GroupM has issued an update for marketers and advertisers amid the coronavirus outbreak, warning ad spend might fall while flagging the possibility of a recession.
The three page update, written by GroupM global president of business intelligence Brian Wieser (pictured below), indicated the “uncertain” impact coronavirus will have on the advertising industry and how it will affect not just aspects of the ad business, but also global events, like the Tokyo Olympics.
Wieser said: “Many aspects of life and business will be altered in many countries around the world. As we have seen in China we would expect to see less travel, less manufacturing, reduced retail sales and cancellations of many forms of public entertainment.
“Media consumption at home will likely rise as will e-commerce sales, although because so much of the world relies so heavily on China to manufacture finished goods or components of goods, supply chains will likely be compromised.”
Wieser also said the possibility of a recession is “realistic”, but said it’s too soon to anticipate how it will affect advertising spending. He said, however, it is “highly likely the impact will be negative, with growth in some countries softening, others going flat and others declining”.
Marketers who can avoid making cuts will fare better, Weiser noted, given what will likely be relatively favourable pricing and reduced competition for consumer attention.
“Longer-term brand-building will benefit from a sustained media presence, albeit with appropriately modified messaging,” he said.
And, as concerns about the impact of a global pandemic rise, there has been plenty of industry speculation over whether annual events will be cancelled, including the advertising industry’s Cannes festival and even the Tokyo Olympics.
On Saturday, France’s ministry of health banned public gatherings of 5,000 people or more. While Cannes Lions doesn’t start until June, the event’s organisers have already added a notice about the coronavirus to the top of its home page, noting their “priority at this time is the safety of our delegates,” and that it will be closely monitoring the situation.
The Tokyo Olympics is another point of concern, as many of the trial games have already been postponed or cancelled.
At this stage, the Games will be going ahead, however, if they were to be cancelled, it is unclear just how broadly it will impact brands and advertisers. Locally, it would certainly be a massive headache for Seven, who has created its entire strategy around its broadcasting of the Olympics.
Seven recently posted a $67m loss with debt of over $550m, more than double the company’s market cap, while last Friday its shares slid to record lows of 16c.
The International Olympic Committee has set aside $981m for broadcasters if the Games are cancelled or postponed. The issue for Seven, however, would be the loss of advertising deals.
In terms of 2019-20 network upfront advertising deals, the networks are keeping an eye on third-quarter cancellation options, where advertisers have the option to cancel as much as 50 per cent of their upfront ad buys. Typically, those options need to be exercised 60 days before the beginning of the quarter.
On which media will be most impacted by the coronavirus pandemic, Wieser said it’s too soon to tell.
“If the volume of available budgets for spending on advertising weakens in any given country, it is difficult to anticipate which specific media will be most impacted.”
He said that certain media could benefit from the lifestyle changes associated with a public health concern, especially TV.
“Traditional television could fare relatively better because of the likely improvements in audience levels, while outdoor advertising may be worse off with lower levels of foot traffic in many places.”
He added: “At the same time we emphasize that spending on paid media will not necessarily correlate with spending by marketers on services, such as those provided by agencies.”
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