GroupM Finds Good News/Bad News In U.S.-China Trade War

by Joe Mandese @mp_joemandese, August 12, 2019

The escalating trade war between the U.S. and China is likely both good news and bad news for the ad industry, according to an assessment released today by GroupM's Business Intelligence unit.

The good news, writes Global President Brian Wieser, is that it is likely to boost digital ad spending by Chinese marketers in the U.S., especially those using e-commerce platforms that are unlikely to be impacted by trade tariffs.

The bad news, he predicts, is that it will likely put the brakes on ad spending by U.S. marketers in China, which has been one of the fastest-growing ad markets worldwide in recent years and a source of expanding revenues for U.S. and global ad agency holding companies operating there.

"The news is significant for the advertising industry as it represents one of the looming economic risks countering recent growth trends in countries around the world," Wieser writes in the GroupM report, "U.S.-China Trade War: Implications For Advertising."

"Beyond the likely higher prices for consumers in both countries, if everything else were held equal – such as consumer preferences for either domestic or foreign brands and allocations of revenues into ad spending – foreign brands that manufacture in their home countries and market abroad will become more expensive and lose market share," he continues, adding: "In China there is significant spending from U.S. brands across the media industry. Higher prices for U.S.-manufactured goods driven primarily by a weaker yuan and stronger dollar would make those U.S. brands less affordable and presumably would negatively impact their market share and their ad spend. This would be negative for China’s domestic media industry."

Meanwhile, an escalating trade war is not likely to impact corresponding spending by Chinese marketers in the U.S. media industry.

Wieser notes that Chinese marketers spend relatively little in legacy media such as TV, radio and print media, which are unlikely to be impacted at all.

But digital is likely to see a bump as Chinese brands marketing direct-to-consumer actually accelerate their digital ad spending.

"According to our estimates, Chinese marketers who are based in China but look to reach consumers outside of their home market accounted for somewhere between $4 billion and $6 billion of ad spending on Facebook alone during 2018 and are on pace to spend somewhere between $5 billion and $8 billion this year," Wieser explains, adding: "A significant portion of this activity is likely directed into the United States. Separately, according to estimates published in May by Marketplace Pulse, 40% of the top sellers on Amazon’s marketplace in Europe are from China.

The firm believes Chinese manufacturers have a higher share within the United States. Presumably this activity also flows through to spending on Amazon’s advertising products as well."

ad spending, advertising, china, digital, ecommerce, media, research

3 comments about "GroupM Finds Good News/Bad News In U.S.-China Trade War".

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Vikash Jha from Z1 Media, August 13, 2019 at 9:35 a.m.
War of anykind harms economy. Z1 Media - Building the future of Digital Media and Advertising
condemns any such act. We believe in inclusive growth of business, people, country and whole globe as well. Globalization helps in growth and productivity. z1 Media helps businesses and companies to reach their target customer.
Founded in 2015, they've grown exponentially in the last 3 years and are currently working with more than 200 clients and have partnered up with some giants like Google, Uber, Appnexus and more.
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Vikash Jha from Z1 Media, August 13, 2019 at 9:35 a.m.

War of anykind harms economy. Z1 Media - Building the future of Digital Media and Advertising
condemns any such act. We believe in inclusive growth of business, people, country and whole globe as well. Globalization helps in growth and productivity. z1 Media helps businesses and companies to reach their target customer.
Founded in 2015, they've grown exponentially in the last 3 years and are currently working with more than 200 clients and have partnered up with some giants like Google, Uber, Appnexus and more.

Vikash Jha from Z1 Media, August 13, 2019 at 9:35 a.m.