Magna slashes 2020 ad forecast due to coronavirus outbreak
Magna slashed its advertising forecast for 2020 as marketers continue to grapple with the coronavirus pandemic. The agency now expects a 2.8 percent decline in U.S. ad sales this year; it had previously predicted 6.6 percent growth.
“The impact on business and marketing activity will vary across industries, depending on how much demand and investment will be delayed, as opposed to destroyed, during this crisis,” said Vincent Letang, exec VP, global market research, Magna.
The biggest impact will be for the travel, restaurant and movie industry, according to the new report. Retail, finance and automotive brands will also be significantly pressured. Home entertainment and e-commerce have the potential to be two bright spots in the marketplace.
“The current situation is totally unprecedented, but the closest historical equivalent would be a combination of the Great Recession and 9/11; a brutal economic downturn and a ‘Black Swan’ national disaster,” Letang said. “Its effects on supply, demand and media consumption are more complex and widespread than in any ‘normal’ economic recession in the past, and some of them will outlast the current crisis. Nevertheless, there will be an ‘after.’”
While the ad world should brace for a precipitous decline in the near-term, Magna anticipates the market will stabilize and rebound in the second-half of the year and forecasts moderate growth in 2021. It is now calling for a 2.5 percent increase in ad sales next year, up from its previous forecast of 1.4 percent.
The uptick will come from delayed consumption and the postponement of the summer Olympics, along with low comparisons from 2020.
In looking back at previous economic downturns, it seems brands that were able to maintain advertising activity or increase their share of voice during the crisis outperformed the ones that went dark during the recovery, Letang added.
Magna is forecasting a nearly 12 percent drop in linear ad sales this year and 4 percent growth in digital media. It had previously anticipated linear ad sales to be flat and digital media to grow by 11 percent.
National TV ad sales are poised to fall 13 percent, compared to Magna’s previous forecast of just a 1 percent decline. Out-of-home is expected to drop 12 percent, print will plummet 25 percent and radio is expected to drop 14 percent.
In 2021, Magna expects linear ad sales to decline 6 percent and digital media to accelerate 8 percent.