Emarketer reported that marketers were reducing or delaying campaigns and ad spending for the short-term, but anticipated a return to more normal marketing by Q4. That was a month ago, which seems an eternity in the COVID-19 crisis. By the first week of April 2020, the World Federation of Advertisers (WFA) said 57% of its members were cutting ad spending. Elsewhere, The Interactive Advertising Bureau (IAB) reported that 24% of brands paused their ad spending for the first and second quarters of 2020; 46% were at least adjusting advertising spending. And Emarketer issued a new report that initial optimism for a quick recovery has dissolved; As of the first week of April, 86% of survey respondents anticipated “major impact” on ad spending in Q2, and 43% anticipated that impact would extend well into Q3 2020.
Per UK news site Mediatel: “Four out of five marketers from major global brands say they are deferring planned campaigns… A third (34%) have initiated short one- to two-month delays, while 28% are holding off for a full quarter and 13% will wait for six months before bringing campaigns back to market.” In other words, the second half of the year is entirely up in the air.
In a separate WFA survey, marketers say they “are mindful” of the impact on their advertising partners. Nice to know.
As dark as the outlook may appear, it pays to recall that many clients had to cope with critical operational changes, like shifting to remote working when they were unprepared to do so. Others are stressed by interrupted supply chains, labor issues around trying to operate without protective gear or ability to practice social distancing, and the financial challenges of an upended economy. Now that they’ve smoothed out those initial crises, clients are starting to examine normal business operations, including how (or whether) to market.
Interestingly, Emarketer noticed a difference in what factors were affecting ad spending forecasts. Ad sellers are making projections based on economic indicators including changing shelter-in-place orders, the stock market and business reopenings. Ad buyers are instead anticipating a longer and deeper impact based on coronavirus indicators (COVID-19 case tracking, quarantine status, and shelter-in-place extensions). Ad agencies and marketing firms need to recognize this difference in mindset, and prepare for long-term budget impacts.
Widespread Ad Spending Impacts
Emarketer reported huge cuts or pauses in advertising spending across multiple media. Cuts applied to all media… except for search marketing, at first. More on search in a moment…
Advertising spending on out-of-home advertising (OOH) is for obvious reasons plummeting worldwide. Terrestrial radio (as opposed to satellite/streaming radio) has seen cuts because drive-time audiences aren’t driving. Newspapers report huge cuts in advertising because marketers and brands don’t want their products to appear next to coronavirus stories, even as, ironically, readership has spiked as people take advantage of coronavirus coverage in front of paywalls. Many local newspapers could shut down as a result; many were already on the edge of the cliff before the pandemic. Magazine publishers are also beginning to take big hits in slashed advertising campaigns. Cinema advertising, dependent on venue, available content to market around, willing audiences and local advertisers, is gone for the foreseeable future.
So, does this mean digital advertising is seeing increased spending? Well, no… Marketers are also reducing online display ads. Again, many brands don’t want their marketing to appear side-by-side with reports of virus deaths and struggling healthcare workers. Others are concerned about emotional climate-driven backlash to perceived tone or perceptions of profiteering by selling too hard during the crisis. In the period between March10 and March 22, real-time bidding, programmatic guaranteed, direct deal and CPMs all saw double-digit declines in media spending. BUT… marketers began shifting budgets to mission-based messaging, cause-related marketing and building brand equity.
Digital options can provide alternative ways to reach selected audiences, and can be scaled from very narrow to broader delivery. Leslye Schumacher of digital marketing pros Vici Media Inc. reports that initial campaign stoppages have eased as clients start altered campaigns and explore digital media options. Schumacher also says lots of categories are still pursuing marketing, and may need help switching from traditional media (law firms and educational recruiting) or promoting digital offerings (healthcare and banking).
What About Mobile?
Emarketer shared that globally, people have increased time spent on mobile devices while under the pandemic lockdowns. (Data is not available for the US and UK at present.) But people aren’t spending time on apps or platforms that are easily monetized. Also, many marketers don’t have money to spend online or elsewhere right now. The result has been what seems a counterintuitive 13.3% decline in mobile ad spending.
One bright spot for mobile may be mobile gaming. In the U.S., 56% of mobile users had increased time on mobile gaming, per a mid-March survey by InMobi. Schumacher of Vici Media also notes that new options in mobile targeting could help some ad agency clients continue to message people who are sheltering at home.
Video streaming services and subscription video services like sports feeds are also enjoying behavioral changes, and could offer alternative advertising opportunities for appropriate brands. The IAB says 35% of marketers are increasing audience targeting, and OTT/CTV device targeting.
Surely Social Is a Good Bet?
Social media marketing has also taken a hit in ad spending. While people are spending more time on social media platforms (Facebook usage was up 70% in Italy in February), they are using tools where ad serving is more difficult, like Instagram Live and video chats using Facebook Messenger. (The platform enabled Messenger group chats at the beginning of April 2020.) Also, brand tone and appropriateness are as much a concern in social media as elsewhere online; some categories will be able to market without interruption, while others may suffer brand damage due to negative public perceptions of their value.
