The Advertising Standards Authority recently released the amount of advertising revenue generated last year in New Zealand. Traditional media is struggling but as Mark Jennings reports, there are a few bright spots.
The advertising industry and the media that depend on it are mired in the doldrums – unless you are Facebook, Google or a digital billboard company.
The amount spent by advertisers in 2017 was $2.561 billion, a drop of $11 million on the previous year and barely more than the 2015 figure of $2.57 billion.
The money continues to flow out of newspapers and magazines into digital media.
Newspapers dropped by 15 percent from $417m to $353m in the last 12 months.
This is on the heels of a 12 percent drop the year before.
Newspapers' share of the advertising market has now dropped from 20 percent in 2015 to below 14 percent.
In contrast digital has gone from $800m in 2015 to $925m last year and now accounts for 36 percent of the total market.
The bad news for the traditional media companies is they are not getting much of a share of this growth.
The radio industry for instance has managed to pull in just $6m or 0.23 percent of the digital market.
The digital operations of the newspaper chains have now passed $80m but the growth is dwarfed by the loss out of print.
However, there are some bright spots for the traditional media in the latest survey.
Television is making something of a comeback. It is up from $559m in 2016 to $566m last year.
Industry sources say the trend has continued this year and advertising revenues in March were up five percent, year on year.
Sean McCready, owner of New Zealand’s largest independent media agency MBM, says there is an increasing realisation that digital is not that effective at building company’s brands.
“I think some brands have decided that they have over-invested in digital and are now coming back to television.
"They understand now that they probably need both (TV and digital) to build a brand and it is not an either nor situation.
"Television is also very cost-efficient; the price of advertising on TV hasn’t gone up in the last five years.”
Recently, the TV players (TVNZ, MediaWorks and SKY) put aside their competitive differences to reform the lobby group Think TV.
Their aim is to hit back at the online giants and re-educate a generation of young media buyers on the benefits of TV advertising.
The one place where digital disruption has helped traditional media instead of hurting it is in the outdoor sector.
Digital billboards are transforming an industry that was going nowhere.
Since 2015, the spend on billboards has gone from $95 million to $140 million.
Outdoors' share of the advertising market is up from 3.7 percent to 5.4 percent.
According to McCready, digital billboards have put “some excitement back into outdoors".
“Now you can upload an image to a billboard for a few hundred dollars instead of spending thousands on skins (the printed image on a billboard) and that makes outdoor very attractive. Changes can be quick and because media is now so fragmented, digital billboards are a way of making an impact - people can’t avoid them.”
Phil Clemas, CEO of Lumo, a digital-only billboard company, says the growth reflects a global trend that has been evident for the past three to four years.
“I think the growth in New Zealand will continue for another couple of years before we get close to saturation.”
Clemas agrees with McCready that the fragmentation of other media is helping the outdoor sector.
“Our audience is actually growing. We, now get 40,000 cars a day passing our Anzac Avenue billboard in Auckland. Our digital billboard in Hamilton gets 27,000 cars a day past it.
“Billboard operators love traffic congestion, we love increasing traffic volumes. Our measurement is also good. When people read a newspaper or watch television they do it for the editorial content, you don’t really know if they are reading or watching the adverts. When you are stopped at the lights in your car we know you are going to read the billboard.”
According to Clemas, advertisers have yet to fully understand the capability of digital billboards and when they do it will further spur growth.
“At the moment, they (advertisers) don’t buy specific times of the day but this will come, particularly when we can give them real time information on the volume of traffic passing a site."
Radio has had minimal growth but it has been resilient. Digital disruption in the form of music streaming platforms seems to have had little impact on the medium.
McCready also points out that radio, unlike other media, did not take a hit from the Global Financial Crisis.
“Radio did really well during the downturn and that is partly because it has a lot of geographic diversity and is sold differently in this market.”
McCready is referring to the way many small businesses deal directly with radio stations and don’t use agencies to buy media time. They often enter long-term relationships with the stations and get rewarded with trips to places like Fiji.
The ownership structure of commercial radio in New Zealand also means stations get access to a lot of cross-media promotion.
For instance, Newstalk ZB personalities like Mike Hosking are regularly promoted in the NZ Herald and on its website. Both are owned by NZME and even relatively unknown radio hosts end up featuring in its news properties.
MediaWorks, which has nearly 53 percent of the radio market, uses its TV channels to promote its radio hosts.
This season TV3’s Dancing with The Stars programme features The Rock’s Roger Farelly and Robert Rakete from The Breeze as contestants. One of the show’s hosts, Sharyn Casey, is a DJ on The Edge. All three stations are in the MediaWorks’ stable.
CEO of the Radio Broadcaster Association, Jana Rangooni, agrees that radio’s brand strength has helped it hold the line on revenue.
“There is a brand for everyone and people regard radio stations and radio personalities as their friends."
She says streaming platforms like Spotify haven’t hurt radio as much as commentators predicted.
“The reason for that is that a good programmer can still put together a better playlist than you or me or an algorithm.”
But Rangooni is cautious about the future. “As well as promoting individual brands, industry players need to make sure they put aside any squabbles and explain why radio is a great medium.”