Unprecedented Uncertainty: How the Coronavirus Is Disrupting the Global Advertising Industry

As the outbreak upends timelines and traditions, could this also prove to be a turning point?

Most of the marketing and advertising business is in wait-and-see mode. Photo Illustration: Dianna McDougall; Sources: Getty Images

Key insights:

The global advertising industry is no stranger to disruption and turmoil. Agencies and media companies have endured everything from natural disasters to overthrown governments, but these scenarios rarely spill beyond national borders.

The current outbreak of COVID-19, however, is different. Between widespread travel restrictions and a dense cloud of uncertainty, the global advertising machine is slowing to a crawl in some ways and rapidly pivoting in others.

Some corners of the industry already have been hammered by the spread of the coronavirus that causes COVID-19. Several events have been canceled (Editor’s note: Since this story published, South by Southwest was canceled after all). Next to suffer will be the advertising production industry—a world ruled by tight deadlines, inflexible budgets and seamless travel—as its schedules are thrown into disarray. And most holding companies are mum, not wanting to spook investors.

On the other hand, TV executives and media agencies are barreling ahead as the TV ad market remains strong, speculating that audiences could grow as consumers stay home.

What’s clear is the large-scale disruption has the potential to transform the industry, forcing brands and agencies to adapt and consider options like letting staff work remotely, using local resources that don’t require international travel and creating virtual events that are more than just lifeless videoconferences.

Could this period of uncertainty mark an inflection point that marketers and advertisers will look back on as a moment of turbulence and transformation? Adweek spoke with leaders about how the virus will affect four key parts of the industry: ad spend, experiential marketing, agencies and production companies.

TV could continue to thrive

Early indications are that overall ad spending could take at least a temporary hit, but TV could actually benefit from people staying home, tuning in to news and streaming programming.

Publicis Groupe’s Zenith said this week it would lower its December prediction of a 4.3% rise in global ad spending this year due to the coronavirus, according to The Wall Street Journal. Also this week, New York Times CEO Mark Thompson said the Times “is seeing a slowdown in international and domestic advertising bookings, which we associate with uncertainty and anxiety about the virus,” and that the publisher now expects first-quarter digital advertising revenue to drop 10%.

Meanwhile, the consensus from TV ad-sales professionals Adweek contacted was a combination of optimism—fueled by a belief that a ratings increase between the 2020 elections and coronavirus coverage should translate to an increase in ad revenue—and “it’s too early to tell.”

On the strength of the 2020 election cycle and the Summer Olympics, U.S. linear and digital ad revenue had been projected to grow 6.6% this year, to approximately $238 billion, according to Magna’s most recent global ad forecast.

And while coronavirus concerns have already upended some early upfront events, buyers and TV ad-sales execs tell Adweek it hasn’t yet affected any business in the scatter market, which has been robust this TV season, aside from the travel category scaling back its buys.

The industry traditionally sees ratings spikes when major events like bad weather keep people indoors for extended periods, but those could be less noticeable now as TV viewing has become so fragmented. “I think we’ll see an increase in time spent with video, but that will happen across live, delayed, VOD and streaming, so the impact will be tough to measure solely by Nielsen ratings,” said David Campanelli, co-chief investment officer, Horizon Media.

Still, “any time people are at home, there’s a chance their video consumption is going to go up,” said Steve Nason, a research director at Parks Associates, a firm that specializes in entertainment and content services. “So in a way, it could actually boost viewership numbers for a lot of these companies, a lot of these video-on-demand services or even services like Xumo or Pluto that lend themselves to continuous play.”

“Any time people are at home, there's a chance their video consumption is going to go up."
Steve Nason, research director, Parks Associates

NBCUniversal, meanwhile, said this week that ad sales have remained robust for for this summer’s Tokyo Olympics—the company has surpassed $1.25 billion in ad sales, a new Olympics record—as parent company Comcast and the IOC reaffirmed their commitment to the summer games amid coronavirus concerns.

Discussing the outbreak at the Morgan Stanley Technology, Media and Telecom conference on March 3, Comcast chairman and CEO Brian Roberts said the company and NBCU are “full-steam ahead” on Summer Olympics programming later this year and was optimistic that the event would go on as planned.

