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Home / Business

New Zealand online advertising suffers first-ever decline

Chris Keall
By Chris Keall
Technology Editor/Senior Business Writer·NZ Herald·
19 Aug, 2020 05:40 AM4 mins to read

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The local online advertising market suffered its first-ever decline since numbers have been recorded. Photo / 123RF

The local online advertising market suffered its first-ever decline since numbers have been recorded. Photo / 123RF

The local online advertising market suffered its first-ever decline in the first half of this year - or at least its first fall since the IAB (Interactive Advertising Bureau) began collecting numbers in 2007, on the brink of the GFC, chief executive Gill Stewart says.

IAB first-half data released overnight shows a 2 per cent year-on-year decline in online ad spending to $586.4 million overall in the first half.

Source / IAB
Source / IAB

In the second quarter, which copped the majority of the level 4 shutdown, online spending fell 9.8 per cent to $276 million.

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IAB members include TVNZ, MediaWorks, Stuff and NZ Herald publisher NZME.

Source / IAB
Source / IAB

Online advertising got off more lightly than other sectors, with a boom in online shopping helping to offset declines in other digital areas.

Cinema ads were down 83.0 per cent, outdoor advertising was down 59.1 per cent, TV ads off 33.2 per cent and radio fell 26 per cent during the second quarter, according to Standard Media Index (SMI).

That means online advertising is set to increase its lead as the largest single ad category in NZ (online had just under $1.1 billion in 2019 total, according to Advertising Standards Authority figures. The next largest category was TV on $538m).

Nevertheless, it was a historic reversal of fortune for online, and it reflected drops by companies in the sector.

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The IAB had NZ search advertising down 8.4 per cent to $169.3m in the first-half.

That gels with the global result for Google's parent Alphabet, which just reported its first every decline in revenue against the year-ago quarter, with total revenue down 2 per cent and search ad revenue down 10 per cent.

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And IAB found classified and directory revenue off 21.1 per cent in the first half, which correlates with belt-tightening at the now privately-held Trade Me and listed online recruiter Seek, which has withdrawn guidance for the year.

The only bright spot in the IAB's first-half survey was ad spending on social media, which was up 11.3 per cent to $31.5m.

Source / NZ Advertising Standards Authority
Source / NZ Advertising Standards Authority

That was in keeping with Facebook's most recent quarter, which saw the social network report its slowest increase in growth eight years for its April-May-June quarter as sales rose by "only" 11 per cent.

Facebook was still in solidly positive territory for the quarter despite a corporate boycott that began to kick in over June. The company was buoyed by continued demand from small business customers who make up about 70 per cent of its ad base.

Locally, Facebook benefited from a surge in spending by all political parties before the regulated period of spending caps kicked in.

How is the rest of the year looking?

"It's difficult to gauge and depends on alert levels in Auckland and nationally," IAB head Stewart says.

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"While digital has experienced an expected decline in revenue, in the context of the overall economy and market, feedback suggests it is indexing somewhat better than anticipated.

"Our research tells us that many advertisers are pivoting and changing strategy, leaning further into e-commerce and data-led strategies, which does lend itself to more digital advertising.

"We experienced a bounce-back following return to more normalised levels following alert level 4, however we remain cautiously optimistic given that there may be a knock-on effect to the economy later in the year. Digital, however, is placed well to deliver effective results to advertisers given that it is flexible, cost-effective and measurable."

Looking at the market as a whole, SMI Australia and New Zealand chief executive Jane Ractliffe says, "The good news is the market has definitely bottomed, with the lowest point seen in May (-37.6 per cent) and on the improve ever since.

"We this week released first-look (not completed) view of the NZ ad market for July and that showed a far reduced interim decline of 25.6 per cent."

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