WARC projects 2020 drop in ad spend may not be as bad as 2009

by David Brown

While it may seem like this COVID-induced shutdown has already lasted an eternity, the effect on marketing and advertising seems certain to last for quite some time.

On Thursday, WARC (World Advertising Research Center) released new projections about what those effects could feel like through the rest of 2020.

Prior to the crisis, WARC was forecasting ad spend to grow by 7.1% this year. It’s now projecting an 8.1% decrease—a drop of almost $50 billion and an absolute decrease of more than $96 billion from the original growth forecast.

Looking just at Canada, WARC is forecasting a 6.5% drop in ad spend for 2020, down from a projected 1.9% increase before the outbreak and the actual increase of 3.7% in 2019. WARC is also expecting growth to be about 4.5% in 2021.

The report does contain some good news for glass-half-full types, noting that this year’s downturn “will be softer than in 2009, when the ad market fell by 12.7% ($60.5 billion).”

WARC points to several reasons for this, including the upcoming U.S. presidential election, a stronger-than-expected Q1, and “a more established online sector—particularly within e-commerce.”

For the glass-half-empty types, though, WARC points out that in adjusted terms (inflation and exchange rate fluctuations) the 2020 drop could seem worse that that of 2009.

WARC also expects the ad market to grow by 4.9% in 2021. But to get back to the pre-pandemic ad market peak of 2019, WARC said it will require growth of a further 3.7% in 2022.

WARC’s research on the impact of COVID-19 on ad investment is based on 96 markets worldwide.

By product category (see full chart below)

With the crisis so far-reaching, it’s not surprising that almost all product categories will feel the effects. But the greatest damage will be felt in:

  • Travel and tourism, -31.2%;
  • Leisure and entertainment, -28.7%;
  • Financial services, -18.2%;
  • Retail, -15.2%; and
  • Automotive, -11.4%.

By media

With so much consumer media consumption moving online during the crisis, traditional media will be hit hardest (pre-crisis projection in brackets):

  • Cinema, -31.6%, (+5%)
  • Out-of-home, -21.7%, (+5.9%),
  • Magazines, -21.5%, (-5.6%)
  • Newspapers, -19.5%, (-5.9%)
  • Radio, -16.2%, (1.8%)
  • TV, -13.8%, (2.5%)

Online

Only the online ad market is projected to remain in the black for 2020, though just barely, at +0.6%. Still, spend will be down dramatically this year (with pre-crisis projection in brackets):

  • Social media, +9.8% (+20%)
  • Online video, +5% (+20.2%)
  • Online display, +2.1% (+14.3%)
  • Search, +0.9% (+12.4%)

James McDonald, WARC’s head of data content, said the organization foresees three distinct phases to the downturn.

“Firstly, an immediate demand-side induced paralysis for sectors such as travel, leisure and retail, combined with supply-side constraints for CPG brands.

“Second, the recessionary tailwind will exert extreme pressure on the financial services sector as well as the consumer, whose disposable income is now heavily diminished.

“Finally, as the world takes tentative steps towards a recovery, there will be an added emphasis on healthcare and wellbeing credentials among brands not normally associated with the field, aside higher spending within the pharmaceutical sector to leverage the shifting consumer mindset.”

David Brown