The ad industry is a fragile thing, but it always manages to weather the storm and rebound. Over the decades we’ve seen natural disasters such as Hurricane Katrina and national emergencies such as 9/11 disrupt advertising channels for a period of time, but the current public health crisis we face in COVID-19 is a different animal. Most significantly, we face a global event this time. Markets all over the world from North America to Europe to Asia are being impacted. To add to its influence, the novel coronavirus will be disrupting our lives for months instead of weeks and days.
2020 was supposed to be a strong year for advertising with notable events including the 2020 presidential election cycle and the Olympics. Adweek reported that US linear and digital revenue had been projected to grow by about 6.6% this year, totalling $238 billion according to MAGNA’s global ad forecast. Now, though? Industry forecasts all over the world are being adjusted as analysts try to predict just how COVID-19 will affect everyone. While some parts of the ad landscape are certain to see losses, this pandemic is not effecting everyone in the same way.
#SocialDistancing: No More Bread and Circuses
Social distancing is an essential way to flatten the curve; in the other words, slow the rate of transmission of the coronavirus. In order to do that, many local, state and national governments have prohibited social gatherings. This means no more Broadway shows or going to the movies, no more sporting events, no more dining out at restaurants, and in many cases, no more working in the office.
Empty the Forum
These efforts to keep people at home have negatively impacted out-of-home (OOH) advertising in a range of locations including malls and shopping centers, movie theaters, gyms and sports arenas and many other public places. If people are avoiding these locations, then so will advertisers - and people are certainly avoiding them. Whether by government ordinance or an abundance of caution, people have been avoiding public spaces and OOH creative for weeks in the US.
Back in February, eMarketer took a survey of US internet users to see who is currently or will be avoiding public places due to COVID-19. Nearly three quarters of respondents said they would avoid public transportation, shopping centers and malls. A third will avoid movie theaters, and nearly 60% will avoid sports events. Of course, many of these venues have taken the step to close their doors since this survey was taken.
Close the Colosseum
One of the biggest hits to advertising of all forms comes with the suspension of professional sports seasons. The NBA, MLB, MLS, NHL and other national sports leagues have all cancelled or indefinitely delayed the remainder of their seasons in an effort to stop the spread of the virus. This is having a huge impact on media plans dependent on this live entertainment. Sponsors, vendors and streaming services are scrambling to pivot their budgets elsewhere to make up the lost ROI.
There are also other fears associated with cancelling professional sports in the US. Leagues such as the MLB and NHL have experienced interruptions to seasons in the past, and their audience numbers slumped for years afterwards. People may cancel their cable subscriptions without the incentive of live entertainment, and this could affect more than just sports networks.
Quarantined: a Captive Audience
With so many people stuck at home with nothing to do, TV could actually benefit from the COVID-19 pandemic. Across the board, live TV, advanced TV and online video consumption will increase as users turn to video to connect with the outside world and stave off boredom.
Tune in For the Fall of Rome
During major events, people are known to gravitate to media. Whether we’re looking for information or solace, Nielsen data shows that total usage of TV (TUT) - which includes live TV, connected TV and OTT devices such as video game consoles and DVD players - spikes during crises such as hurricanes and snowstorms. When Hurricane Harvey hit Houston, Nielsen saw a 56% TUT increase during the impacted time period with similar occurrences during other natural disasters. Users mostly watched feature films, news content and general format programming.
The Divine Comedy: On-Demand
The number of users moving to on-demand streaming platforms has already been increasing year over year; the coronavirus is just adding to the appeal for consumers. Morning Consult, a global media company, reports that 21% of people who signed up for a streaming service in 2020 did so partly because of the spread of the coronavirus. And, per Nielsen research, retreating to the great indoors leads to a nearly 60% increase in content we watch. Whether consumers are stuck at home due to a weather event or a global pandemic, they ramp up their media consumption to stay connected with others, remain informed or to just kill some time.
Thanks to COVID-19, services such as Hulu, Pluto.TV or Roku could see ad spending grow in the US by 42% this year according to forecasting reporting by the New York Post. Streaming consumption is already up in China, which has been feeling the effects of the pandemic the longest, as well as South Korea and Italy. Other markets are expected to follow suit.
When at Home, Work as the Romans Do
In valiant efforts to stop the spread of the coronavirus, many companies have transitioned employees to work remotely at home. Working remotely increases media usage, a fact these workers probably don’t want their supervisors to be aware of. Nielsen data suggests that remote workers connect over three hours more with traditional TV than their in-office counterparts. Remote workers also spend just as much time listening to the radio as non-remote workers (just over 95%), a surprising feat considering their absence of a regular commute to the office.
With a significant number of employees across the country currently working remotely, their viewing habits should increase media usage, a boon for some advertising channels.
Digital Advertising: A Tragicomedy
Marketers have been following digital consumption habits closely as the pandemic continues to spread and people spend more time on media. The effects on digital media plans have not been as obvious as with other parts of the media world. On one hand, there has been a huge increase in online shopping, which benefits advertisers. Amazon even had to reduce its spending on Google because of the surge in demand. On the other hand, spending for other goods and services such as travel, entertainment and certain consumer packaged goods has taken a dive, hurting advertisers. Supply chain interruptions are even hurting digital advertising. According to Search Engine Land, as products go out of stock without replenishment, Google Ads and Shopping budgets are being slashed.
AdExchange suggests that supply chain hits and a floundering economy put digital ad budgets at risk. Unlike other forms of media spend, though, digital ads are the easiest to halt at a moment’s notice. Some advertisers are pausing digital campaigns in order to weather the economic turmoil; some are increasing budgets to make up for revenue lost in other places. Some are simply pushing their budgets to Q3 and Q4 when some analysts expect a return to more normalcy in the marketplace. This would drive up competition and prices later in the year. It’s hard to know what the long-term effects on digital ad spend will be, but at least for Q1, we’re seeing hits.
Advertising Budgets: a Greek Tragedy
The New York Post reports that the coronavirus outbreak could cause ad and marketing budgets to be slashed by as much as $3 billion in 2020. It’s still a bit too early to get a full picture of how ad spending will change in the US, but we can look to China, which has been dealing with the effects of COVID-19 for much longer, for ideas. There, the original 2020 forecasted growth of 10.5% for the industry has been readjusted to 8.4% by eMarketer. That is the slowest growth the Chinese ad industry has seen since 2011 when eMarketer started tracking it.
In China, print advertising is expected to take the biggest hit. Spend on newspapers is expected to be down 16% and magazines down 14%, according to eMarketer. The growth of OOH advertising will weaken from 2.5% to 0.7%, and digital advertising’s growth has been adjusted from 15.2% to 13%. eMarketer made this new forecast with the prediction that the industry will return to business as usual by the second half of the year, but if that is not the case, these numbers could drop again.
Of course, just how the COVID-19 pandemic affects a business depends on a lot of factors such as what products or services they offer, how their media plan was formed pre-outbreak and what adjustments need to be made in this unsure economy.
We’re Here, More Than Ever
The Ward Group has seen a lot of changes and volatile situations in the media industry since our founding in 1985. We understand that these are uncertain times, and the future of businesses all over the country are in peril. Our media stewards are ready and willing to help walk you through your media plan and make the changes you need. These choices can seem overwhelming, so don’t hesitate to reach out and ask us any questions you may have regarding advertising and marketing efforts during this time. Together, we’ll weather the storm and plan for sunnier days.