Ad Spending During the Coronavirus Pandemic

Published On April 19, 2020
In covid, Blog Archives

International health organizations are still uncertain about how fast and far COVID-19 will spread worldwide. Most countries that have been severely affected by the virus outbreak are urging people to stay at home and be conscious. The coronavirus pandemic has altered the lives of people all around the world. It has also taken a significant toll on every section of the economy. The media and advertising industries are no exception, and they, too, have been adversely affected. As businesses are starting to feel the effects of the virus, they have begun to announce cutbacks. According to a report by eMarketer, the expected global annual growth for resources spent on advertising is expected to reduce due to the virus outbreak. 

Coronavirus to result in shift of ad spend to performance media

Source: Marketing charts

Various events, such as business conferences, sporting events, and concerts have been cancelled. As a result, global markets are in free fall. The global expenditure for advertisements was set to increase by $712 billion, however, in the light of the pandemic the earlier estimate has now been reduced to nearly $692 billion. (eMarketer). Since the 2020 Summer Olympics to be held in Japan is most likely to be cancelled, this number will only diminish further.

But even so, the current estimate is a 7% (eMarketer) increase when compared to the global ad spending in 2019. Huge corporations such as Google, Unilever, Spotify are encouraging their employees to work from home. As a result, there is a significant sudden increase in people being indoors. Therefore, the lifestyles of many consumers have changed, and they have started spending more time online. To keep up with this changing environment, brands that have traditionally been offline must adapt. Brands must innovate new online services to cater to the increasing online traffic. 

Impact of COVID-19 on China

Impact of COVID-19 on China

Source: Freelancemantra

China was the epicentre of the virus outbreak. Since the first case of the virus in December 2019, China’s markets, manufacturing processes, supply chains have been adversely affected. Due to most people being confined in their homes, the country’s digital media consumption has significantly increased. Yet, advertisers are reluctant to spend money on ads because they are afraid that the effects of the virus could further damage the supply chains. If the supply chains are damaged, then they will not be able to get their products to the market.

All of China’s ad spending for the year 2020 has been reduced. The expected total ad spending of $121.13 billion has been reduced to $113.7 billion (eMarketer). Their ad spending growth rate has decreased to 8.4% from the predicted 10.5%. Even their digital ad spending has reduced to 13% from the original estimate of 15.2% (eMarketer). Since China is the second-largest ad market, only behind the United States, a reduction in China’s figures is highly likely to lower the global forecast.

change in ad spending due to coronavirus

Source: eMarketer

What Twitter’s Withdrawn Forecast Means for Online Advertisements

Twitter is a source of information that consumers heavily rely on for health and political updates. With the coronavirus crisis becoming more severe, users are spending significantly more time on Twitter. Due to its exceptional infrastructure, even in times of chaos, the social media site allows millions of users to receive latest news and updates. However, the company’s primary source of income is online advertising, and given the current scenario many advertisers have cut down on their ad expenditure.

What Twitter’s Withdrawn Forecast Means for Online Advertisements

 Source: eMarketer

On 23 March 2020, Twitter withdrew its revenue and forecast for the first quarter of the year. The company has given the impact of the global pandemic on advertiser demand as the reason for the same. In their statement, Twitter did not mention what type of companies are pulling back. However, the company is preparing for a steep potential drop in revenue. In the coming weeks, all investors must pay close attention to commentary from Google and Facebook. Though there has been a massive surge in internet traffic due to the disrupted global supply chains, brands are not putting money into advertisements. Therefore, in this highly unusual scenario, increased media consumption does not translate to more ad sales. 

The Impact of COVID on Marketer’s Budgets

The global pandemic has resulted in a split in the marketing community regarding how the outbreak will impact budgets. While 48% of marketers are anticipating a reduction in consumer spending, 46% are expecting no change (TheDrum). The remaining expect spending to increase. Few marketers even claimed to have gained profit by taking advantage of new investment opportunities. While 41% of marketers have adjusted their budgets, 59% are carrying on with the same budget (TheDrum). 

The Impact of COVID on Marketer’s Budgets

Source: Chatbotsmagazine

It is evident that the level of uncertainty is high, and it would be in the interest of the marketers to track the changes in the lifestyle, purchase behaviour and media preferences of their target group over time and understand how ad budgets can be spent effectively. Hence the need to invest in actionable research is even more critical than ever.

Marketers must ensure that ad budgets are spent wisely on communicating the brand values while being conscious of the ways their target audience would like their brands to communicate during the times of COVID-19 crisis. A good example is the Nike campaign promoting social distancing.

“If you ever dreamed of playing for millions around the world, now is your chance. Play inside, play for the world”

The coronavirus pandemic is having a significant impact on the entire world. Though global ad growth has begun to fall, marketers have already started to adapt. They must not lose focus of their long-term goals. Even amid this crisis, there are opportunities. Since the cost of digital marketing is decreasing due to the pandemic, marketers can take advantage of it to acquire new customers at a lower price. There has been an accelerating shift towards utility, e-commerce, and live streaming. It is imperative to consider more digital solutions for all industries at such times. Marketers are responsible for adapting to this changing environment and cater to the needs of their customers.

A majority of ad spending takes place in the latter half of the year due to holiday campaigns and product rollouts. Therefore, the entire advertising market might bounce back in the second half of the year.

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Amit Verma
Amit Verma
About the Author

Amit has over 16 years’ experience in the research and insights industry. He has led big-ticket client engagements across multiple industries, supporting top research companies, consulting firms and corporates. He presents at global research conferences and closely tracks the developments in the research industry. He enjoys travelling in his leisure time.

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