Digital now accounts for more than half the world’s advertising for the first time, according to new figures from Zenith, a subsidiary of the global giant Publicis Media, which also forecasts that ad spend will drop 9.1 per cent this year.

Globally, the ad market was hit hardest Q2 this year, and at least, for now, Zenith expects a 5.8 percent rebound in spending in 2021. In Australia the estimated decline in 2020 is 11 per cent with little likelihood of a bounce back to pre-COVID levels for the next two years, however by 2022, Zenith anticipates the overall market being back 8 per cent vs. 2019.

Zenith Sydney’s Head of Investment, Elizabeth Baker told Which-50, “Unsurprisingly, the verticals most impacted by the pandemic, and hence their advertising spend are Travel, Automotive, Cinema/Theme parks and retail – although retail was already trending down prior to the national lockdown late March.”

Zenith Sydney’s Head of Investment, Elizabeth Baker

On the flip-side, however, she said some sectors have weathered the conditions very well. “Indeed some have benefitted from the current climate, like grocery and FMCG, particularly household essentials, cleaning, and some pharma products. Within the grocery vertical, online grocery shopping has grown a staggering 50 per cent year on year.”

In terms of advertising revenue, outside of Government spending, banks – with communications focusing on the assistance they are providing to customers during the pandemic, house-hold supplies (cleaning products for instance), Technology and In-home entertainment sectors have all added the most increased volume into the market, said Baker.

“Overall, we are seeing indications of ad spend recovery in Q4, and whilst the market will be down holistically, budgets for most grocery and FMCG sectors remain stable. The extension of JobKeeper and JobSeeker will have a positive impact on consumer confidence, which in turn is a good thing for challenged sectors such as auto and retail.”

Vertical markets

We asked Baker to outline some of the vertical industry impacts. Among those she identified;

  • Banking: The local banking sector, which had largely been quiet post the influx of spending throughout the Royal Commission period, to continue to market the assistance it can provide to customers. Much of this broad recovery is contingent on keeping COVID-19 infection rates at a manageable level nationally. Should other states, particularly NSW, go back into lockdown then recovery could be paused or delayed.
  • Travel: Any recovery for the travel sector is likely to be delayed further due to the unfortunate situation in Victoria which has prompted the re-introduction of some state border closures.
  • Automotive: The automotive industry was facing challenges prior to COVID-19, however, in positive news, new car sales performed significantly better in June than expected. Whilst sales were down 6.4 per cent versus June 2019, this was a much smaller decline than both May (-35. per cent) and April (-48.55 per cent). With international travel not an option, and interstate travel also currently curtailed, the auto industry might benefit from more in-state travel as consumers invest in up-grading their cars to make their road-trips more comfortable and enjoyable.
  • Cinema: With social distancing protocols still in place for the cinemas that are open, as well as the release of new films largely dependent on the US, the rate at which cinema will recover is uncertain.
  • Technology: this category has seen ad spend growth. It is believed the onset of COVID-19 has stemmed the decline in the PC market with the increase in working from home. However, don’t foresee this to be a trend that will be sustained.
  • Home Entertainment: This vertical will remain strong and players will continue to promote their offerings as demand for streaming services surge. Recent statistics show that Australians with access to pay-TV services has grown 6 per cent from May 2020 versus February 2020. This increase includes solid growth from the more established players like Netflix, Foxtel (including Kayo), Stan, and significant increases for Disney+ and Amazon Prime (of course off a lower base.

Global outlook

Zenith says advertisers pulled back spending sharply when the scale of the coronavirus crisis became clear with the steepest declines hitting between March and May, though the timing varied by country.

According to a Zenith statement accompanying the release of the data, “These declines have now started to ease and are expected to gradually moderate over the rest of the year. Zenith forecasts a 5.8% recovery in global ad spend in 2021, boosted by the rescheduled Summer Olympics and UEFA Euro 2020 football championship.”

The company said the US has been relatively resilient, but that is largely a function of record political spending in the run-up to the Presidential elections in November. “US ad spend is expected to decline by just 7 per cent this year.

APAC is forecast to shrink by 8 per cent, thanks to the success of some markets in keeping the virus under control. Advertisers in Western Europe cut spend aggressively in Q2, and ad spend is forecast to shrink by 15 per cent here. And Zenith forecasts 8 per cent decline in Central and Eastern Europe, 13% in Latin America and 20 per cent in MENA in 2020.

Digital shift

Consumption of digital media, along with television, spiked in the early weeks of lockdown, according to Zenith.

“Although both are now trending down again, they are not expected to retreat to pre-crisis levels any time soon. Together with the rise of ecommerce and data, this has driven a rapid shift in media budgets from traditional to digital media, accelerating the trend that was already taking place,” said a company spokesperson.

Zenith now forecasts that digital advertising will account for 51 per cent of global ad spend this year, up from the 49.5 per cent it forecast in December. 

That said, digital ad budgets declined quickly in the crisis’ first phase, given generally easier to cut without penalty. “But as time progressed, brands allocated more budget into digital channels to take advantage of their flexibility and ability to optimise performance, particularly important qualities in an uncertain time,” the Zenith spokesperson said.

Image source: Photo by Joshua Earle on Unsplash

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