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Pandemic Impact on Advertising

Pandemic Impact on Advertising

The great shock due to COVID-19 in late-2019 that started in China and later affected the world, caused a worldwide lockdown which led to global economic crisis and a deep plunge into recession nearly 5.2% shrink according to World Bank forecasts.

By many businesses in various industries being on survival mode at the moment, marketing and advertising are essential solutions for their recovery; however, the negative impact of the pandemic on revenues has been so huge that affect the ad spending budgets and patterns in an unpredictable way.

 

Ad Spending Statistics

Ad spending statistics during decades demonstrates that global GDP rise or fall has a key role in the growth or shrink of ad market. According to Interactive Advertising Bureau(AIB), by the significant growth of 3% to 6% in GDP annually, the ad market was forecasted to increase from $646 billion in 2019 to $865 billion by 2024.

Considering these numbers, few months after the pandemic 24% of corporations, media buyers and businesses stopped all advertising and marketing activities for the second quarter of the year and 46% of them decided to adjust their ad budget for that period. According to International Monetary Fund Blog(IMFBlog), since the Great Depression in 2008, this is the worst recession with greater impacts on the world economy by -3% growth in 2020 comparing to -0.1% in 2009.

By a sharp decrease in ad spend, as displayed in the figures below, non-profit organizations and governments all around the world are the major advertising buyers to promote public health awareness and journalism.

China’s Global Impact

In countries like China that online advertising is dominant, it has been a considerable climb in digital ad revenues; and advertising market is predicted to increase by 8.4% after the pandemic according to AIB.

On the flip side, China as the second largest ad market after the US is facing a drastic fall in total ad spending from estimate of approximately $121 billion to $113billion this year, and considering its global power and impact, it lowers the global forecast. It should be noted that companies all around the world that are dependent on China’s supply chain will also have a remarkable reduction in ad spend.

Since Chinese tourists are considered as major source of income for many countries in retail market and travel industry, global retail and tourism hit strongly due to border closure and lockdown. According to the International Air Transport(IATA), the loss of revenues in Asia-pacific airlines is estimated around $30 billion.

 

Shift in Consumer Behavior Pattern Due to he Pandemic

Self-isolation, economic uncertainty and a shift in consumers’ needs have changed the consumer habits profoundly across different areas of life such as working, shopping, working out, and entertaining.

As you see in the photo below by McKinsey & Company, 8 areas of life have been affected after the pandemic.

 

 

  • Purchasing behavior in consumers indicates that they are being more conscious-buyers and focus on basic needs more than luxuries and they are embracing and being comfortable with E-commerce. Data collected by Bazaarvoice from a survey on more than 5000 consumers in different countries shows a noticeable rise in online shopping. Mexico 70%, United States 62%, Canada 59%, and United Kingdom 58% are among the top countries in this ranking.

 

  • Digital entertainment, digital dating using dating apps, streaming services and gaming have significantly risen based on the survey by GlobalWebIndex on US internet users. These numbers are proof of digitalization as a solution to self-isolation and cancellation of live events and activities.

 

  • Working and learning virtually through zoom, and other applications and software have changed consumers’ conception of workplace and classroom, to the point that they enjoy this lifestyle and are more willing to continue it to save time and be more flexible.

 

Advertising Shift

Regarding the changes in consumer behavior, the adjustments in advertising and marketing techniques are essential for brands and businesses to survive.

As quarantine period increased, traditional media such as print and out-of-home (OOT) ad fell noticeably, and as a result of social distancing and isolation restrictions, since people avoid large public areas, the businesses have switched to digital advertising.

As traditional media lost more revenues than other types of advertising due to lockdown, according to Emarketer, significant decline of around 30% in print, 23% in radio and 15% in TV is expected in near future.

According to various objectives in advertising such as brand awareness and brand equity, sales boost, and building loyalty, different company sizes acquire different methods. For example, small to medium size businesses usually focus on customer engagement while bigger corporations mostly rely on running value-based marketing campaigns to make association with customers’ identities.

One of the main adjustments made by companies is changing their missions and messages to respond the needs of the customers during this period. IAB data indicates that 73% of businesses have developed and modified their assets.

Unilever company as one of the biggest consumer goods companies is an example of changing and adopting their focus from out-of-home (OTT) to in-home channels resulted from the emerge of total digital life during COVID-19. According to Alan Jope, chief executive officer of Unilever, “Unilever is guided by three beliefs: brands with purpose grow, companies with purpose last and people with purpose thrive.” And this is how they adopted their mission to the new situation by adding this sentence to their message: “The pandemic will not waiver our commitment to purpose-led business, nor will it change how we position our brands.”

 

Future Transformation

Based on the numbers and statistics, the pandemic is going to largely shape the advertising industry in the long-term.

Businesses are planning to change their strategies and brand-building based on new habits and needs.

Rising preferences for D2C (direct to consumer) brands, and switching to over-the-top providers such as streaming services are one of the major future transformations.

Some of the predictable enduring habits that have been grown during the pandemic is the surge online shopping and e-commerce, remote working and learning, E-doctor and digital pharmacy, digital entertainment, and focusing on health and hygiene.

Digital advertising in the long run will appear stronger and more important regarding two factors. The revenue generation will be higher comparing to other types of advertising and the data collected during the pandemic including consumer behavior patterns give digital platforms a competitive power in the advertising industry.

Canada Ad spend 

 According to WARC’s Global Advertising trends mentioned in Media in Canada latest news, although there is a noticeable decline in Canadian ad spend, they are relatively doing better than the global average.

WARC indicates that there was an approximate 7% drop in ad investment in Canada; however, 4.5% increase is expected in 2021.

Print advertising such as magazines and newspapers were the most affected by near 30% decrease in investment and it is expected to be down by around 7% next year.

Other types of media advertising such as radio, TV, and OOH investment are estimated to bounce back by 3.5%, 2.6% and 17.7% respectively.

Contrary to offline sources, digital ad spending such as online display by 4.5%, online video by 7.3%, and search by 0.7% had a growth.

 

 

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