Ad Spending Is Expected to Drop 10% This Year. Here’s Why It Could Have Been Worse

GroupM's mid-year forecast shows a landscape that's stark but salvageable

GroupM's global mid-year forecast shows how Covid-19 dramatically changed the global ad economy. Canva / GroupM

After months of scrambling to pull back, revise, delay and cancel ad campaigns because of the Covid-19 pandemic, marketers now can put a number to the impact on their industry. 

The global ad industry is projected to see a 10% drop in spending this year, ending nearly a decade of growth—and abruptly ending a years-long run of massive, double-digit expansion for digital advertising.

These changes are reflected in GroupM’s annual mid-year forecast report, which details how various markets, industries and mediums will be impacted this year.

While its predictions for 2020 are grim, GroupM finds cautious optimism in the fact that the ad industry’s fate could actually have been worse, given the extent of the pandemic’s impact. The agency’s forecasts for next year also show that growth may return at a fast clip. For instance, the report points out that, in some markets, “pent-up demand is expected to overcompensate for 2020’s losses.”

Here are some of the big takeaways:

  • Global ad spending will decline 9.9% this year, GroupM projects.
  • What’s keeping the drop from being worse? The U.S. presidential election, which will inject enough money into advertising to lift what would otherwise be a projected 11.8% decrease.
  • But GroupM also says that, considering the pandemic’s scope, the impact is surprising. “While severe to be sure, 2020’s decline can still be considered ‘modest’ given the scale of the impact of the pandemic on global GDP, which will fall by much more than it did in the 2009 global financial crisis,” the report stated. “During that year, when GDP declined by 1%, we estimate that global advertising fell by 11.2% in nominal terms.”
  • During 2020, GroupM said digital extensions of TV, radio, print and outdoor advertising should equate to $31 billion, or 13%, of advertising activity, up from $22 billion five years ago.
  • The media agency expects digital advertising, “narrowly defined to exclude traditional media extensions,” to drop 2.4% this year following nearly a decade of double-digital growth.
  • Excluding political advertising in the U.S., GroupM anticipates total television advertising to decline by 17.6% in 2020 before rebounding slightly next year.
  • GroupM expects out-of-home media, including digital, to decline 25% this year. The agency said this medium has been “disproportionately” impacted by the crisis.

Adweek spoke with the author of the report, GroupM’s global president of business intelligence, Brian Wieser, on what the data means and where the ad business could be headed.

Adweek: Overall, what are there comparisons to past crises that explain where we are at the moment?
Brian Wieser: The advertising market is down 10% this year at a global level, which is bad, but nowhere near as bad as I think a lot of us thought three months ago. The point of reference is that this is about as bad as the global financial crisis of 2009, despite a substantially worse economy. And the reason for this seeming disconnect is the narrow concentration of the consequences of the pandemic, both in terms of the types and sizes of businesses impacted, and how people and their relative economic standing is affected. And trends generally vary by country, largely in line with expectations for economic outcomes for the year.

What are some examples of this impact?
The best big market is South Korea, down only 2%. Yet, not surprisingly, Brazil is down 29%. There’s a direct relationship between the state of their economies and populations. Also, the pace of rebound varies pretty widely. I think largely the degree to which a given economy and its government hibernated its population helps. And that means a market like the U.S. has a much slower rebound in a lot of other markets will.

A vaccine and treatment may still be far in the distance. How is that affecting the thinking in the ad market?
We’re assuming that countries return to whatever their pre-pandemic growth rate was usually by 2023. A critical assumption is that there’s a vaccine discovered and distributed by July next year. And if that assumption falls apart, a lot of the numbers do, too. But I think that that how governments react and how societies respond will make all the difference in terms of how things play out.

What do you believe could happen if that target is missed?
There are two things here. First, consumers and businesses continue to adapt. And this is one reason why advertising has outperformed relative to where we thought it would have been. Most businesses have figured ways to adjust, and more will do so. The other thing is that most governments in most markets will step up with some kind of support for businesses and people—or businesses or people.

Despite the obviously rough numbers, where is there room for optimism?
There will be opportunities to find new ways to engage with consumers. People are buying from vendors online that they would never have thought of before. I believe that that the growth opportunities and the positivity is the idea that so many businesses have transitioned far faster than they otherwise could have to a true omnichannel experience. Best Buy [on the brand’s latest earnings call] talked about how their stores were closed for half the quarter but retained more than 80% of their revenues by transition almost entirely to BOPIS (buy online, pick-up in-store). I think that where there’s a positive takeaway here is that a lot of businesses have accelerated their digital transitions and are finding that they’re overcoming internal obstacles to make this stuff happen.

@Minda_Smiley Minda Smiley is an agencies reporter at Adweek.
@zanger Doug Zanger is a senior editor, agencies at Adweek, focusing on creativity and agencies.