Nobody knows anything; Accenture’s big hire; NYT's Wordle strategy
Few predicted 2021’s ad spend revival, and only an idiot can claim to know how 2022 will unfold; Nick Law is the latest Aussie to join Accenture's global leadership;
Welcome to Unmade, mostly written on board this morning’s Japan Airlines flight into Sydney from Tokyo. It’s good to be home in Australia.
Happy Groundhog Day. Again. No really, it is. And it’s also the 2/2/22, which is kinda satisfying. Got any big plans for 2.22pm?
Today: Are the SMI numbers as good as they seem?; Wordle’s new home; and The Unmade Index stages a recovery.
It’s been a while since I read William Goldman’s Hollywood memoir, Adventures in the Screen Trade. But one sentence stayed with me: “Nobody knows anything”. It could just as easily be applied to predictions about the economy, and what that means for future ad spend.
In the early days of Covid I chatted to somebody who reckoned he had the inside track on a particular large travel company. The company would easily come through it, because the disruption would allow it to clean up its balance sheet and see off its rivals, he told me. Since then the share price has halved.
Or the global spend predictions issued annually by the major media buying groups. I don’t think I can think of a time over the last decade when they haven’t turned out to be overly optimistic.
And then there are the confusing signals in the wider economy.
I wrote here about last Monday’s doom-laden edition of the Australian Financial Review which seemed to offer a red flag on every page.
Yet, yesterday’s update from Standard Media Index suggested the opposite. Not just brightness at the edge of town, but a shoot-the-lights-out finish to the calendar year which saw 2021 beat all records, not just make an improvement on the miseries of 2020.
The 2020 benchmark wasn’t hard to beat given the way that media spend was almost entirely turned off in some sectors early in the pandemic.
But beating the previous high of 2018 was something I would not have called.
SMI, which covers most Australian advertising spend that comes via media agencies, reckons the market was worth $8.6bn in 2021. That’s up by $324m on the 2018 record. I’d have guessed it would be years until we got to that point.
But look at the dip in the graph above. I’m not sure a repeat for 2022 can automatically be priced in. One question is how much of that 2021 money is really 2020 money, with a delayed spend? It’s a fair assumption, for instance, that much of Seven’s revenue boost for 2021 came because it finally got to broadcast the Olympics, a year late.
So the 18.1% year-on-year growth for traditional TV revenue is explainable, but I wonder if it’s sustainable. Even with the benefit of the beginning of the home Ashes series on Seven and Foxtel, TV only grew by 4.9% for December 2021 compared to December 2020, which suggests the broadcast bounceback might be softening.
The SMI data suggests the big jump came in the April, May and June quarter, when optimism abounded and nobody had yet heard of Omicron.
There are two more tables from SMI worth looking at carefully.
The first shows how the market ended with the December numbers.
The second shows the picture for the full calendar year.
It was a similar story to TV for the radio, up by 17.5 per cent for the year but only 2.6 per cent for the month of December.
The major medium (if you can still call it that) which failed to bounce back for the year was print. Newspapers were down 8.6 per cent for the year and magazines down by 0.9 per cent.
It was also a rotten December for newspapers which were down by 22.1% as the Omicron wave broke. Magazines were up by 20.1% for the month but with longer lead times most of that would have been booked in pre-Omicron.
It’s still hard to fully understand how bad things are in the long term for the magazine medium. One of the reasons that advertising was almost flat for the year was because Bauer Media (or Are Media, as it is now) closed or suspended so many titles in 2020, just getting some of them back out on the street shored things up for the year just gone.
It’s going to take a few more months, when more normalised like-for-like comparisons start to become available, to understand how magazines are really faring.
When it comes to magazines, Are Media is now the only major consumer player. New owner, the venture capital company Mercury, paid next to nothing for the company when the Bauer family wanted to exit in a hurry last July.
Mercury’s best return for its investors may well be to run Are Media as a cash cow, and not even try to reverse the decline through investment. I’ve not observed any attempts by Are Media to promote the magazine medium to advertisers since the Mercury takeover. Magazines is now the only major medium - if you can call it that - without an industry marketing body.
From the outside, the true state of the magazine sector is hard to tell. SMI gives a partial picture of advertising because it covers media agency spend, but not direct revenue. There’s no longer data on circulation revenue because of the axing of circulation audits five years ago; readership data is a poor proxy for cover sales. And because Are Media is privately held, there are none of the reporting obligations that an ASX company would face.
With the decline in newspapers’ print advertising revenue, there’s a more complex story in play. There are now far fewer local papers after News Corp’s mass closure round half way through 2020, but national print mastheads grew revenue.
The 8.6% annual fall for printed newspapers was offset by the 26.5% rise in digital revenue (albeit on a much lower base). Not included in the figures is the money now coming into the news companies from Google and Facebook. And there are also rising digital subscriptions.
