Global advertising spend is set to fall by 8.1% – $49.6bn – to $563bn this year, led by severe cuts in investment among major product sectors as a result of the COVID-19 outbreak, the latest WARC Global Advertising Trends report finds.
The new projections, detailing the impact of COVID-19 on ad investment at the media, ad format and product category level, are based on data from 96 markets worldwide, and represent an absolute downgrade of $96.4bn compared to WARC’s previous global forecast of 7.1% growth made in February 2020.
At a product category level the casualties are unsurprising, with certain sectors making deep cuts this year:
- Travel & tourism (-31.2%)
- Leisure & entertainment (-28.7%)
- Financial services (-18.2%)
- Retail (-15.2%)
- Automotive (-11.4%)
But, ultimately, almost all product categories are expected to record falling ad investment in 2020.
“We note three distinct phases to the current downturn,” says James McDonald, Head of Data Content, WARC.
“Firstly, an immediate demand-side induced paralysis for sectors such as travel, leisure and retail, combined with supply-side constraints for CPG 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.
"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 higher spending within the pharmaceutical sector to leverage the shifting consumer mindset.”
The media picture
At a media level, this will be particularly painful for traditional formats, which will see ad investment fall by 16.3% this year, equivalent to the removal of $51.4bn from 2019 levels.
- Cinema (-31.6%)
- OOH (-21.7%)
- Magazines (-21.5%)
- Newspapers (-19.5%)
- Radio (-16.2%)
- TV (-13.8%)
Though not nearly as hard hit, internet adspend growth will likely be arrested at 0.6%, the result of a $36.5bn cut in projected spend. For context, WARC’s February forecast anticipated growth of 13.2%. But that was then.
While only online classified ads should see a fall (-10.3%), largely through recruitment freezes, internet formats will see much weaker growth than has been the case in recent years:
- Social media (+9.8%) – likely the strongest performer of 2020
- Online video (+5.0%)
- Online search (+0.9%)
Despite heavy downgrades across the board, the global decline in 2020 will be softer than that recorded in 2009, when the ad market contracted by 12.7%, or $60.5bn.
Record-high spending during the US presidential campaigns will stymie US ad market decline to -3.5% in 2020, while stronger-than-expected first quarter results show key media owners were in relatively good health heading into dire second and third quarters.
While 2020 won’t be quite as lucrative for the Duopoly of Facebook and Google, they will likely emerge in a comparatively strong position.
Alphabet’s advertising revenue – across Google Search, YouTube, and Google Network Members (third parties that host Google ads) – is forecast to rise by just 1.6% to $137.1bn this year – before the deduction of traffic acquisition costs (TAC), which amounted to $30.1bn in 2019.
This means the company accounts for almost one in four dollars (24.4%) spent on advertising worldwide. The latest projection represents a downgrade of $12.9bn from WARC’s pre-outbreak forecast.
Meanwhile, Facebook is expected to bring in $77.6bn across its products, up 11.5% on 2019. While this is a downgrade of $5.3bn from WARC's pre-COVID forecast, Facebook will likely come away with a 13.8% share of global investment.
“Opportunities can come from this crisis, both for advertisers and for media owners – every brand should be questioning assumptions about their company’s competitive position,” noted Brian Wieser, Global President, Business Intelligence at WPP, commenting alongside industry experts in the report.
"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.”
Sourced from WARC