Forecasting advertising spending during an unpredictable worldwide pandemic is easier than it sounds, according to Brian Wieser, global president, business intelligence, at media buyer GroupM.
GroupM’s latest U.S. forecast, excluding political advertising, called for a 13% drop in overall ad spending for 2020 and 4% growth in 2021.
Television overall will be down 7.1% this year and down another 11.7% in 2021. National TV is expected to drop 11.3% this year, with a 5.6% rebound next year. Local TV, bolstered by an estimated $8 billion in political spending, is expected to grow 0.8% during 2020. Next year, with the presidential election behind us, local TV ad revenue will drop 40.2%, GroupM said.
(In a separate report, Magna Global, another huge agency, forecast a 13.2% drop in national television advertising revenues for 2020 and a 4.3% rebound in 2021. Local is expected to grow 2.8% in 2020, including political spending, then drop 14.5% in 2021, with core revenue up 0.1%.)
The drops in advertising are not as pronounced as they were during the 2008 financial crisis, when ad spending plunged 16% despite a smaller drop in gross domestic product, Wieser noted.
That’s because, although a handful
of categories have been shut down by COVID-19, most have figured out how to do business in a pandemic, Wieser said. That means that they will figure out their marketing needs and spending patterns will be predictable.
Wieser said he had been following the spread of the coronavirus since January. By February, it was clear the impact was going to be worse than SARS, and by March he was alarming people by asking whether this could be worse than the Great Depression. “I was being warned that I was scaring people,” he said.
In March, advertisers canceled what they could cancel and paused what they could pause.
Finding a New Stable
“But after a couple of weeks of regrouping and figuring how to operate if possible, a new normal — an overstated term, but let’s call it that — took root,” Wieser said. “What I think is happening is that most categories of marketers realized they actually can adapt to this. It’s not the end of the world for most categories and most categories that tend to be large advertisers — they’re pretty OK.”
That’s why, given the steepest drop in gross domestic product since the Great Depression, ad spending isn’t suffering proportionately.
Wieser said that short-term increases in new COVID-19 cases, or even states tightening up social distancing and stay-at-home rules at this point, shouldn’t have a big impact on total ad spending.
“We’ve had a pretty good view about
how this plays out, and the vacillations
of the past few days in the [stock] market don’t make me think we need to rethink this,” he said.
Even something that could have a big impact on advertisers, like whether or not live sporting events return, would likely have only a marginal effect on total ad spending.
“We know the sports leagues will try to start the season, but will they complete what they start?” Wieser asked. “In Germany, they’re playing soccer, so it can work if you do everything right. Now, are you confident we’ll do everything really well? I don’t know about you, but past evidence is not supportive of that.”
Either way, from a forecaster’s vantage point, “the observable evidence that
sports causes incremental spending, or
that eliminating sports leads to an elimination of spending, is pretty modest,” Wieser said.
With no sports, marketers who need to advertise will, with the help of their media agencies, find other ways to reach those viewers.
Pricing Impacts
The shift will have implications in terms of price inflation for other programming, as money moves from high-priced, highly-rated ad inventory to lower-rated inventory with lower costs per thousand viewers (CPMs), he said.
“That’s why it’s not as hard as you might think to forecast if you start with the view that most large marketers have figured out how to adapt their business,” he said.
