Demystifying the Impact of COVID 19 In the World of Advertising



Just like any other industry hit by the pandemic, advertisement is observing a trend that will change the outlook of revenues generated by Ads. 

The pandemic has affected every industry equally. There is no lie that COVID 19 has done more than the Sub Prime crisis of 2008, dismantling financial institutions and ravaging the economy.

For the advertisement industry, an institution that is considered to be the warning sign of GDP, the contraction due to COVID 19 was 8.1%, thus equating the loss to $US 50 billion. Before the pandemic, the ad market was forecasted to grow by $US865 billion by 2024. And the revenue generated by the advertising market for the year 2019 was risen by $US646 according to a report by the World Economic Forum (WEF).

The World Advertising Research Centre (WARC) forecasted a growth of 7.1% in the global revenue generation through advertisements. Nonetheless, with the emergence of the pandemic, the widespread travel disruption, canceled events, and economic uncertainty has hit the advertising agency globally. The pre-pandemic growth forecasts by WARC suggests that the total loss of advertisements revenue becomes $US 96.4 billion.

The impact of the financial crisis of 2008 was -6.4% as compared to the impact of COVID 19, which is -9.1%.


Changing Patterns in Global Ad Spending

As per the report by WARC, before the pandemic, the global spending on social media platforms was 20.0%, which has now decreased to 9.8%. Nonetheless, despite these Social media platforms such as Facebook and Google has seen a better increase in their revenue than they anticipated, for the first quarter. Tencent’s digital advertisement revenue too increased by 32% as compared to last year.

However, despite big tech, still holding the upper card of profit, many smaller and medium brands, who are more dependent on advertisements are rendered with no option other than sales cut.

For online video, the global ad spending was cut from 20.2% to 5.0%. The global ad spending, for online display, crashed from 14.3% to 2.1%.

With many media outlets, on the verge of losing their footing, due to COVID 19, the revenue generation for online classified saw a negative outlook from -10.3% before the pandemic to 6.8% post-pandemic.

As estimated by WARC, the traditional media format would observe a decrease in spending. It was already -5.9% before the pandemic hit the industry and is now forecasted to be at -19.5%. Newspapers like The Newyork Times observed a fall of 15% in ad revenue during the first quarter of the current financial year. Similarly, the UK observed that 75% of local print houses would shut their business following a drop in income.


Changing Advertiser Behaviour

With changing customer behavior, most of the advertisers are now moving towards prioritizing over spending in digital media. The report by WEF suggests that brands are spending more capital on media formats that can be seen at home.

According to Research and Market Report, advertising spenders such as Procter and Gamble (P&G), Unilever, Apple, Microsoft, Danone, ABInBev, Burberry and Aston Martin have cut their spends on the advertising revenues. This cut in the revenue spending is observed to be 24% until the end of the second quarter. An estimated 46% of advertisers are now adjusting their ad revenue.

For local advertisers, the situation is tougher. According to the IAB report, 73% of advertisers are now engaged in modifying or developing new assets, whereas 53% are now engaged for an increase in messaging thus emphasizing the mission of the company.