New ad spending forecast paints grim view of 2020—but not as bad as the 2009 recession
Brands reeling from COVID-19 will cut $50 billion from their ad budgets in 2020, leading to a global spending decline of 8.1 percent—but political ad outlays will keep the industry from falling as far as it did during the 2009 recession. That's according to a new forecast from WARC, a research organization that services marketers, media companies and agencies.
The projection, which is based on data from 96 global markets, shows declines across the board, with traditional media taking the biggest hit. Spending on cinema ads will fall 31.6 percent, followed by out-of-home (21.7 percent); magazines (21.5 percent); newspapers (19.5 percent); radio (16.2 percent); and TV (13.8 percent).
Online spending growth will “almost grind to a halt” with just a 0.6 percent gain, according to the forecast. Spending on social media, online video and online search will still grow, but at far lower rates than previously projected, with outlays on online classified ads set to drop by 10.3 percent.
WARC projects total global advertising spend of $563 billion in 2020. The prediction of an 8.1 percent decline is a significant downgrade from the 7.1 percent growth it forecast in February.
The good news, if there is any, is that political spending in the U.S. will cushion the fall, keeping the global drop-off less steep than what occurred in 2009, when the ad market contracted by 12.7 percent, according to the forecast.
WARC cites a political spending forecast from Magna, the Interpublic Group of Cos.-owned firm that provides investment and media intelligence, which projects healthy spending levels on the U.S. presidential election. “While we reduced our political ad forecast as fundraising will be affected by the economic crisis, spend is still expected to grow significantly on the previous presidential cycle, with almost $5 billion (up 26 percent vs. 2016) more invested, including an extra $1 billion going into digital,” states Vincent Letang, Magna’s executive VP for global market intelligence.
The situation is much grimmer when it comes to business spending. WARC predicts declines for almost every one of the 19 product categories it tracks, led by travel and tourism, which is forecast to fall 31.2 percent. Other laggards include financial services (down 18.2 percent); retail (down 15.2 percent) and automotive (down 11.4 percent).
James McDonald, WARC’s head of data content and the author of the forecast, foreshadows three phases to the downturn: “Firstly, an immediate demand-side induced paralysis for sectors such as travel, leisure and retail, combined with supply-side constraints for [consumer packaged- goods brands]. Second, the recessionary tailwind will exert extreme pressure on the financial services sector as well as the consumer, whose disposable income is now heavily diminished.”
He continued: "Finally, as the world takes tentative steps towards a recovery, there will be an added emphasis on healthcare and wellbeing credentials among brands not normally associated with the field, aside [from] higher spending within the pharmaceutical sector to leverage the shifting consumer mindset.”
Brian Wieser, global president of business intelligence for WPP's GroupM, is quoted in the report urging brands to question their assumptions about their competitive positions. “What are the ways in which you can reinvent the category? That the economy will be weak is a given, but any one business’s outcomes are not.”
In a separate report released on Thursday, Nielsen points to the paradox marketers are confronting: with people stuck at home glued to TVs and the internet, brands can get their attention—but getting them off the couch to spend money is a different story.
As the pandemic took hold from March 13 to March 31, usage rates of TV, internet-connected devices and gaming consoles soared 18 percent compared with the first two weeks of the month, according to Nielsen. But “the irony to marketers was that while viewers were certainly tuning in, many were and still are ostensibly ‘shut ins,’ venturing out very little to shop, dine and socialize.”
Still, Nielsen urged brands against cutting all ad spend. “Going silent on consumers is always a risky gambit for marketers, even for brands with hard budget decisions to make,” Nielsen stated, adding that “brands that go totally dark for the rest of 2020 could be facing revenue declines of up to 11 percent in 2021.”