21 APR 2020

US AD REVENUE EXPECTED TO DECLINE DESPITE MEDIA CONSUMPTION INCREASE DURING PANDEMIC

US spending on search advertising will decline by between 8.7% and 14.8% in H1 2020, which will lead to $6 billion to $8 billion less revenue. Spending in Q2 will experience a steeper decline of between 20.2% and 29.4% on a year to year basis.

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According to data released by Emarketer, despite a massive increase in media consumption amid the Covid-19 pandemic, US spending on search advertising will decline by between 8.7% and 14.8% in H1 2020, which is about $6 billion to $8 billion less revenue than expected. With an economic slowdown crashing markets and supply chains disrupted by the virus, many advertisers are canceling their spending on placing them on a halt, meaning increases in media engagement aren’t translating into increased ad revenues.

A past forecast of US digital ad spending, completed on 6 March called for a 14.4% increase in search ad spending for all of 2020. Current indications show that Search ad spending was flat in Q1 resulting from the consistent performance at the beginning of 2020. Emarketer predicts that Q1 ad investments came in somewhere between a year-over-year spending increase of 2.8% and a decline of 0.2%. The model predicts that major decreases in spending began in March and will continue through Q2. Spending in Q2 will experience a steeper decline of between 20.2% and 29.4% on a year-over-year basis.

  

Emarketer believes that travel advertisers will decrease search spending, and media and entertainment industry search budgets will be severely trimmed as well. Advertisers in other industries may also refrain from spending, but there likely won’t be as large a drop in pricing for search ads as there will be for display. The main two reasons why Emarketer predicts there will be a decline in ad spending is because the search includes a lower-funnel ad channel that typically drives conversions, including in-store, and many conversions have been canceled due to the pandemic. As a result, there were inventory shortfalls. As a performance marketing channel that is relied upon to help invest, search is often viewed as relatively safe during a financial crisis, when marketers are forced to justify their budgets.

Twitter was among the first of major US digital ad publishers to give investor guidance under the new circumstances. Based on eMarketer’s analysis of Twitter’s Q1 update, the company looks set to see a decrease in revenues of between 9% and 40% during March. Facebook also released information about its engagement and ad revenues, stating that a lot of the increased engagement comes from properties or services, such as WhatsApp, which aren’t monetized much anyway. 16% of US internet users surveyed said they would have a less favorable opinion of a brand whose ad was adjacent to coronavirus-related content. Almost eight in 10 respondents said such placement wouldn't change their view of a brand. Respondents were slightly more likely to say they thought it was “unsuitable” for a brand to advertise next to this content, at 22%. Approximately one-third said it would depend on the brand. Almost half of the respondents said they wanted to see health and pharma-related brands advertising near coronavirus content. Marketers are concentrating on brand-focused creativity that emphasizes their roles and will help offset the lack of out-of-home advertising in these communications.