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 finds Warc, the international marketing intelligence service.
The new projections, based on data from 96 markets worldwide, represent an absolute downgrade of $96.4bn compared to Warc's previous global forecast of 7.1% growth made in February 2020.
Traditional media will fare far worse than online, with ad investment set to fall $51.4bn (-16.3%) this year. Declines will be recorded across cinema (-31.6%), OOH (-21.7%), magazines (-21.5%), newspapers (-19.5%), radio (-16.2%) and TV (-13.8%).
Online advertising is not shielded from the downturn; internet growth will almost grind to a halt (+0.6%) in 2020 following a $36.5bn cut compared to Warc's February forecast to $298.9bn. Social media (+9.8%), online video (+5.0%) and online search (+0.9%) are expected to record growth but at far lower rates than were previously projected, while online classified - particularly recruitment advertising - is set to fall by 10.3%.
Facebook's full-year prospects have been downgraded by $5.3bn to 11.5% growth this year, to a total of $77.6bn, while Alphabet's revenue is expected to grow 1.6% to $137.1bn - $12.9bn lower than the pre-outbreak forecast of 10.4% growth.
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.
Vincent Letang, EVP, Global Market Intelligence, Magna Global, comments: "In the US, the spending cuts from most industry verticals will be mitigated by the incremental political spend in this presidential election year.
"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 $5bn (up 26% vs 2016) more invested, including an extra $1bn going into digital."
The online advertising sector - particularly e-commerce, which has boomed during the crisis - is more established than it was during the Great Recession. Internet advertising today accounts for 52.8% of global ad investment (compared to 13.8% in 2009). Alphabet and Facebook, combined, draw one in three dollars spent on advertising worldwide.
Patrick Miller, co-founder, Flywheel Digital, says: "In the last ten years, e-commerce as a share of total retail sales increased ~10 points; in the last eight weeks, it has increased 11 points.
"There is an opportunity to leverage Amazon's Demand Side Platform to create audiences of customers who have recently purchased or viewed in surging categories."
Adspend is set to fall across almost all of the 19 product categories monitored by Warc. The travel & tourism sector is expected to record the steepest decline, with a forecast of -31.2% for 2020 representing a $7.2bn reduction in spend compared to 2019, to a total of $16.0bn.
The leisure & entertainment (-28.7%, down $6.6bnfrom 2019 to $16.4bn), financial services (-18.2%, down $8.7bn to $39.2bn), retail (-15.2%, down $10.2bn to $57.2bn) and automotive (-11.4%, down $7.4bn to $57.6bn) sectors are all set to witness sharp declines this year.
Summing up, James McDonald, head of data content, Warc, and author of the research, says: "We note three distinct phases to the current downturn: 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.Brian Wieser, global president, Business Intelligence, WPP, adds:
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. What are the ways in which you can reinvent the category? That the economy will be weak is a given, but anyone business's outcomes are not.
A sample report of Warc's Global Ad Trends: Covid-19 and ad investment is available to download here. The full report is available to Warc Data subscribers.
Global Ad Trends, a monthly report which draws on Warc's dataset of advertising and media intelligence to take a holistic view on current industry developments, is part of Warc Data, a dedicated independent and objective one-stop online service which rigorously harmonises, aggregates, verifies and evaluates data from over 100 reputable sources, including Nielsen, featuring current advertising benchmarks, forecasts, data points and trends in media investment and usage.
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