The global economy is set to fall into recession, with the ad market likely to follow in the first half of this year, according to a new forecast from Warc.
In February and March, the Purchasing Managers’ Index, a monthly survey of trading conditions in private sector companies, recorded the worst results for the services sector in recent history across the US, UK, Europe and China, with all regions in decline.
On Monday Warc said the COVID-19 crunch is now filtering through to advertising, with commercial broadcasters across Europe and the US all reporting a decline in ad bookings.
In the UK, ITV, the largest commercial broadcaster, and JCDecaux, the largest out-of-home media owner, said they both expect ad growth to be down 10%.
Meanwhile, Baidu in China advises first quarter revenue will be down by as much as 18% while other online pure players, such as Alphabet, Twitter and Facebook are also exposed – largely because digital channels are often the easiest to switch off in a time of crisis.
However, Warc said FMCG brands are better-placed to weather the storm, especially as online shopping rapidly becomes the new norm.
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“The current downturn may not hit FMCG as hard as other product sectors, but it is likely to be consequential in terms of changing consumer purchasing behaviour,” said James McDonald, managing editor, Warc Data, and author of the research.
“A sharp increase in e-commerce activity may result in online players becoming more significant as the gatekeepers to FMCG shoppers.”
The last financial crisis in 2009 removed $60.5bn from the advertising market, with all media apart from online search recording declines in investment. The market took eight years to recover after accounting for inflation and currency fluctuations.
However, advertising investment among the food and drink sector fell at a far softer rate than the wider industry during that period.
In the UK, the food sector reduced investment by 1.3% to £860m and the drinks sector by 2.3% to £321m. This compares to a 5.6% fall for total FMCG (to £1.98bn) in the UK and an 11.7% dip for the total UK market (to £13.11bn). TV was by far the hardest-hit advertising medium.
