The ad industry is expected to make a major comeback on COVID

0

Data: GroupM; Graphic: Will Chase/Axios

The advertising industry, plagued by pandemic-induced budget cuts last year, is poised to come back stronger than ever in 2021 and beyond, according to several new forecasts.

Be smart: The rapid recovery means the ad market is recovering faster than it did after the 2008 recession.

  • In 2021, the U.S. ad industry is poised to regain everything it lost in 2020 and more,” GroupM’s Brian Wieser wrote in an analyst note last week.

Why is this important: During a recession, marketing budgets are usually the first expense to cut from a company’s budget. But because the government injected so much stimulus into the economy, initial fears of a protracted slump in consumer spending have subsided.

  • “Unlike economic downturns in years past, the ratio of US advertising expenditures to GDP has not declined sharply, but has rather increased,” media analyst Michael Nathanson wrote in a note to clients. Nathanson adds that his company MoffettNathanson is “incredibly optimistic for the years ahead.”

By the numbers:

  • In the USA, GroupM predicts the industry will grow 15% this year, better than its previous forecast of 12%. Wieser predicts that the United States “should end the year with 6% more activity than what we saw in the last ‘normal’ year of 2019.”
  • Worldwide, Magna – another advertising agency – also raised its forecast, predicting that the global advertising market will grow 6.4% to $240 billion this year, from 4.1% originally forecast in December.

Between the lines: Beyond the general economic recovery, analysts are also optimistic that in-person activities, such as sporting events, live entertainment and travel, will return faster than expected, generating marketing opportunities.

  • The Summer Olympics, for example, is expected to generate $800 million in additional revenue this year, per Magna.
  • Magna expects the highest ad spend growth rates to come from the travel, automotive, beverage and movie categories.

The big picture: The pandemic has accelerated the migration from analog to digital media, and the same effect can be seen in the advertising market.

  • Digital advertising has held up during the pandemic, thanks in large part to small businesses leaning into e-commerce and favoring tech giants like Google, Amazon and Facebook.
  • Traditional publishers, on the other hand, “have barely stabilized digital ad sales,” according to Magna.

Yes, but: For some industries – like the automotive sector – Wieser notes that the recovery could be a little slower, thanks to the reliance on foreign supply chains that are tied to countries that may not recover as quickly as United States.

Share.

Comments are closed.