Gloomy days ahead?

In the brand and agency world, several considerations are at play, especially as the industry puts more of a premium on experiences. Some global events have been canceled, including Facebook’s F8 developer conference and Mobile World Congress. Companies that have traditionally had activations at SXSW, including Mashable, Twitter, Facebook and Intel, dropped out. And TikTok announced it will not be in Austin.

Big tech companies like Twitter and Facebook can pull out of an event “without huge business implications,” said Chris Sojka, co-founder and CCO of Madwell, but “smaller brands are living in limbo trying to decide the opportunity cost between proceeding as planned and cutting their losses.”

“We see clients struggling with the reality of losing their investment in the [recently postponed] Expo West natural foods show in Anaheim,” Sojka said. “Many of them chose not to attend as they were unsure if they would get a credit or refund before the organizer announced the postponement.”

And while b-to-b conferences are feeling the squeeze, it’s still early for brands with consumer activation plans. But it is on the minds of agencies responsible for making them happen.

“The biggest challenge is that we’ve moved more and more into interactive, participatory, experiential work as an industry,” Sojka said. “This means lots of touching and close contact. And often such endeavors occur at large international gatherings, all of which seem ill-advised under such rapidly evolving circumstances.”

"We have no doubt there will be an impact on the experience industry, particularly around large scale events with a global audience."
Alanna Lynch, CEO, Fake Love

Fake Love CEO Alanna Lynch said there’s “no doubt” the experience industry will be affected, “particularly around large-scale events with a global audience.”

“To better prepare for the inevitable shifts in consumer behavior, we are proactively thinking about how our approach to branded experiences may need to evolve in the short term,” Lynch said, “more specifically, how physical activations could be experienced virtually and then shared virally.”

Brand experience agency Optimist is beginning to see some fallout, with cancellations and what it calls “worst-case-scenario proactive planning” based on the locations of their clients, some of whom are in Asia, where the outbreak started. Additionally, the agency is working to ensure it doesn’t bear the financial brunt of a brand putting the brakes on projects.

“We are in the process of providing kill-fee scenarios for a large-scale experience that is still several months out as well as creating a Plan B and C to replace an experience and production that was initially scouted for the APAC marketplace,” said Optimist CMO Rose Odeh. “In addition to projects that may be impacted and a pause on spending, as an independently owned global agency, we need to assess the scenario and make the best decision for our clients, our business but most importantly, our team and their families.”

Pivot and adapt

Most holding companies have issued guidance, built precautionary measures and put restrictions in place on nonessential travel. This could cause problems on the production front, where travel is such an essential part of the process. Adweek reached out to several holding companies to get a better idea of how their policies are evolving but did not receive information beyond what they have made public so far.

However, one global agency network, which asked not to be identified due to a corporate policy against discussing coronavirus response publicly, said the disruption caused by travel restrictions has been minimal and, in some cases, even somewhat of a positive.

Staff members have found they can replace time-consuming, in-person meetings with more collaborative digital discussions or videoconferencing, for example. A travel lockdown also means finding new solutions for production staffing. The agency said that in one instance, a U.S. creative leader who couldn’t fly to an overseas shoot was replaced onsite by a peer from the network’s local office, creating an opportunity for a collaboration that otherwise might never have happened.

For London independent Mr President, its size—it has 35 people on staff—is an advantage. Still, CCO Laura Jordan Bambach noted that working remotely and having all agency operations in the cloud makes any kind of disruption more manageable.

“We could be working from five different countries, and we’d still be able to do the work because that’s the way we’re built.”
Laura Jordan Bambach, CCO, Mr President

@zanger doug.zanger@adweek.com Doug Zanger is a senior editor, agencies at Adweek, focusing on creativity and agencies.
@Minda_Smiley minda.smiley@adweek.com Minda Smiley is an agencies reporter at Adweek.
@kelseymsutton kelsey.sutton@adweek.com Kelsey Sutton is the streaming editor at Adweek, where she covers the business of streaming television.