HOW THE CORONAVIRUS WILL CHANGE USA'S AD SPENDING?

The report titled "How the Coronavirus Will Change Our US Search Ad Spending Forecast" by eMarketer maintains that advertising investment in the United States will decrease between 8.7% and 14.8% during the first semester of 2020, which implies approximately between $ 6 billion to $ 8 billion less than expected, according to its latest estimates. "Our previous forecast of US digital ad spending, completed on March 6, 2020, called for a 14.4% increase in search ad spending for all of 2020," says the report.

Search ad spending was flat in Q1, thanks to continuing solid performance at the beginning of 2020. eMarketer think Q1 ad investments came in somewhere between a year-over-year spending increase of 2.8% and a decline of 0.2%. Your model assumes that major decreases in spending began in March and will continue through Q2.

The investigation maintains that search ad spending in Q2 will experience a steeper decline of between 20.2% and 29.4% on a year-over-year basis. "We believe travel advertisers will decrease search spending most sharply, and media and entertainment industry search budgets will be severely trimmed as well. Advertisers in other industries will also pull back spending on average—but keyword bidding means there likely won’t be as large a drop in pricing for search ads as there will be for display."

Why Search Ad Spending Will Fall? As a performance marketing channel that is relied on to drive return on investment, search is often viewed as relatively safe in a recession, when marketers are forced to justify budgets. But there are at least two major downward pressures on search ad spending during the current crisis:

• Search is a lower-funnel ad channel that’s typically geared toward driving conversions—including in-store—and many of those conversions can’t happen right now because of quarantines, inventory shortfalls and related problems.
• Search budgets aren’t committed in advance and can be paused or pulled at any time.

The report ensures that Ecommerce activity typically drives a significant share of search ad spending. But for now, tight supply chains and logistical restrictions—like those announced by Amazon to limit warehouse operations—mean it’s hard for consumers to buy a lot of items online. Amazon has reportedly pulled back significantly from spending on Google search ads, likely because it doesn’t want to drive additional demand when it’s already running close to capacity.

"Our current guidance assumes that advertisers in different industries will make different decisions about budget allocations, and not all sectors of the search ad market will experience the same degree of decline during H1", concluded.