Advertisers have been warned that ad sales are in trouble.
The Australian advertising industry is experiencing a severe downturn in the wake of a global recession and that’s leaving consumers vulnerable to fake ads, according to an industry group.
The group, which is the Australian Industry Group, has warned advertisers that the advertising industry’s future is in doubt, especially in the digital and social media space.
In a submission to the Australian Advertising Standards Authority, the association’s chief executive, David Tufnel, said the industry is facing unprecedented pressure to be more competitive with the likes of Facebook, Google and Apple.
“A number of ad agencies are being forced to rethink their approach to their businesses, especially their online sales models,” he said.
“Many of these agencies are already facing significant pressure to cut costs, while others are having to raise prices to compensate for these pressures.”
Mr Tufnell also said ad agencies have also been hit by a massive shift to a new era in the industry, in which advertisers are increasingly using “advertising as a sales channel”.
“The advertising industry has faced an unprecedented transition in recent years, which has seen many of the key businesses, such as social media and mobile, transform,” he wrote.
“These companies have changed their business models to align with the ever-changing needs of their customers, but these changes have also made ad agencies vulnerable to increased competition from the likes and brands of Facebook and Google.”
The ACCA submission said the sector has been hit hard by the digital recession, which forced some advertisers to cut staff numbers, and also by the financial crisis.
“This is a time of significant uncertainty for ad agencies,” Mr Tufng said.
“This is exacerbated by the increased pressure to meet demand in the advertising space.”
Mr Venter said the ACCA was working hard to provide support for ad buyers and to make sure the industry remains competitive.
“We will continue to work closely with the ACCC, the ACCAA and the relevant industry bodies to ensure that we continue to provide a safe and stable environment for businesses to make their best decisions about ad sales,” he told the ABC.
The ACCC’s submission said there is also a significant threat from “unprecedented” competition from new digital services such as Amazon and Google, and from new forms of online advertising such as paid clicks.
“As ad buyers look for ways to reduce costs, they are faced with a growing number of online platforms offering advertising as a service and competing for their business,” the ACCCA said.
“This poses a significant challenge for agencies, which are forced to take a more cautious approach to ad sales and must therefore adapt their business model and operations to compete effectively with these new services.”
“Advertisers are also likely to find themselves facing a growing amount of advertising spending from non-advertising platforms.”
The submission added that a number of agencies are in “advanced stages of a restructuring process”, which includes “re-structuring and selling” the business.
“Advertising agencies will be required to reassess their business plans and make adjustments to their business plan, including in light of the changing digital market environment, to ensure they are able to meet the needs of the advertising market,” the submission said.
Mr Talfnel also highlighted the impact that the global recession has had on the industry.
“The Australian economy is in its sixth recession since the mid-1980s and there is a significant and growing gap between the number of people employed in the Australian economy and the number who are working in the economy,” he noted.
Mr Tofnel said the report’s recommendations include a crackdown on misleading or deceptive advertising.
“If you believe that your product or service is being misrepresented, you should be able to take action against your advertising agency and take it to the ACCAC,” he advised.