Other platforms downgraded ad revenue projections in March, and influencer marketing on platforms like Instagram has ground to a halt as marketers pause budgets. Even YouTube has seen ad spending decline.
Emarketer reports that, among U.S. ad buyers, social media ad spending budgets are projected to decline an average of 48% between March and June 2020. But… Facebook CPM ad pricing is down by 50%, so if you have the right product or service for the times we now live in, consider social options. It’s a buyer’s market.
Search marketing as a category showed glimmers of hope in early March, as for every decline in ad spending, new ad dollars also rolled in to balance it. Google engagement was up, even as Facebook had been trending down for months, not solely because of coronavirus behavioral changes. Yet marketers have now reduced search ad spending. The biggest impact on Google’s dominant search platform has been the loss of travel/hospitality and entertainment ad spending. Wall Street analysts are projecting ad revenue declines for both Google and Facebook for the first time in their histories.
To make matters more interesting, Australia just mandated that Facebook pay online publishers for the content that flows through online news feeds and search returns, and share their data relevant to that content. Nations having unfair competition regulations say the platforms have made no forward progress in addressing the power imbalance between local news organizations and the global platforms profiting from those organizations. Last month, France took similar action against Google. Google retaliated by either eliminating some publishing content from search results, or greatly reducing the descriptive text displayed with URLS. France is now imposing even more regulation on the platform.
Emarketer’s new forecasts for search ad spending in 2020, previously set to see paid search budgets grow based on last year’s very good numbers, now sees search losing advertising dollars through this year. The COVID-19 economic shutdowns spurred slashed budgets on anything aimed at driving offline conversion (restaurant marketing, entertainment ads, retail marketing), and those will revive very slowly after shutdowns are eased. Tight supply chains and inventory issues are also constraining online sales and marketing. Platforms are also struggling with policing profiteering in items like masks, hand sanitizers and other in-demand consumer packaged goods.
Even so, search spending can be more easily restarted than many other forms of ad spending, and Emarketer continues to adjust estimates from initial COVID-19 forecasts. It’s worth building paid search into recovery plans, as it may prove a good test arena for restarting ad spending.
Changes in B2B Ad Spending
B2B ad spending was already on the chopping block before the COVID-19-generated “recession” began to develop. Uneasiness about a real recession kicking in, and uncertainty in financial markets over trade issues, oil prices and other factors, had many B2B companies assessing how much to spend and where, especially in light of unhappiness about ad fraud and shoddy measurement practices.
B2B event marketing and trade shows have been enormously impacted, a segment that many B2Bs rely on to find new business prospects and connect customers with services and products. Agencies that can find ways to help B2Bs adapt to this loss will definitely be seen as valuable partners.
Ad budgets are projected to be cut by about 18% of B2B’s, reports Emarketer, but most are not planning cuts, or are waiting to see how the crisis unfolds. Others are reining in spending because their products may be “non-essentials” in our crisis moment; those groups may need help with adjusting campaigns, and deciding when and at what frequency to resume normal sales messages. These B2Bs may also want to continue content marketing, as educating customers and sharing useful information will be received more readily right now than sales pitches.
Other B2Bs, part of essential supply chains, will largely see marketing unaltered… unless their ability to operate is harmed by coronavirus labor, production and delivery challenges. We all must learn to be more agile. Crisis planning seems belated in our current moment, but agencies with this skillset may be able to help clients prepare for ongoing disruptions so those events are more manageable should they occur.
More than ever, messages must be relevant and offer value to recipients/audiences, and brands must continue to be authentic to their brand promises. It’s worth noting that B2B media buyers are still expecting accountability and measurement from their media buys.
We Can Do This
Agencies and their clients need to find a balance between stopping marketing altogether, and trying to keep key messaging in place so share of market and share of voice are not entirely disrupted. Given the economic fallout from COVID-19 shutdowns, that will be difficult for many smaller businesses, and their smaller ad agencies. But the enforced downtime many businesses and agencies are experiencing makes this an ideal time to plan and prepare for a future that looks very different from the one we had in mind on January 1st.
While the ad spending outlook is grim, it pays to remember that the crisis is projected to be short-term. Many businesses are looking toward a return to more normal spending by the fourth quarter of 2020; many will begin ramping up by Q3. All of this depends on the virus: as the CDC’s Dr. Anthony Fauci said, the virus makes the timeline. That means one thing we can count on moving forward is continuing uncertainty. Plans must be flexible.
Stay tuned for updates on how ad spending is evolving as we move through Q2 and into the summer. Hang tough, everyone.
You may also want to view Laurie Mikes’ interview with Leslye Schumacher of digital marketing partner Vici Media Inc. Find the video under #GoodAdvice on our COVID-19 help page.