MAGNA, the centralized IPG Mediabrands resource that provides strategic investment and media intelligence for agency teams and clients, has released its latest report on the impact of COVID-19 on global advertising revenues.
It finds that media owners’ advertising revenues will decrease by $42bn (£33bn) in 2020, from $582bn to $540bn, as advertising spending shrinks due to the severe economic recession triggered by the COVID-19 pandemic, as GDP is expected to contract by between 5 and 12 per cent across the world’s largest markets. Global advertising revenues will decrease by an estimated 7 per cent, as the heavy, double-digit decline of linear ad sales (linear TV, print, linear radio, OOH, cinema), by 16 per cent to $238bn, will be mitigated by the stability of digital formats, which will rise by 1 per cent to $302bn.
Linear television ad revenues will shrink by 12 per cent this year, due to the weakness of demand, the cancellation of many TV campaigns and the postponement of major sports events. Print ad sales will decline by 32 per cent, while linear radio advertising revenues will decrease by 15 per cent, while global Out of Home (OOH) ad sales are expected to decline by 22 per cent. Finally, theatre closures will cause cinema advertising to decline by 40 per cent this year.
Ad revenues from digital formats, including search, video, social and banners ads. are expected to be flat (up by 1 per cent at $302bn) as a second-half recovery will offset the first-half decline. Digital formats benefit from increased digital media usage during lockdown, an acceleration of eCommerce that will likely outlive the lockdown, and a boost to lower-funnel marketing tools that is classic in recession times.
Search will remain the largest digital advertising format with revenues of $142bn, but global sales will fall by 1 per cent. Social media and digital ad formats will slow down from previous years but still grow single-digit this year (both up by 8 per cent), while revenues from static banner ads will fall by 11 per cent as the COVID-19 crisis adds to the increasing restrictions on data-based targeting.
As the pandemic and economic crisis is global, so is the impact on the advertising market. EMEA and Latin America will experience the worst downturn, with total advertising revenues down 10 per cent, with APAC marginally more resilient, down by 8.5 per cent. North America may show more stability, partly due to the $5bn that will be spent around the 2020 election cycle. Among the worst downturns predicted by MAGNA in 2020, among large markets, are Japan and Spain (both down by 14 per cent), France (down 13 per cent) and Italy (down 15 per cent). India ( up 2 per cent), China ( down 6 per cent) and the US market (down 4 per cent) will be less dramatically affected.
The report also finds that the Q2 lockdown has prompted some dramatic changes in media consumption. Linear TV viewing has increased by 10 per cent to 40 per cent during lockdown, but MAGNA anticipates a return to long-term erosion in the second half of the year. Streaming video, SVOD and OTT consumption also accelerated further during lockdown. The impact on audio media varied by market, but radio struggles where car commuting represents a large part of the daily audience. Finally, OOH suffers from driving mobility and transit mobility, with revenues down by 60 to 80 per cent in North America and Europe in Q2, and only the former showing significant recovery by June.
In 2021, MAGNA predicts that the global economy will recover, with real GDP up 5.8 per cent according to the International Monetary Fund, and major sporting events, including the summer Olympics and the UEFA Football Championship in Europe, fuelling a recovery in marketing budgets and advertising spending. MAGNA predicts global ad spend to grow by 6.1 per cent in 2021 to $573bn (EMEA: +7.1 per cent, APAC: +8.1 per cent, LATAM: +6.7 per cent, NA: +4 per cent). Despite the forecast recovery, the global market place will remain $9bn smaller than its pre-COVID-19 level.
In the UK, the report finds that linear ad sales (linear TV, radio, print, OOH) will decline by 23 per cent in 2020, due to the combination of Brexit impact and COVID-19 recession. Within this, TV ad sales will fall by 17 per cent, print by 27 per cent, radio by 24 per cent, OOH by 28 per cent, and cinema by 55 per cent.
Digital ad sales will decrease slightly (by 3 per cent) but social media and video may be more resilient. Total advertising sales, including linear and digital, will decrease by 8.9 per cent to £20.5bn. In 2021, economic rebound (GPD up by 4 per cent) and major sports event will help generate a recovery in advertising revenues, with linear ad spend forecast to rise by 7 per cent and digital by 8 per cent. The UK remains the fourth largest ad market in the world and the largest in Europe.
“Beyond the short-term V-shaped recession/recovery impact on the economy and the advertising market, the COVID crisis will have global and long-term effects on society, business models, consumption habits, mobility and media usage, all factors pointing to a more subdued economic growth and advertising spend than previously forecast for the 2022-2024 period,” said Vincent Létang, EVP Global Market Intelligence at MAGNA, and author of the report. “MAGNA thus reduces its global advertising growth forecast for these three years, from +4.5 per cent per year to +3.5 per cent year. The global ad market will reach $647bn by 2021 compared to $745bn in our previous long-term scenario, a 14 per cent decrease.”