Coronavirus has arrived to disrupt our lives and its consequences are still unknown. Between enormous restrictions and uncertainty, the global advertising industry seems to be doing both, slowing down in some verticals and pivoting in others. The reality is that Coronavirus is not only disrupting our lives, but the whole digital advertising industry.
How Coronavirus is currently affecting the industry
With key industry events being canceled, giants like Apple dealing with supply chain issues and the current consumer demand decreasing, companies are forecasting losses. Also, many of them have put advertising budgets on hold. However the outcome of this crisis in the long-term is hard to predict.
While the travel industry (and therefore the travel advertising industry) is under enormous economic pressure, other companies like Microsoft or Slack seem to have an opportunity to increase their revenue . How? By offering products useful for people to adapt to the new circumstances. This will certainly reflect on their advertising.
How long is the Coronavirus impact going to last for?
Although online publishers have already made it clear that coronavirus is starting to take a hit on ad revenues and uncertainty and fear are affecting the digital ecosystem, some analysts believe the impact could be short-lived. In fact, the flexibility of the digital ad industry and its agility are both great advantages when it comes not just to adapt and survive the situation, but also to normalize it. For instance, programming and budgets can be easily modified ad hoc and now that people are forced to spend more time at home, brands are shifting ad spending from offline media to online.
However, Facebook predicted that the advertising spending will be lower in travel, retail, consumer packaged goods and entertainment. These verticals make up approximately 30% to 45% of their total revenue. Also, Google estimates a 15% decline in travel ad revenue in the first quarter and a 20% drop in the second quarter. Some businesses have cut digital budgets by more than 50% or even put a full stop on them.
What we’ve learned from previous crises
Looking back at previous crisis experiences, it makes sense to think that we might see an uptick in verticals like food or grocery delivery and CPG as soon as the panic is over. Also utility, live-streaming and e-commerce will probably grow. The way consumers interact with the world is different in a global crisis. Their habits are changing and so does the way they consume digital media, including which channels they use. That also affects the way they buy products and services and, therefore, the customer journey too.
Despite all these considerations, the only valid conclusion so far, is that we are facing an extraordinary situation. Advertisers and publishers are compelled to change the way they operate, sell and advertise to avoid a deeper crisis. Yet, this might not be entirely possible. Depending on how the different scenarios evolve, we might end up facing another economic crisis.
If that’s the case, then the luxury industry, health, pharma and vices like alcohol, will grow. This means that the digital advertising industry will have to adapt to the changes like it’s already doing. Evolution is the key to survival, whether we are talking about a virus or its consequences.
How is coronavirus affecting the digital advertising industry?
Covid-19 is affecting some sectors negatively such as travel, retail, sports and traditional entertainment, deducing their revenue and ad spend.
What are brands expected to react to the pandemic?
Most brands will try to reduce their offline channels while increasing their online presence. Also they will adapt creatively to the new situation and focus on regionality.