Outdoor will be fascinating to watch in 2022. Its growth of 26.8 per cent for the year was mainly a function of it bouncing back from its awful 2020. But the City of Sydney contract switching from JC Decaux to QMS kicks in shortly and that will create a lot of noise in the market. Yesterday QMS revealed its launch partners. I wouldn’t be surprised if the activity drags more revenue into outdoor as a whole.
And then there’s one indisputable growth story - that of digital audio. Up by 37.5% for the year, and 21.5% in December, there’s real heat in podcasting and the wider streaming market. Not only is it a consumer trend, but the traditional radio players are going even harder because it provides them with the sort of growth story that shareholders like.
2022 also seems to have started strongly in terms of adspend. The rest of the Ashes, and the later, February start to the Tennis on Nine, both of which are yet to show upo in the SMI data, likely means a strong start.
Another major factor will be the election, which will take place by May at the latest. Most government spend will need to be suspended during the campaign, but party political spending may well fill the hole.
But the big unknown remains how consumer behave when the economy gets back to normal. Interest rates will go up and share prices might well go down.
Not that anybody knows anything.
Accent on Accenture
The push by the big accounting firms into the marketing space has been going on for so long now that we can no longer think of it as an experiment, with Australia as the petri dish.
For a time I’d have called PWC the leader among the consultancies. It owned a thought leadership position thanks to the annual Media & Entertainment Outlook, shepherded for many years by Megan Brownlow. And Russel Howcroft turned the CMO practice into something to contend with. It continued in tghe same vein under which carried on strongly under Justin Papps after Howcroft’s move to radio.
But now all three are gone and PWC is no longer, for me at least, the first consultancy that comes to mind.
In a future instalment of Unmade, we’ll dig deeper into all the consultancies, including examining their key capabilities and people. KPMG and Deloitte have both travelled a long way, and the impact of Sayers Group (where Papps ended up) is yet to be measured.
This week though, Accenture is top of mind.
As well as owning The Moneys, which remain among Australia’s best creative agencies, there is now even more Australian talent at the global helm.
David Droga, founder of the legendary Droga5 and boss of Accenture Interactive globally since last year is Australia’s greatest ever advertising export. There was a terrific profile of him in Weekend Australian Magazine a couple of weeks back.
Law was the creative force behind R/GA when it was the top global digital agency doing amazing work for Nike.
Campaign Brief points out that the organisation’s global chief creative officer, Neil Heymann, is also an Aussie expat.
Quite what having Droga, Law and The Monkeys in the same stable means for the Australian market, requires a little more thought. But if feels pretty interesting. At the very least, it’s proof that what started out looking like an experiment is sticking.
Like many in the industry, my daily rhythm has changed slightly in recent weeks with an early morning visit to the Wordle website.
Some days it’s infuriating and some it’s highly satisfying.
There’ve been Wordle waves on Twitter.
First came the sharers. Then the over sharers. Then the backlash, with the people who were irritated with the over sharers. Then the politicians trying to turn it into a lame campaigning meme. Then the backlash to the backlash.
And now the Wordle website has been sold to the New York Times “for a low seven figure sum”. Which seems nice for its creator, a decent sounding bloke called Josh Wardle ( so that’s where the name came from) who didn’t seem to be in it for the money - he didn’t even attempt to trademark or patent it.
It’s also a pointer on the NYT’s evolving thinking on its digital subscriptions, in which it is a global leader. The readers don’t just subcribe to the NYT for the writing. It’s serious about crosswords and word games too.
It’s a trick that the Australian news publishers seem to be missing. To the casual subscriber they present themselves almost entirely as written offerings with things like crosswords and cartoons an incidental extra. However, as subscription streaming demonstrates - consumers can be persuaded to pay for entertainment
Unmade Index: The recovery continues
While The Unmade Index is yet to recover to its 1000 point baseline it began the year with, this week saw it claw back some more ground, and out performing the wider ASX which was only just in positive territory yesterday.
Among the major media and marketing stocks, Southern Cross Austereo fared best yesterday, up by 3.7%. However, it was a good day across the board, with every company on the index growing their market capitalisation.
Jetlagged in China Town
As ever, I welcome your thoughts on all of the above to email@example.com
Time for me to let you go about your Wednesday. Apologies that this email is slightly later than usual. (And for any jetlagged typos.)
We landed ahead of our 6.30am slot, but by the time I’d panicked about lost luggage (it turns out the suitcase I remembered as being dark purple was in fact black; the people at lost luggage were kind enough not to laugh at me), navigated the taxi queue, and checked into my hotel, the morning was slipping away.
Now I need to tackle the jet lag.
Have a great day.