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."
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."