Brace for an ad spending roller coaster ride in 2020.
Interpublic intelligence arm Magna has issued a revised U.S. forecast declaring that full-year ad sales may drop 2.8% this year versus the pre-pandemic call of a gain of 6.6%. That earlier call, of course included the Olympics, which has now been postponed, although political is still in the mix.
For 2021, Magna is now forecasting total growth of 2.5% due to “the low comp, delayed consumption effects, and postponement of summer Olympics” to next summer.
But the first half of this year will be harrowing with a 20% drop for traditional ad sales but just a 2.5% drop in the second half, for a combined full-year decline of 12%. Digital ad sales will be more resilient with a full year gain of 4% including a 2% dip in H1 and a 10% spurt in H2.
But with the revised forecast came a proviso: “At this stage both the macro-economic outlook and the corresponding advertising forecast present a high degree of uncertainty and significant downside risk for 2020.”
So far the expected drop remains less severe than the recession of 2008 when ad sales plummeted 20%. For now Magna says the weight and resilience of digital advertising weighs against a repeat of Great Recession declines.
“The impact on business and marketing activity will vary across industries, depending on how much demand and investment will be delayed as opposed to destroyed during this crisis,” Magna stated. The firm “expects the impact to be severe for the travel, restaurant, and the theatrical movie industry, significant for retail, finance and automotive, moderate for packaged food, drinks, personal care, insurance and pharma, and potentially positive for ecommerce and home entertainment.”
After slowing this year, digital ad sales are expected “re-accelerate” next year to gain 7%, including double growth for both social and digital video. Search growth will taper to an estimated 4.5%.
Per the revised outlook the full-year decrease in traditional ad sales will reach -13% for national TV, -12% for OOH, -25% for print and -14% for radio.
“The outlook will be slightly more positive for broadcasters and publishers when including digital ad sales,” Magna stated. “Local TV’s non-political ad sales will also decline massively but political spending (almost $5 billion) will stabilize full year revenues (+1%).”
Vincent Letang, Magna's executive vice president, global market research, stated: “The current situation is totally unprecedented, but the closest historical equivalent would be a combination of the Great Recession and 9/11--a brutal economic downturn and a “Black Swan” national disaster. Its effects on supply, demand, and media consumption are more complex and widespread than in any ‘normal’ economic recession in the past, and some of them will outlast the current crisis. Nevertheless, there will be an “after”. At this stage, Magna anticipates ad market stabilization and rebound in the second half of 2020, and moderate growth in 2021”