U.S. advertising spending, excluding political advertising, will drop 12.9 percent in 2020 to $207.9 billion driven by the novel coronavirus pandemic and resulting recession before swinging to a 4 percent gain in 2021 to $216.6 billion, ad giant GroupM forecast late on Monday.
That drop will not be as bad as the 16 percent drop seen in the 2009 financial crisis, according to the firm. “By now, the ad market’s decline is abating after an initial freefall that impacted many types of media beginning in late March,” explained Brian Wieser, GroupM’s global president, business intelligence, in a report.
Including political advertising, which GroupM expects to “expand massively” for the presidential and Congressional elections and political causes, the U.S. advertising market will fall by 8 percent this year, followed by a further 1 percent decline in 2021 “as underlying improvement is more than offset by a relative absence of political advertising activity next year.”
The drop will happen despite political advertising expected to hit a record of $15.0 billion this year, compared with $8.0 billion in 2018.
In 2019, ad spending had reached $238.8 billion, up 6.8 percent.
“We might normally expect that because the 2020 economic decline is so much worse than 2009, advertising should be much weaker,” Wieser’s report highlighted. “In nominal terms, GDP declined in 2009 by 1.8 percent; 2020 will probably fall by something closer to 4 percent on a comparable basis. There are, however, several differences between 2009 and 2020.”
Among them is the fact that “the declines in the last downturn played out over months, as financial institutions ground to a halt because of illiquidity concerns,” the report noted. “A wider range of businesses were gradually and severely impacted. By contrast, in 2020, during March most conventional in-store retail activity ground to a halt, as did tourism, hospitality and place-based entertainment industries. But most other economic activity continued, and over the course of weeks, a significant amount of retail and hospitality activity returned, as BOPIS (bought online, picked-up in-store/curbside) or delivery strategies were implemented.”
GroupM also argued that “a disproportionate share of the individuals impacted in retail, food service and hospitality are lower-wage workers, many of whom will benefit from temporary improvements in unemployment benefits. Consequently, massive levels of unemployment will not fully map to lost spending power, and advertisers will be reluctant to miss capitalizing on related activity.”
Here are the four areas that were considered in detail at the midway point of 2020 from the forecast:
In terms of political spending this year, GroupM expects slightly more than half to go to local TV, with much of this activity concentrated in “swing states.”
The firm forecasts digital advertising to decline by 2.5 percent in 2020 on an underlying basis or up a slight 0.1 percent when including political advertising. For 2021, GroupM expects a rebound to growth of 11.8 percent, or 9.3 percent when including political advertising.
Television advertising, meanwhile, will fall 7.1 percent, including political, in 2020 and another 11.7 percent next year, according to the forecast. Excluding political ads, TV ad spending will fall 19.1 percent in 2020 before rising 1.2 percent in 2021, projects GroupM.