How The Coronavirus is Affecting The Media Industry

The spread of the coronavirus is making adjustments to the work of the largest brands. Uncertainty in the market forces them to change their strategy. There are those who, according to experts, will only benefit from the epidemic.

Procter & Gamble, Unilever, Apple, Microsoft, Danone, AB InBev, Burberry, Aston Martin and many other major advertisers have already lowered their sales forecasts for the year ahead. In this situation, some companies may pause their ad campaigns. For example, The New York Times expects that coronavirus- related ad revenue will decline by 10% in the current quarter. 

According to the forecast of the Organization for Economic Cooperation and Development, in 2020 the spread of the coronavirus could cut global economic growth by almost half - from 2.9% to 1.5%.

It is now impossible to determine the scale of the consequences of the coronavirus for the global advertising market, since the epidemic has so far strongly affected only a few territories. But given the economic history of the advertising business, the situation does not bode well.

The economic shock from the coronavirus is unique in its own way: both supply and demand suffer. On the one hand, consumers are giving up travel and limiting their spending. On the other hand, producers suffer: their supply chains are disrupted. This particularly hit companies dependent on Chinese suppliers - due to the coronavirus, many factories in this country are closed to this day. Businesses that are somehow related to China are likely to revise their media budgets.

What's happening in the advertising market now?

Who was hurt? 

Publishers and agencies are already preparing for changes in advertising budgets for companies. “Customers who are currently having difficulty sourcing manufacturing components from China are asking us to develop contingency plans,” said a senior planner at a UK media agency speaking on condition of anonymity.

Who did win? 

Adjusting plans does not always mean cutting budgets. For example, one media company operating in the Scandinavian market has increased the number of orders for online advertising (especially from public health agencies that want to inform people about the outbreak).

Some large advertisers have limited themselves to changing their ad spend structure. Thus, the international brewing corporation AB InBev has redirected its financial investments from outdoor advertising to online platforms. On the Internet, there is a revival of traffic from buyers "locked" at home, explained this decision, CEO of the corporation Carlos Brito.

What's next?

And yet, many advertisers are likely to postpone their campaigns until a later date. This will especially affect digital media. Television will suffer to a lesser extent - advertisements there are usually booked several months in advance and it is not so easy to waive such preliminary obligations (there is also financial responsibility for this). “None of our clients are going to cancel their TV deals yet, but if this happens, we will try to dissuade them,” said a senior TV buyer at a major media agency, who asked not to be named. By the way, during the advertising crisis of 2009, the blow fell on brand marketing and, as a result, on TV budgets, while search and other performance marketing channels practically did not suffer.

In a situation where advertisers are postponing or cutting back on their spending, brands that continue (or launch new) ad campaigns will benefit. 

Most likely, the situation will be favorable for players who can avoid budget cuts - prices will be relatively profitable, and competition for consumer attention will decrease.

Now advertisers seem to be just waiting for the moment when the consequences of the epidemic will become clearer. If it lasts more than three months, the current contingency plan may change.

“The most unpredictable for business is the scale of the epidemic's impact on economic activity,” says Brian Wieser. The implications for the advertising market depend on whether the coronavirus affects consumer habits over a 12-18 month cycle, or whether its effects are short-term and limited.