9 MAR 2020

GLOBAL AD SPENDING WILL LIKELY FALL IF SPREAD OF CORONAVIRUS CONTINUES

If the spread of COVID-19 continues, that could result in increased ad spending in areas such as mobile gaming or streaming services if consumers end up spending more time at home amid the outbreak.

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As coronavirus cases continue to sweep the globe, the advertising industry is keeping a close eye on what impacts the spread will have on ad spending amid volatile economies, changing consumer habits and affected supply chains, according to CNBC.

Experts say that if the spread of coronavirus continues significantly, that could result in increased ad spending in areas such as mobile gaming or streaming services if consumers end up spending more time at home amid the outbreak, while ad spend could decrease in areas such as out-of-home advertising. The cancellation of major events like the Olympics could be another major factor affecting ad-spend.

● LEVEL OF CONTAINMENT WILL CHANGE THE IMPACT

If the crisis remains contained, advertising spend would be delayed until later in the year, the World Advertising Research Center said in its “Global Ad Trends” report on ad spend. The group forecasted last week that advertising spend would reach $660 billion this year, but that figure doesn’t include potential impact from the coronavirus.

“Advertising’s relationship with GDP is strong, but a slowdown in economic output as a result of the virus will not necessarily translate into reduced advertising investment,” the report said. However, if events like the Tokyo Olympics or UEFA Euro tournament are postponed or canceled, the group said, it would expect a “notable impact”.

James McDonald, WARC Data’s Managing Editor, told CNBC a major disruption from coronavirus could lead to long-term restrictions on movement and large gatherings. That would impact spending in areas such as cinema, the out-of-home advertising market and even radio, since so much of radio is consumed during commutes, he said.

If people are spending more time at home, they would instead be spending more time on streaming services, social media and mobile games, which could all see increased ad investment, McDonald explained.

● KEEPING AN EYE ON THE CHINESE MARKET

“China is going to be really useful to get a read in how this can play out,” Brian Wieser, Global President of Business Intelligence for GroupM, WPP’s media agency arm, told CNBC.

On Monday, Wieser said in a post that everyday life in China had been severely impacted by travel restrictions and business closures due to the coronavirus outbreak, and people spent more time consuming media and less time going out shopping. But, as the pace of new infections in China began to decelerate, Wieser said, stores and factories began to reopen.

“In short, there appears to be a basis for optimism around a resumption of normalcy — or at least a ‘new normal’ — in the coming months,” Wieser commented. “Unfortunately, much of the rest of the world is only now going through what China has gone through over the prior two months. This means that we likely have yet to see the worst play out,”  he added.

Wieser said the possibility of a recession will be realistic for many countries, at least on a short-term basis. “While it is far too early to anticipate outcomes with any precision, the implied double-digit declines in ad spending within China for the first quarter could play out elsewhere, with reduced declines in subsequent quarters and an eventual reversion back to growth as we have seen following other recessions,”  he wrote.