Daniel Farey-Jones
Mar 05, 2020

Could coronavirus tip the global ad market into recession?

Uncertainty is in the air.

Could coronavirus tip the global ad market into recession?

From "Boris bounce" to the Covid-19 curveball in the space of six weeks – it was as recently as mid-January that industry spirits were lifted by the IPA’s Bellwether survey reporting a surge in the number of marketers expecting budget upgrades this year.

But now agency suits, rather than bouncing into the office, have in some cases been turned away – with OMD and PHD taking the precaution of closing for a number of days last week.

The coronavirus outbreak suddenly feels close to home, no longer just about Brits on cruise ships on the other side of the world.

There are now more than 50 cases in the UK, as this article was published, and the spread of the virus in Europe and the US has governments worried not just by the disease but by the economic impact of any necessary quarantine measures.

Big global brands have already been hit by such measures in China, where car sales declined by 22% in January and might sink by 30% in February.

The anxiety spread to stock markets, with shares in ad holding groups falling by more than 10% last week.

The question now is whether the unease will feed through to consumers’ buying behaviour and marketers’ plans for upcoming campaigns.

So could coronavirus lead to an ad market recession?

Tracey Barber
Global chief marketing officer, Havas Creative Group

The short answer is we don’t know. But what is clear is that brands, across a whole range of sectors, are being affected, with forecasts and sales hit and stock markets volatile. We will inevitably feel the knock-on effects, but the situation is changing so rapidly that it is incredibly hard to predict its overall impact. Indeed, for our industry, it will take some time for the full effects to be felt. Right now, the priority must be to protect our people while ensuring "business as usual" as much as we can. The best thing – perhaps the only thing – we can do is to support our clients, many of whom are hurting more than us.

Julian Douglas
Vice-chairman, VCCP; chief executive, VCCP Asia  

Maybe. I'm an optimist, so I don't want to say it will, but what is certain is that this is a serious moment of reckoning for the global economy and therefore the global ad market. In the face of uncertainty, postponement and even total removal of marketing spend, many brands will face irreversible damage. However, the most adaptable will survive and even thrive. Challenging times require a challenger mindset. Those brands who are able to manage their finances, act swiftly and decisively, and even play on the offensive will be able to refuel the growth engine for the post-Covid-19 world. Even if we can avoid a recession, expect to see a different landscape out the other side.

Lorna Tilbian
Chair, Dowgate Capital

The global economy is taking body blows all at once: Covid-19 started in China, but is now in 60 countries. This comes at a time of growing stress points in the global economy – the regular cycle exhaustion; structural issues in auto and retail; trade and tariff wars; global indebtedness; and political uncertainty from Brexit to US elections at a time of peak margins and multiples. It is Covid-19, though, that could be the straw that breaks the camel’s back, because it is effectively grinding global trade to a virtual standstill. And monetary and fiscal policy will have limited impact – what good is a 50-basis-point rate cut if people cannot travel and factories are shut down? If it is one-off in nature, a one- or two-quarter hit to economic activity with transmission slowing and a vaccine in the near future, then a full-blown global recession might be averted. If it persists before a vaccine is found and transmission continues, then global GDP is in for a demand and supply shock.

Stephan Loerke
Chief executive, World Federation of Advertisers

There are plenty of doomsday scenarios, but the reality is no-one knows. The situation in 2020 is very different to what it was in 2003 during the Sars outbreak. China now represents 17% of global GDP – three times more than 16 years ago.

Two factors will be critical: first, the effectiveness of the containment strategies and the degree to which people follow public health recommendations; and second, the speed at which governments and central banks react to cushion any adverse economic impact.

I remain confident that the global ad industry will able to weather the storm and bounce back strongly as soon as the outbreak has peaked.

Brian Wieser
President of global intelligence, Group M

The possibility of a recession is realistic for many countries, at least on a short-term basis.

In the near-term, how much a recession may impact advertising spending in any given country is difficult to anticipate – not least because economic activity is not tangibly correlated with ad spending in every country – although it is highly likely that the impact will be negative, with growth in some countries softening, others going flat and others declining.

While it is far too early to anticipate outcomes with any precision, the implied double-digit declines in ad spending within China for the first quarter could play out elsewhere, with reduced declines in subsequent quarters and an eventual reversion back to growth as we have seen following other recessions.

Of course, marketers able to avoid making cuts will generally fare better 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.

Source:
Campaign India

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