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Unlike the 2008-2009 recession which had a similar impact across all businesses, the economic effects of the coronavirus pandemic has been more hit-or-miss – and it has mostly missed digital advertising.
While some businesses like brick-and-mortar retail dwindled, others adapted and grew as ecommerce surged. In media, sheltering-in-place created skyrocketing consumption on digital video and social media that has attracted ad spend. But other media types like newspapers and terrestrial radio, that were already seeing lowered demand from advertisers, were hit with steep, double-digit declines.
“The impact is much more concentrated,” said GroupM global president of business intelligence Brian Wieser. “There are smaller numbers of people that are disproportionately hurt.”
GroupM, according to a spend forecast released Tuesday, predicts total United States advertising spending will decline 13% this year, less than the 16% drop during the 2009 recession. Adding $3 billion in expected political advertising causes the 2020 US ad market to drop just 8%.
Magna, which released its forecast Monday, expects a 7% decline in media owner ad revenues this year globally. The US should decline less than the global average, just 4%, according to its estimates. Without political advertising, the US market’s 4.3% decline would end up being a 6% decline.
Total ad spend declines – but digital doesn’t
Without the pandemic, digital advertising would have grown by double-digits. With the pandemic, Magna predicts 1% growth, while GroupM expects digital advertising to remain flat even with political advertising.
“Digital media will be resilient,” said Vincent Letang, EVP and managing partner of global market intelligence at Magna. “Especially because digital video and social media are seeing increased consumption which bolsters ad revenue.”
But there are winners and losers even within digital. Per Magna, social media will rise 8%, while banner ads will fall 11%. Media owners should expect ad spend to stabilize over the summer, or Q3. By Q4, spending will return to close to normal levels – provided there isn’t a second wave of infections and quarantining, which Magna assumes won’t happen in its forecast.
Digital advertising is also benefiting from an influx of new buyers – SMBs.
SMBs flock to ecommerce
Millions of small businesses embracing ecommerce have helped save the US ad market.
“This crisis is accelerating trends that were already there in a pretty spectacular way,” said Letang.
Brick-and-mortar-focused businesses putting off ecommerce were forced to adapt, and will likely continue providing online ordering – and investing in digital advertising – even after pandemic restrictions lift.
GroupM’s Wieser, who’s been bulk buying $75 bags of coffee instead of $5 servings from his local coffee shop, called SMBs’ embrace of ecommerce the “great surprise” that’s kept digital advertising from falling.
“Small businesses, in their fight for survival, have increased their digital spending,” Wieser said. “They’ve had to create digital products, and if they want to do any customer acquisition, it’s going to be on digital.”
Political advertising saves the day
The influx of political advertising in the US has also softened the economic blow of the pandemic.
Magna predicts that political advertising will add $4.8 billion in incremental ad sales to the 2020 total, up 24% from the 2016 election year. Digital media will approach $1 billion in political advertising spending for the first time, Letang predicted. Another $3 billion in political advertising will go to local TV.
GroupM forecasts much more in political advertising – $15 billion overall, including $3 billion spent in digital advertising. That’s more than double the 2016 total political advertising spending of $6.5 billion.
While digital media consumption, SMBs and political advertising have made online advertising a bright spot amid the economic devastation, the biggest factor affecting a country’s economy is its national leadership.
South Korea and New Zealand, which have both contained the virus, will have rosier economic forecasts than the US, Wieser said, where national, regional and local leadership has often been lacking.
“There are plenty of other places that will have most robust rebounds even with the same underlying assumptions around when the pandemic comes to the end,” Wieser said. “A well-managed pandemic from a health perspective will better position an economy for longer-term growth.”
