New Zealand advertisers' love affair with digital continued in this quarter, with the total in Q2 2012 hitting $91 million, up 16 percent from Q1. But as more local eyeballs head to international sites and more ad spend heads overseas with them, is the level of digital expenditure actually being underestimated?
Chris Riley, the managing director at OMD, believes the figures aren't providing a totally accurate portrayal of the money that's being spent online, largely because content is not constrained by geographic boundaries any more and a big chunk of change is now going offshore as Kiwi clients put their ads on international sites that aren't represented here.
When a site is represented in New Zealand (for example BBC.com or about.com), the vendors are asked to provide the spend to the IAB and PwC. But Riley says Demand-side platforms (DSPs) are becoming increasingly common for buying ad inventory (he gives the example of Brandscreen, which offers impressions on more than two million sites) and he estimates 15-20 percent of some big clients' online spend goes to offshore publications and could be slipping through the cracks.
PwC partner Chris Peree was unable to be contacted to discuss the issue. But IAB's general manager Alisa Higgins says it is currently conducting a review to see how it can capture more of the spend that may be heading offshore. She says it asks the publishers to provide spend data so there's no double counting. And she says the DSP issue "has only just started happening in New Zealand, because, "we're always behind with the trends". She has recognised it's time to do something about it and, given media agencies already provide spend figures for Google and Facebook because neither company "plays the game" and releases its spend figures to the IAB, the media agencies might be asked to help out on this one too.
Given Fairfax just announced a massive $AU2.73 billion loss after a writedown of its assets and APN just wiped almost AU$500 million off the value of its New Zealand assets, underestimating the amount being spent in your channel seems to be a very good problem to have in comparison.
So, on to the numbers.
Overall, it was the highest quarterly spend since the IAB started collecting spend data in 2007 and all channels showed positive growth from the last quarter, with search and directories up 15 percent, display up 28 percent and classifieds up seven percent (in Australia, display and classified achieved year on year growth for Q2 of 15 percent and 11 percent respectively).
The addition of mobile advertising revenue for the first time also helped lift the total spend. But a recent comScore study put the cat amongst the pigeons when it showed that 31 percent of the online display ads purchased by 12 large US advertisers weren't seen and a small portion were only seen by "non-human agents".
“Online advertising spend is well on its way to reach the $400 million mark at the end of this year. We are seeing considerable growth in mobile expenditure with the first half of 2012 delivering the total amount spent in 2011," says Higgins.
"Growth levels for total market in Q2 2012 have slowed to seven percent year-on-year, which is on par to Q1 and Q2 back in 2009," says Liz Fraser, IABNZ chair and general manager MSN New Zealand. "Search saw a decrease of two percent, due to the Google Display Network revenue figures moving from this category into Display, which began in Q1 of 2012. Display however, only increased eight percent year-on-year. What we didn’t see was the usual rush from advertisers to spend marketing dollars at the end of many financial years. Leading up to the end of June, often marketers have a bit of loose change that they want to offload. However, my belief is that cost savings in businesses were found well before the start of Q2. The outstanding performing category was once again classifieds with 20 percent year-on-year growth for Q2, a total of $28 million. This is now two consecutive quarters for the Classifieds category to see such high growth.”
Within display spending, travel and accommodation bounced back from last year’s drop in Q2 to lead with 14 percent growth.
“What a turnaround in category advertising spend this quarter," says Laura Maxwell-Hansen, general manager, Yahoo!New Zealand and IABNZ vice chair. "The category spend is very reflective of both the macro influence of the economic climate and the micro influence of the change in consumer behaviour. Kiwis are becoming more comfortable with online purchasing but also very selective about where they spend their disposable income. As such, advertising spend from the Leisure and Entertainment category has dropped to just over six percent of advertising spend, compared to over 10 percent in Q2 2011. Government and Investment/Finance/Banking sectors both showed declines from this period last year. But the use of online to research and purchase holidays has been recognised by the Travel sector. Travel advertising spend in display inventory was the top category in Q2, with online campaigns targeting the Kiwi want for a mid-winter escape to the sun or the snow, or maybe the Olympics."
As for the mobile advertising sector, Bridget Gallen, mCommerce manager at Vodafone, says the addition of search in this first half year number has clearly provided a boost to the spend figure as well as providing a more accurate reflection of the true spend.
"A 156 percent normalised growth figure is a considerable level of growth for the industry. It is likely this growth is contributable to the increase in specialist mobile media companies new to the New Zealand market, a rapid rise in smartphone penetration (now around 40 percent and expected to be over 50 percent by year end), and a rise in New Zealand-based apps and publisher sites, making mobile a more attractive media channel to marketers," she says. "While mobile ad spend in New Zealand is well below what it is in other markets, we anticipate that this recent growth should continue as it has in these other markets where mobile is now a significant proportion of the overall digital media spend."
Spend in New Zealand has been less than one percent of online, but in the UK and US is more than four percent and expected to rise to 15 percent in the next few years.