Huge discounts are making a mockery of spending trends, say analysts
Annual advertising spending in SA could be barely half the official figure because of the growing incidence of discounts, says marketing consultant Peter Langschmidt.
AC Nielsen, which compiles advertising spending figures in SA, reported that R34,4bn was spent on advertising in SA in the 12 months up to February 2013. But Langschmidt, CEO of marketing consultancy Echo and publisher of ConsumerScope, thinks that's a wild exaggeration.
In a recent research report, "The 'real' penetration of SA media", he says that after taking into account rate discounts granted to media buyers by publishers and broadcasters, the real figure could be as low as R19bn.
"Nielsen's AdDynamix is compiled from media owners supplying their information and Nielsen adding it up," he says. "But all this is based on rate card rates, which is different from actual spending because everyone negotiates for discounts."Different media have different rates, but the actual spend across the industry amounts to around R19bn. This is closer to the real money spent, but the share between the various media types remains the same."
According to AdDynamix, the share for TV is 47,3%, print 29,3% and radio 15,6%. The balance is made up of online, cinema and out-of-home. The last of these includes billboards, brand activation and airport, mall and washroom advertising. The Media Shop group MD Chris Botha says discounts in the industry are widespread. "I don't think there is a single piece of media that is purchased at the flat rate-card rate," he says. "Discounts are always factored in." Botha says media with huge surplus advertising inventory will be the most heavily discounted. "It's mostly media with the right balance of massive inventory, good demand and fair pricing," he says. "The most obvious ones are certain DStv channels and the total out-of-home industry. They have a good product with high demand, and the industry buys a fair amount of it. But supply invariably outstrips demand. This is when the media owners offer packages and deals that clients lap up."
CWP Advertising media director Dawn Nagel says the larger the volumes sold, the bigger the potential for discounts. "Spending figures don't reflect the discounts and, because of competition, media owners won't declare either," she says. "For the bigger clients, discounts can easily go up to 30%. Television provides the biggest discounts because the rates are quite steep and the stations often have a lot of unsold inventory."
Sometimes television stations have last-minute cancellations and have to sell at discounted rates. Nagel says print media, by contrast, have a lower prevalence of discounting as pages can easily be cut or empty spaces filled by other content.
RMS Media director Rob Smuts says a competitive media landscape is also leading struggling media owners to offer discounts to stay relevant to clients. "As the environment gets more competitive, some media owners will have to discount heavily to ensure they stay on the media schedule," he says. "However, there is no point in getting a big discount if it's not the right medium."There is no point in getting 60% less if you shouldn't have been there in the first place. The problem with discounting is that the investment often ends up in the wrong place."