Ad crunch ahead
Closures, mergers and falling revenues in traditional advertising are taking place — grim times seem to be waiting in 2017 for SA’s marketers. But industry experts tell us there is light at the end of this tunnel
The next 12 months will test the industry as never before, is the ominous view of one advertising executive: "Strap in for flight 2017 and make sure you know where the emergency exits are."
It comes in the context of a changing customer paradigm in which product choices are increasingly made through virtual and augmented reality and sophisticated smartphone technology.
Says Publicis Machine CEO Adrian Hewlett: "It will continue to get significantly harder as clients face harsher trading conditions.
"The natural impact is [for them] to seek out savings and efficiencies — and advertising and sponsorships are an obvious target."
Hewlett says that what this means for agencies, besides tighter budgets, is a move to a more transactional working relationship with clients. "Agencies that are viewed simply as suppliers struggle to deliver value that comes out of a trusted client-agency partnership."
The Hardy Boys CEO Dale Tomlinson says 2016 was a debilitating year, but that there is light. He says 2017 will once again be tough, but it will also be more rewarding. "Most of the clients we engage with have recalibrated and are better poised to tackle the new reality."
He believes growing talent through strong mentoring will make agencies more relevant, alongside a tighter control on resources and overheads. There will be a strong focus on shorter-term objectives, with a conservative but steady hand on longer-term investment.
Gendel Advertising’s Mike Gendel says the economy’s contraction hit the industry hard, and ripples of this will be felt in 2017. "The severe impact on employment numbers will make it tougher to place newly qualified graduates in the profession. I also don’t expect significant net growth in new marketing spend, but rather accounts moving around like chess pieces as [clients] seek superior value and new ideas."
Gendel believes there will be more agency closures and mergers in 2017. Most will "be inclined to reinvent themselves to offer a differentiated profile and value proposition to marketers".
A further trend to expect, says Gendel, is the reintegration of traditional and nontechnical specialist digital services, as clients look for a one-stop point of contact.
Yavi Madurai from the Black Box Theory agency says there is only one word that will describe advertising in 2017: mobile.
"Digital advertising spend will most likely dominate ad budgets for 2017, increasing to approximately 30%-40% of total budget. But with that comes a requirement for innovation and understanding the developing target market better," she says.
People are switching off traditional advertising and looking for experience, engagement and value add. "Content marketing will be forced to become more sophisticated as storytelling becomes a buzzword," she says.
Madurai says this means advertising has to work in real time. But there is a caveat. "The concerns around all of these are access to the Internet, costs of data and the required emergence of the smart city concept in SA where Wi-Fi hotspots are the norm."
Of course, this isn’t just an SA phenomenon. New figures from the Warc research company show that while global adspend rose 5.2% in 2016, the 2017 figure will come in lower, at just 3.6%. And yet, global Internet adspend is expected to rise 12.5% in 2017, compared with a 1.9% decline for TV.
Clearly there’s growth — but you have to be in the right space.