The coronavirus pandemic has caused a considerable drop in advertising spending. Ad spends are down 9% on average across Europe, with Germany and France falling by 7% and 12% respectively. Three of this years quarters are expected to have a greater impact than the financial crisis in 2008.
There’s a rule of thumb in the advertising industry that ad spend follows any rise or fall in GDP. Over the last decade, as global GDP has risen 3-6% each year, the ad market has grown with it to around $646 billion USD in 2019. Pre-coronavirus, the ad market was forecast to grow to $865 billion USD by 2024.
Coronavirus has forced a rethink – the pandemic has led to an immediate drop in advertising spending. First quarter data from Publicis showed that year-on-year revenue in China was down 15%.
The remainder of 2020 looks set to be challenging. According to the Interactive Advertising Bureau, almost a quarter (24%) of media buyers, planners and brands have paused spending until the end of Q2, while 46% indicated they would adjust their ad spend across the same time period. Three quarters expect the pandemic to have a bigger impact than the 2008 financial crisis.
However, there is a deviation to the principle that companies cut advertising budgets during a recession. In many countries, governments have emerged as advertising buyers to promote public health messages or support journalism. According to Brian Wieser, Global President, Business Intelligence at GroupM, “This is not going to make a huge difference considering the dominance of the US and China over the total market, but it is an interesting exception.”
COVID-19 is changing consumer behaviour – and therefore advertising
Wherever consumer behavior has shifted, advertising spend has adjusted in response. It makes little sense for advertisers to spend on media that have no audience. As confinement measures were introduced around the world, out-of-home and cinema advertising shrank almost instantly; print advertising also fell.