pulse with a lot of different businesses and industries being agency owners. So, in terms of what you're seeing and feeling out there in the market at the moment with your clients, would that match what you're seeing or are you seeing it go in a different direction? It?

Speaker 1:

is, but I think we're also we're finally getting our clients to now not expect the highs that they went through over the post-COVID couple of years.

Speaker 1:

So I think that a lot of targets were quite inflated and that we're sort of getting back to that lower expectation or just because there was numbers that were hitting was so high coming out of COVID and year on year that haven't been able to maintain the growth, or some are, but many of them are sort of not having that extra cash that was sort of thrown around the economy at the time hitting their accounts.

Speaker 1:

So we are seeing it, and especially this time of year on the e-commerce side of things. It definitely a bit of a quieter period being in here in australia middle of winter and also leading up into sort of peak sales periods. So we are seeing a bit of a slow here and year on year potentially some down, but not not completely across the board. I think that the businesses that are still advertising they're not covering the full coverage of what their potential market is anyway. So it's not like, hey, there's less people buying, so they're getting less sales. It's like they're still advertising just as aggressively and so they're still generating a lot of sales, because it's not like that shrunken market is going to impact them.

Speaker 2:

Because they're not capping out at all the sales. They have more opportunity anyway. And yeah, the fewer consumers or lower consumer spending isn't yet going to impact them.

Speaker 1:

No, because there's still going to be people in the market that are willing to spend more. Unless they're in a very, very niche market where people are just not spending at all, that's not going to have that much of a thought and effect to them.

Speaker 2:

I also think there's a key point in here when they're looking at the advertising market spend in media. Basically, there is a huge factor at play that is attributing to the slow growth, and that's the shift away from traditional channels. They state here. The shift to digital has had clear implications on traditional media. According to the report, in 2013, 60% of all advertising revenues in Australia came from printed newspapers, television and radio, While in 2023, those avenues only attracted 20%. So 60% of all media spend were in those traditional channels. That's down to 20%. The margins on those were crazy. So while I think the revenue might've slowed overall, or the revenue growth might've slowed overall, I think it's also a bit more cost efficient to get out there and reach those audiences in digital channels as well.

Speaker 1:

I understand I think I was seeing something like Meta and even Google. They're still hitting record amount of spend on their channel, so it's all that money that's being pulled out of it, which is probably more expensive than there's been thrown into these platforms, and that's probably potentially why there's been a bit of a dip there too.

Speaker 2:

Yeah, absolutely. I mean from my perspective at Nowse when I think of the clients that we're working with. When there is pressure to deliver results within the business, when there's lower budgets due to economic constraints on our clients, we do see important components of media plans get stripped away. There is a refocus on performance only. Let's just strip back to generating those leads and sometimes that can be to the detriment of building the brand, which isn't as easy to qualify or quantify. Why it should be there? Because a lot of the benefit of the brand work is seen a bit further down the track and that reliance on the good old last click conversions seems to bubble up. But we are seeing needs from clients to try to counteract their drop in customer spends with advertising rather than going the other way. They're not dropping the performance campaign activity. They need it to try to grow.

Speaker 1:

So I listened to a great podcast this morning which was Perpetual Traffic John Moran is talking about. It probably wasn't released this morning, but it was pretty recent, but it was talking about the difference between demand capture and demand generation campaigns. And I think you just need those demand capturing campaigns on at all times, because if there's demand there, you want to make sure that you're showing up for it. So that's either your social ads targeting the in-market traffic or your Google search campaigns, and so making sure that you're showing up even if the market slows a little bit. You want to be turning up every time that people are showing like looking for your products or services. The demand generation is probably the part that you're referring to. People start pulling that down, but then that shrinks that little bucket of demand capture and so it has a flow on effect and it will just then snowball down to a smaller market because people aren't spending so much more and increasing the awareness of their products and services.

Speaker 2:

I think that's a really good way to word or explain the difference between demand capture and demand generation. Sometimes, when people hear brand campaigns, they immediately think money wasters.

Speaker 1:

Yes, just sticking the brand name up there and that's all it is.

