Magna predicts Canadian ad market to fall 6% in 2020, with recovery expected next year

Canadian advertising revenues are projected to fall 6% to $15.3 billion this year according to the latest ad spend forecast from IPG Mediabrands’ Magna unit, marking the first year-over-year decline since 2013, when the market contracted by 1%.

Magna says the expected decline in Canadian ad spending is the same as that experienced during the height of the global recession in 2009.

However, GroupM’s “This year next year” report for the U.S. market, issued Tuesday, said that an expected 13% decline in the world’s largest ad market (not including election spending) will not be as the severe as the 16% drop that came during the worst of the 2008-09 global economic crisis.

“That we ‘only’ expect a 13% decline is surprising,” said Brian Wieser, GroupM’s global president for business intelligence, in a statement. “We might normally expect that because the 2020 economic decline is so much worse than 2009, advertising should be much weaker.”

Wieser pointed to some significant differences from the last downturn, including the fact that it played out over several months and that a wider range of businesses were “gradually and severely impacted.”

The impact of today’s pandemic on that market, he said, has been largely restricted to in-store retail, tourism, hospitality and place-based entertainment, with most other economic activity continuing around so-called BOPIS (bought online, pick-up in-store/curbside) or delivery  strategies.

“Large brands that initially paused spending retained substantial portions of their budgets, even as many small businesses saw their operations devastated,” he said. “Many evidently transitioned their operations online and supported those operations with related digital media spending.”

Other factors, he says, include a presumption that normal activity is expected to resume in short order, “possibly because of willful optimism that a vaccine discovery is not far away,” which presents some certainty for marketers that didn’t exist during the 2008-09 recession.

The U.S. market is also expected to benefit from political advertising, which is expected to increase “massively” in the run-up to November’s presidential election. GroupM estimated that political advertising this year could total US$15 billion, up from $8 billion in 2018—with slightly more than half going to local TV, particularly stations in the nation’s swing states.

Magna, meanwhile, predicted that global advertising revenues will fall by 7% (an estimated US$42 billion) this year, including a “heavy, double-digit decline” for traditional media that will be partially offset by relatively stable digital revenues.

The company predicts that the Canadian market will rebound in 2021, with the Tokyo Olympics (delayed from this year) contributing to a 5% spike in revenue. It predicts that it will return to pre-COVID spend levels in 2022.

“COVID-19 has obviously had a major impact on ad revenues across all channels,” said Chris Herlihey, vice-president of insights and analytics at IPG Mediabrands in a statement. “The pandemic has affected every aspect of consumer habits—from media consumption to purchasing behaviour—causing a ripple effect throughout the industry.”

Magna’s report provided detailed predictions across media, taking into account a number of important variables for Canadian spend:

Traditional media: The drop in Canada will be most pronounced among traditional media formats, which will fall 15%. It is predicting double-digit declines for radio (15%), out-of-home (16%) and print (20%), with closures contributing to a 30% decline in cinema advertising.

•Live sports and TV: The disruption of live sporting events—particularly the NHL and NBA playoffs—will exacerbate TV declines. TV is in what MAGNA calls “long-term structural decline,” with seven straight years of losses and revenues expected to drop 10% this year. The report says that the return of the NHL in two “hub cities” with a 24-team playoff structure that includes six of the seven Canadian teams, is good news for the television market.

•Digital and social: The digital category—which accounts for 63% of the total ad market—is expected to see a 2% drop in search revenues, offset by gains in digital video (7%) and social media (6%).

The Canadian ad market was valued at $16.2 billion last year, making it the eighth largest in the world, behind Brazil and ahead of Australia. With an annual ad spend of US$325 per person, compared to the global average of $100, Canada is also among the world’s most mature markets, said Magna.

Chris Powell