SMI June: Agency spend sets new FY record over $7.1b

Australia's media agency market is this month feeling the full effect of last year’s pre-federal election advertising deluge with government category spending now back 69% year-on-year and disguising solid underlying growth across key media and media sectors.

MORE: SMI reports May 2016 government ad spend distorting YOY ad comparisons

As such SMI’s headline number shows the market back 9.2%, or by $60.1 million in June, to $596.7 million but that reverts to a stable position (-0.6% before late digital bookings are included) once $59.7 million in abnormal 2016 government bookings are added back.

Last year’s unusually high government ad spend also affects SMI’s June quarter figures which show a headline market decline of 4.8% reverting to growth of 1.4% to a record $3.23 billion once the $95.6 million in Q2 government category advertising expenditure is added back.

The Australian agency market is also on track to deliver its fifth consecutive year of record financial year advertising expenditure with the total for the 2016/17 year now back just 0.1% at $7.1 billion, but that with a difference of only $10.5 million from the previous year the record will be achieved once SMI included late digital bookings this month.

Meantime, the media most affected by the government spend last June is television with its top line decline of -10.8% changing to growth of 3% once normalised for government bookings. For full transparency, SMI has provided June growth figures both with and without government category bookings included. (See chart below.)

SMI AU/NZ managing director Jane Schulze said the sheer size of government category ad spend in June 2016 ahead of the federal election on July 2 last year meant this was another month in which the top line numbers could not be looked at in isolation.

Jane Schulze

"As I said last month, federal elections are like Olympic broadcasts from an advertising revenue perspective and are absolutely abnormal events, and that’s even more apparent this month given the proximity to the date of last year’s fiercely contested federal election," she said.

"So, again, it’s important to look at the underlying result and also the longer-term trends and despite all the tough comparative challenges from last year, Australia’s Agency advertising market is set to deliver its fifth consecutive year of record financial year ad spend which underscores the strength of our market."

Schulze added the fall in government category ad spend also disguised continuing growth from other key product categories such as the market's largest – automotive brand – lifting its media investment by 7.6% this month, while the home furnishing/appliances market grew its ad spend 14.4%.

On the flipside, retail advertisers delivered a rare month of lower ad spend (-1.5%) and travel bookings fell by 10.8%.