Total advertising dropped 7.2% in the first half of 2020, according to a new forecast from Magna U.S., a unit of media agency Interpublic Group, but political advertising will soften the blow in the second half.
Vincent Letang, EVP and managing partner for Global Market Intelligence at Magna U.S., estimated that political ad spending will reach $5 billion, up 32% from 2016 and a new record. Digital media will be $1 billion of that for the first time, triple the 2016 level. Local TV will be the primary beneficiary of the political influx, at an estimated $3.3 billion.
COVID-19, which kicked in hard last March, knocked out live sports and scripted production, and the toll from widespread lockdowns sent the economy into a deep recession. That meant many advertisers headed to the sidelines.
In times of deep recession, Letang said, “branding budgets and linear media spend are cut disproportionally while lower-funnel market mechanisms and digital ad formats show much greater resilience, boosted further by the acceleration of e-commerce in the COVID and post-COVID world.”
Digital now represents 55% of the U.S. ad market, and that scale helps explain the Magna outlook for a full-year ad decline of 4.6%. That is far less severe than the double-digit declines experienced during the last major recession in 2008 and 2009.
“For linear media, however, 2020 remains brutal,” Letang noted, but Magna is confident that ad revenues will stabilize and recover in 2021.”
The expected recovery of the economy will push up total ad spending 4% in 2021, a year when event schedules will normalize, the Olympics will be held and programming will return to familiar patterns.
Seven of the top 10 ad categories will grow next year, Letang predicts, but automotive and retail had already been lagging even before the pandemic.
The second quarter appears to be the bottom of the trough, even though analysts have differing views on whether the recovery will be V-shaped, U-shaped or a shape to be determined.
One indicator of the extent of the damage: National television posted a 30% decline, the worst quarter ever for the category. Even almighty search ads — a growth category for two decades — reported its first-ever decline in the quarter, dipping 3%. For Google, the pullback in search was counter-balanced by growth at YouTube, a safe harbor for many media buyers as traditional TV remains under a cloud.