Even though the 2020 economic decline is the worst since the peak of the Great Depression, experts believe that the advertising drop this year won’t be as bad as that of the 2009 financial crisis.
According to GroupM’s U.S. Mid-Year Media Forecast, advertising (excluding political ads) will decline 13 percent in 2020, compared to the 16 percent plummet in 2009. Next year, advertising is expected to grow 4 percent on a comparable basis, the report states.
"Consequences of the pandemic are relatively narrow, with certain categories such as travel, personal services and some retail seeing their businesses evaporating, but most categories finding ways to adapt and sustaining most of their media spending as a result," said Brian Wieser, global president of business intelligence at GroupM.
The fact that many companies – especially smaller businesses – have aggressively been transitioning towards e-commerce and omnichannel strategies will likely permanently accelerate the role of e-commerce in the economy and help sustain faster digital advertising growth, he added.
"Put together, the decline in advertising is significant, but not as bad as one might expect relative to the decline in the overall economy," said Wieser.
On a global basis, the U.S. has a more resilient TV sector compared to other countries, particularly due to the upfront process and inability for marketers to cancel spending immediately
An insight that surprised Wieser from the forecast is that political advertising is growing faster than expected.
"We are forecasting a nearly 80 percent gain in 2020 over 2018 to around $15 billion," he said.
Below are four key areas explored in the GroupM forecast.
Political advertising: expected to see its highest spend ever in 2020, estimated to be $15 billion in spending versus the $8 billion from 2018.
- We estimate slightly more than half of this amount will go to local TV and much of this activity will be concentrated in "swing states," which usually account for only a minority of the country’s population. It also remains to be seen whether June’s current demonstrations will lead to incremental political fundraising activity.
Digital advertising: expected to decline by only 3 percent during 2020 on an underlying basis or be flat including political advertising.
- Regardless of the base, we expect a rebound next year with underlying growth of 12 percent, or 9 percent including political advertising. Political advertising activity should amount to approximately $3 billion this year across all digital media.
Television advertising: expected to decline by 7 percent in 2020 and falling by another 12 percent next year.
- National TV should be around 11 percent this year, followed by 6 percent growth next year.
- Digital extensions and related media, including Hulu, Roku, etc., will fare much better, with only a modest 3 percent decline in 2020 and 15 percent gain in 2021.
- We estimate those digital extensions will amount to around 14 percent of total national TV spending this year.
OOH advertising: set to decline by "only" 21 percent this year, with second quarter cuts to spending more muted than we have seen in other markets around the world.
- On the upside, we estimate that digital revenue will account for 38 percent of the medium’s activity this year, rising to 40 percent next year.