GroupM is now forecasting a 13% drop in U.S. ad expenditures for 2020 (excluding political) to about $208 billion, followed by a rebound of 4% in 2021 to $216.6 billion.
According to the company’s revised ‘This Year Next Year’ forecast, the drop won’t be as sharp as the 16% drop that occurred during the 2009 financial crisis.
And given that the state of the economy, driven to its worst decline since the Great Depression by the ongoing COVID-19 pandemic, the decline in ad spending could be a lot worse.
“Putting current conditions in tangible terms, as measured solely by gross domestic product, conditions are still best characterized as awful,” the report states. “Refinitiv’s consensus estimates as of mid-May call for a 5.7% inflation-adjusted decline in economic activity during 2020, the worst outcome since the trough of the Great Depression in 1932.”
As to why spending hasn’t declined more precipitously the report submits that “one interpretation … is that divides playing out in society are also playing out in business, with haves and have-nots on different dimensions. More specifically, the costs of the pandemic disproportionately impacted low-income and underrepresented communities (often Black and Hispanic individuals) and smaller businesses, on average.”
One area of spending that seems impervious to the COVID-19 virus is political advertising which is expected to soar this year to $15 billion versus $8 billion 2018. “We estimate slightly more than half of this amount will go to local TV and much of this activity will be concentrated in swing states, which usually account for only a minority of the country’s population.”
With political dollars factored into the mix GroupM estimates that total 2020 ad spending will be down 7.6% to $223 billion with 2021 down 1.7% to $219 billion.
Digital advertising is expected to decline by only 3% during 2020 on an underlying basis or be flat including political advertising.
Television advertising is expected to decline by 7% in 2020 and falling by another 12% next year. Out-of-home advertising is expected to take a 21% hit this year. The full revised forecast can be accessed here.
The GroupM report follows a mid-year take on the global ad economy issued by Interpublic’s Magna on Monday.