What you need to know:

• Indie agency bosses say SME spend has largely returned to pre-Covid levels in most categories.
• There has been a continued shift towards digital, but many SMEs are now investing in brand building over performance.
• Key sectors for growth post-Covid: professional and financial services, recruitment, domestic travel, health and fitness, construction.
• "What we’re seeing now is a lot of SMEs pitching – a lot of small pitching." – Kaimera CEO, Nick Behr.

Australia’s small and medium businesses (SMBs) are back in market and spending increasing amounts in a bid to regroup after 2020 wiped out growth across much of the market. Most are focusing on digital and performance to deliver quick wins – but the larger SMBs are hitting a tactical ceiling.

Advertising spend from Australia’s 2 million-plus small and medium businesses is broadly back to pre-Covid levels with firms seeking to quickly capitalise on rising demand, according to independent media agencies. However, some are finding lower funnel tactical marketing has its limits.

“2021 is the reset level for brands. Last year was an anomaly, this is the new base,” said This is Flow’s Jimmy Hyett.

While Indago Digital boss Gary Nissim told Mi3 clients continue to prioritise performance, Hyett said there is a greater emphasis on brand, even within digital channels.

“There is a much bigger emphasis on connection with audience, rather than just awareness,” said Hyett.

Kaimera CEO, Nick Behr, agreed that businesses at the larger end of the SME market were hitting performance limits – and seeking new agency capability as a result.

“What we’re seeing now is a lot of SMEs pitching – a lot of small pitching,” he said.

“What we’re really finding interesting is we’re seeing a lot of above the line spend, more brand versus activation. There are a few reasons around this. A lot of smaller clients have reached a point of diminishing returns on performance-based returns. Bottom of the funnel isn’t working, they can’t squeeze any more out of it.”

The health insurance sector is spending more than ever in brand, Behr said, and all his clients are above Covid levels.

However, increasing focus on brand building from larger SMEs is perhaps yet translate into brisker business for traditional media. Big brands continue to drive a resurgence that has arrived “far quicker than anyone expected”, according to Nine’s Chief Sales Officer, Michael Stephenson.

“We have our 9Voyager platform to allow SMEs to buy television and video-on-demand, and we’ve got a pool of advertisers using that,” he said. “It is, and will become, a greater focus for us. As a marketplace, we’re seeing [SMEs] recover and confidence come back.”

SCA Chief Sales Officer Brian Gallagher said most SMEs had missed out on the opportunity for heavily discounted advertising during Covid – because small firms have limited ability to respond to market shifts.

“You’ve got big brand advertisers, who’ve got the clever and correct view to stay active, retain market share, and reap the benefits from a jittery sell side, who were prepared to offer up value they weren’t before,” said Gallagher.

“The big end of town took advantage, whereas the small side, the SMEs, they didn’t have that flexibility.”

While many SMBs pulled back entirely, some sectors “were doing so well out of Covid it would have been rude to talk about it,” he added, with those sectors, such as building firms, real estate, personal investment, and health and fitness now spending freely as a result.

Until last month, Melbourne’s SMB market was returning in a big way, according to Ryvalmedia MD, Joseph Pardillo.

Prior to the latest outbreak, firms that had built out digital infrastructure during the first set of Covid restrictions were spending hard to fill their pipes, said Pardillo

“Those that embraced the challenge and adapted and sped up the need to transform digitally, got up their e-comm infrastructure, reorganised the way they understand customers, geared up and set themselves up, digitally, came out flying.”

But the current situation has undermined the recovery.

“This particular lockdown has deflated some spirit out there,” said Pardillo. “It’s a case of ‘shit, here we go again’."