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. But the pandemic changed all that – according to the World Economic Forum Covid Action Platform,
- 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 that the financial crisis in 2008.
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%. Countries in Europe saw an average reduction of 9%; Germany and France fell 7% and 12% respectively.
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.
COVID-19 is changing consumer behaviour – and therefore advertising
Wherever consumer behaviour 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.
Meanwhile, in-home media usage went up. TV viewership has climbed, but digital consumption has increased even more: use of social platforms and streaming services have risen almost everywhere; gaming has also grown dramatically.
Advertisers have adapted by following consumers, which means prioritizing digital advertising. The online environment is favourable for “direct response” campaigns – those encouraging quick purchases by consumers – an attractive proposition for brands spending cautiously and looking to drive sales. In the first quarter, Facebook and Google saw better than anticipated first quarter revenues.
Against this new normal, and given that advertising still plays an important role in promoting a brand and its products and services, the question is… where does one advertise?
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