Speaker 2:

If you separate it that way, a lot of clients think that there's just an endless tap of leads that can be attracted from the demand capture. There is only a finite audience that we can reach, who will be interested in your product at that point.

Speaker 1:

And swear. All your competitors are sitting as well. They're all there trying to capture that same amount of traffic and that same amount of people there. But if you're able to, then look outside of that and then, as you said, the brand campaigns, the demand generation campaigns you can build your own bucket that they aren't even getting in there.

Speaker 2:

They're bypassing that highly competitive environment and coming to you, hopefully, through channels that are at lower cost. So that wraps up that one. Let's move on to the next one, and it's very relevant, flowing on from advertising spends in traditional media reducing, and that brand versus or let's call it demand generation versus demand capture. This one is on Ad News and it is from Chris Pash Brand advertising is rising on YouTube. So how relevant. So the long and the short of it, advertising on Google's YouTube is seeing more brand advertising as the digital giant applies increasing AI-driven solutions. So search is up year on year, which is good. A lot of people saying search is dead with the excitement around TikTok search. But also YouTube was up 13% at 8.66 billion, and Google has stated that most of that is coming from the growth in brand as well as some direct response advertising. So this follows on nicely from our podcast last week around the power of YouTube targeting capabilities and its importance in your overall marketing mix. So what are your thoughts on this?

Speaker 1:

Yeah, I mean, it's what we've really been focusing on lately, isn't it? Youtube is so powerful and underused and the power of getting your ad on a TV and a lot of brands would never think it'd be possible With this tiny budget that you're able to apply. People are watching YouTube on their TV. You've got your big ad running on someone's big screen TV in their home. It's just so impactful and I feel like a lot of small businesses and smaller brands the bigger brands have been doing it forever since YouTube came out, but sort of the smaller brands, I think, are now starting to realize hey, I can really make an impact and build my brand awareness by putting ads on this, and we talked about it the other day.

Speaker 1:

I have turned off the ads because I want to turn on the ads, turned off the ads because I want to turn to on the ads, turn off the premium so that I can start seeing the ads. And I feel there must be a real lack of inventory because I'm seeing the same shit over and over again, and so I want to see more breadth and more diversification in the ads, but I'm seeing like the same advertisers hitting me over and over again. I feel this because there's just not enough advertisers for the amount of inventory that's on there. So I feel massive opportunity, as we've said, and we're going to be really focusing on this as an area, educating and giving strategies around how to really use YouTube to help grow your business.

Speaker 2:

Yes and I think we mentioned this in the YouTube specific targeting podcast that it kind of almost seems like it's a second rate platform to some clients and advertisers Like, oh, youtube, you know, that's just. You know little videos on your phone. I think where people fall down is thinking about their own media usage. If they watch free-to-air TV or they don't really use YouTube, they're thinking everyone is like them. But you need to, as a marketer and someone responsible for a media plan, trust the data in usage on these platforms. Stop thinking that everyone is exactly like you and how you consume media. And if a platform has a certain level of penetration in the market, the capability to reach and engage with a large volume of people over a long period of time, it's kind of indicating that well, maybe you don't use that platform in your downtime and for entertainment, but a lot of people are Give it a go, it's going to be worth it and a lot of marketers are catching onto this and that's why we're seeing that brand growth in YouTube. So good confirmation for us and I promise it's not confirmation bias I didn't just go out looking for something pro YouTube after our last episode. Also. That wraps up our brand news for this week.

Speaker 2:

I did want to highlight in a brand news episode from three weeks ago, we talked about the deprecation of cookies on Google. Five days later, google announced that they were rolling that back and we did cover that off in the next brand news. But I just wanted to highlight that we are aware of the fact that Google is no longer getting rid of cookies, so to the glee and happiness of advertising agencies, media planners and programmatic businesses everywhere. Yeah, such a good day. Yeah, it's all handy for us, but yeah. So that wraps up Brand News this week. We'll be back in a couple of days with our next episode. Thanks for listening. In a couple of days with our next episode. Thanks for listening, thank you.