As a result of the pandemic, brands will cut $50 billion in ad spend this year, an 8.1 percent decrease, according to WARC’s latest global ad trends report exploring the impact of COVID-19. The estimate represents a $96.4 billion downgrade compared to WARC’s previous global forecast of 7.1 percent growth, made before the pandemic.
Ad spend is set to plummet across all of the 19 product sectors WARC examined, with the steepest decline recorded in the travel and tourism sector, down 31.2 percent, or a $7.2 billion reduction in spend compared to 2019.
Leisure and entertainment brands will also make severe cuts, with ad spend down 28.7 percent, or $6.6 billion; followed by financial services, down 18.2 percent, or $8.7 billion; retail, down 15.2 percent, or $10.2 billion; and automotive, down 11.4 percent, or $7.4 billion.
“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, says James McDonald, head of data content, WARC, and author of the research.
The pandemic will hit traditional media the hardest, with ad investment set to fall $51.4 billion and additional declines across cinema (-31.6 percent), out of home (-21.7 percent), magazines (-21.5 percent), newspapers (-19.5 percent), radio (-16.2 percent) and television (-13.8 percent).
Online media will fare better than traditional media but is not immune from the downturn. At a global level, internet advertising will see modest growth this year, a 0.6 percent increase.
The strongest performer in 2020, social media will increase by 9.8 percent to $96 billion. Followed by online video, which will increase by five percent and online search, which will increase by 0.9 percent. Still, all represent far lower rates than WARC previously projected.
Alphabet, which accounts for nearly one in four dollars spent on advertising worldwide, will see its ad revenue rise by just 1.6 percent to $137.1 billion in 2020. This represents a downgrade of $12.9 billion from WARC’s pre-COVID forecast.
At $77.6 billion, ad spend across Facebook, Messenger, WhatsApp and Instagram is expected to rise by 11.5 percent from 2019, marking a downgrade of $5.3 billion from WARC’s pre-COVID estimate. This means Facebook holds a 13.8 percent share of global ad investment. Together, Alphabet and Facebook account for one in three dollars spent on advertising globally.
The pullback in Latin America will be acute, with ad spend set to decrease by 20.7 percent. Whereas in Africa, ad spend will fall 19.5 percent; in the Middle East, 15.1 percent; in Europe, 12.2 percent; in Asia-Pacific, 7.7 percent; and in North America, 3.7 percent.
Brands will have to ride COVID-19 out until 2021, when WARC predicts there will be a recovery, at a 4.9 percent increase. McDonald notes that during the recovery phase, “there will be an added emphasis on healthcare and wellbeing credentials among brands not normally associated with the field.”
On the flip side, this year’s downturn will be softer than in 2009, when ad investment dropped by 12.7 percent, or $60.5 billion.
WARC’s new projections are based on data from 96 markets worldwide.