Digital ad industry braces for impact as coronavirus disease causes economic downturns

Industry experts forecast digital ad revenues to drop in the wake of the coronavirus, but no one can say the degree to which ad spend will be affected.

COVID-19
COVID-19

In ordinary conditions, the ad industry would expect to see digital ad revenues steadily increase during the coming months as we near the 2020 Olympics and U.S. election season. But we are far from ordinary times. The coronavirus, or more specifically the respiratory disease COVID-19, is spreading globally at an alarming rate, and the digital ad industry may need to brace for impact.

Travel and hospitality businesses have already experienced significant economic downturns as consumers and businesses cancel travel plans. Amazon, Facebook, Google, and Twitter have enforced employee travel restrictions and are encouraging staff to work from home. Major industry events, including Facebook’s F8 Developers Conference, Adobe Summit and Google I/O, have been canceled.

According to a March 2 government filing, The New York Times expects its total ad revenue to see a decline in the mid-teens this quarter, with digital ad revenue to drop 10%. CEO Mark Thompson said the paper is already seeing a slowdown in international and domestic advertising bookings, accounting for the downward trend to uncertainty and anxiety associated with the virus.

The New York Times isn’t alone. Zenith, an ad-buying firm within the Publicis Groupe, is revising its global ad spend forecasts, according to The Wall Street Journal. Zenith originally anticipated global ad spend to be up 4.3% this year. The firm hasn’t released any new numbers but confirmed it would be lowering its ad spend forecasts in the coming weeks.

After reporting projected global ad investments to rise 7.1% this year, reaching $660 billion, the World Advertising Research Center (WARC) released a follow-up statement last week confirming it has seen evidence brands are taking a cautious approach with ad spend. WARC’s Managing Editor James McDonald laid out three possible scenarios:

  1. Spend is displaced, but annual growth will be largely unaffected
  2. Spend is reallocated significantly with brands focusing on the short-term
  3. A severe disruption increases the potential for an advertising recession

Unnamed industry experts told CNBC that mobile gaming and streaming services may see increased ad investments with people spending more time at home, but that is, at most, speculation. The ad industry’s overall consensus on how the virus will impact U.S. digital ad revenues mirror the general understanding of the disease and how it is spreading – we simply don’t know yet, but initial findings are concerning.

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Akvile DeFazio is the President of AKvertise, a social media advertising agency. She specializes in Facebook, Instagram, LinkedIn, Pinterest, and Twitter Ads. Follow @AkvileDeFazio