Why the search for growth might take you Down Under
In the lead up to FTVA Sydney, Mediatel's first in-person event since the Covid pandemic hit, consultant David Roddick analyses whether Australia could be the ad industry's post-pandemic land of opportunity
The 1960 US Presidential campaign was conducted in an age of crisis. A stagnant economy was labouring in the shadow of a deepening Cold War. Senator Kennedy’s response was simple.
“The Chinese,” he said, “use two brush strokes to write the word ‘crisis’. One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger – but recognise the opportunity.”
Sixty years on and another US President faces an economic crisis and a menacing threat to American freedoms. Biden uses different words, but echoes of ‘in danger lies opportunity’ feature large in his early messages.
Flowery rhetoric can only go so far of course. Today, when the economy of advanced nations has contracted by -7% and when confidence is running at a record low, danger is much easier to spot than opportunity.
But counter-intuitive as it might be, looking beyond the domestic market could help. Because while the crisis is severe and the outlook bleak in the US, UK and western Europe, there is a mature market that has consistently outperformed recent OECD averages and looks set to lead the way out of the downturn.
That market also limits risk due to its size, is relatively safe due to a track record of managing Covid outbreaks, and has an appetite for innovation. What’s more, if you live in the UK, it looks a lot like home.
There’s more to Australia as a market for scale up media suppliers than a ‘she’ll be alright mate’ optimism. The argument is based on three characteristics: a solid economy to generate cash, a buoyant level of confidence to encourage growth, and a culture which is comfortable with change and progress.
In combination with low Covid numbers, these put the Australian media market in pole position for recovery. No doubt this will be a theme we’re sure to see spotlighted in this month’s Future of TV Advertising event in Sydney (for which, while in-person tickets are sold out, digital tickets are still available).
I expect delegates to enthuse about the opportunity in 2021 and to be looking for technology partners to accelerate their upside from recovery.
Solid underlying economic conditions
“I think the economy is in a remarkably good position given the amount of things that have been thrown at it,” declared Richard Murray, CEO of giant electrical retailer JB Hi-fi, in his January results call.
Murray anticipated half-year profits to rise a staggering 86% on the previous year, which on its own would be remarkable, but when put alongside similar sentiment from Super Retail Group (furniture, automotive and leisure retail), Harvey Norman (electrical goods, and soft furnishing), Premier Investments (fashion) and others, it suggests this is a trend.
In fact, The Australian calls Q1 results a ‘profit season that is likely to shoot the lights out on investor and analyst expectations’. This comes after the December quarter saw Australian GDP record the largest quarterly increase since 1976.
We shouldn’t be completely surprised. Tucked away and able to withstand global market pressures, Australia has enjoyed arguably the most resilient and consistent economy in the world.
Until Covid, Aussies enjoyed 103 consecutive quarters of economic growth, the longest period of prosperity in history, surviving slumps including the 2008 financial crisis without falling into recession. Consequently it has one of the wealthiest populations, with median average wealth per capita being second only to Switzerland.
The same resilience characterised Australia’s reaction to Covid. By virtue of its distance, controllable borders and early government action, infection rates have been low, allowing GDP growth to be outperformed by only four countries.
And without overseas travel to spend on, domestic retail is booming. Australians not travelling is worth an estimated $60bn a year into the retail economy, according to the National Australia Bank.
In other words, no structural defects exist in Australia’s economy and the recovery is looking real and sustainable. There is money around, and demand to be won from consumers, so advertisers are active. Media owners and major agency groups are reporting buoyant starts to 2021, and are on track to beat the equivalent period in 2019.
In fact, one large TV network has called the forward book into Q1 “the best start to a calendar year in memory, way beyond simply a return to pre-Covid levels”.
Encouraging leading indicators of client confidence
But TV networks and other media executives will need advertisers that are ready to commit.
The good news is they seem to have them across almost all categories. NAB has shown general business confidence rising for each of the last four months, November growing by +12 points on October.
Consumer confidence has risen steadily since August and hit a ten year high recently. 42% of Australians believe now is a good time for a major purchase, compared to 16% last May.
And using property as a barometer of confidence, the value of Australian homes hit a record AU$7.3tn high in September, and transaction numbers were growing at +6% year-on-year in the final weeks of 2020. These are remarkable numbers at a time of such global economic uncertainty.
“Confidence is consistently higher than it was a year prior,” said ANZ Bank’s head of Australian economics David Plank, announcing that he expected GDP growth in the final quarter of 2020 and throughout 2021.
Unemployment is also tumbling after a 7% peak, never reaching the double digit heights of the United States or many European markets.
“90% of jobs lost during the pandemic had returned by the end of the year,” said PM Scott Morrison. “Three gauges of confidence...household spending, business investment and employment - have all been extremely positive; consumer sentiment being especially encouraging.”
Now this is carrying over into the media sector. Advertisers, marketing agencies and publishers are all bullish about the year ahead and considering how to take best advantage of the recovery.
Undimmed appetite for innovation
A resilient economy in recovery is not enough though if new entrants face a tendency towards conservatism and aversion to risk. But Australia is unusual in developed markets by being young, unencumbered by centuries of tradition or legacy processes.
Australian business, especially in media and marketing, seeks out best practice wherever that resides, urged on by the restlessness of spirit at the heart of culture.
With 67% of the population either born overseas, or having a parent who was, and more than one in ten residents being foreign nationals, Australian business is fuelled by, rather than resistant to, imported energy, thinking and talent.
The Lucky Country
For media, martech and adtech businesses, then, Australia represents a true land of opportunity.
At 25 million inhabitants, two-thirds of whom are clustered into the five main cities, it has a scale that makes it attractive but is not overwhelming to manage. It is a relatively young consumer population, with consumption patterns and marketing conventions shared with the US and Europe.
As such, it is not only an attractive but a remarkably familiar place to do business.
And as perhaps the most resilient economy in the world, with an enviable track record in dealing with the pandemic, comfortable with importing innovation and talent from off shore, the prospects of upside for businesses looking to scale but held back by domestic downturn are mouth watering.
So, to Jack Kennedy’s point, the current crisis does not mean businesses have to put growth on hold for another year or two. Those ready for expansion should be aware of the danger in markets where there will be lasting economic effects of the pandemic, and at the same time recognise the opportunity in The Land Down Under.
David Roddick is a C-suite sales director with experience in advertising in over 20 countries. He currently lives in Sydney and is a consultant for overseas businesses entering the Australian advertising market.
On Thursday 25th of February, from 8.50am AEDT (or Wednesday 24th of February at 9.50pm GMT) Mediatel Events will host the Future of TV Advertising Sydney and continue to address the cutting edge of TV advertising in Australia and New Zealand. In-person tickets for the hybrid event are now sold out, but tickets for the digital live stream are still available.
If you are unable to watch live, the day's sessions will be available on-demand a week after the event.