The COVID-19 Impact on Advertising Spend



covid-19 advertising spend

The COVID-19 Impact on Advertising Spend

Before the COVID-19 outbreak, global advertising investment was estimated to grow at a 7.1% clip in 2020.

Now, it is estimated to see a brutal contraction of 8.1%—equating to almost $50 billion—as a result of changing consumer behavior. The total loss becomes a bleak $96.4 billion when taking pre-pandemic growth forecasts into account.

Today’s graphic uses data from the World Advertising Research Center (WARC) to visualize the estimated decline in advertising spend by media format and industry.

As advertisers adapt to rising in-home media consumption, the tug-of-war for ad dollars between online and traditional media seems to have a decisive winner.

The Death of Traditional Media

After decades of experts predicting the death of traditional media formats, the COVID-19 pandemic could be the last nail in the coffin.

In fact, spend across every type of traditional media format will see a decline in 2020, while most online media formats are expected to see an increase in spending.

Mid-term, this era will be associated with an accelerant of latent and incremental trends towards more digital consumption, commerce, and thus advertising”

—Dr. Daniel Knapp, Interactive Advertising Bureau Europe

With consumers spending significantly more time at home, brands are allocating more dollars to certain media formats to reflect that. However, when it comes to traditional in-home formats such as TV, consumers are opting for streaming services instead. In fact, they are streaming twice as much online video on services such as Netflix compared to last year.

Spending Estimates, by Category

Almost every industry will see reduced spending. The one category that will buck the trend is “Telecoms & Utilities”, which will experience a 4.3% increase in ad spend throughout the year.

Interestingly, stay-at-home restrictions have increased consumers’ reliance on these services for staying connected with loved ones and working from home.

Moreover, the pandemic has proved to be a turning point for the telecommunications industry, as the importance of faster internet speeds are emphasized and the potential of 5G is realized.

The Road to Recovery?

When inflation and exchange rates are taken into account, the decline in advertising spend is expected to be worse than that experienced during the global financial crisis.

Although 2021 shows signs of recovery, WARC suggests this is reflective of how steep the decline in 2020 will be.

covid-19 advertising spend

Data shows that global advertising spending growth did not fully recover for eight years following the previous recession, so a swift recovery may be highly unlikely, and returning to pre-pandemic growth rates may not be possible for a number of years.

The Changing Advertising Landscape

As advertisers come to terms with their new reality, they are faced with the uncertainty of changing consumer behavior and the potential for a second wave of the pandemic, tightening quarantine restrictions once more.

Could COVID-19 be accelerating the inevitable shift to digital, or is the pain for traditional media only temporary?

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The post The COVID-19 Impact on Advertising Spend appeared first on Visual Capitalist.




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