By A Correspondent
This is the time when various media agency networks release their annual forecasts. There’s GroupM, IPG Mediabrands and Zenith. And first off the block this year is GroupM. The reports are for the UK and US markets, but these are good indicators of what’s happening across the world.
Given that the two media economies have a significant penetration of adspends in digital, normally what holds good for UK and US and many other digitally developed markets does not hold for India.
But this year, things may change, and hence it becomes important for a careful study of the study.
Chalo, let’s read what has been put up:
The UK: A Decline of 4.4% for 2020
It could have been worse. Nine months into the COVID-19 pandemic, the scale of its impact on the U.K. is relatively clear by now. Overall, our forecast predicts a decline of 4.4% for 2020, which is much improved over our prior expectation of a 12.5% decline that we forecasted in June. While the economy was historically weak as anticipated, marketers both large and small proved to be relatively resilient.
One of the “bright spots” of advertising in 2020 has been in digital. We estimate that pure-play digital advertising will grow by 4.9% during 2020, following 2019’s 16% rate of growth. Next year should see additional growth of around 12%, tapering off toward 7% after 2021. While this year’s gains look strong in comparison to the rest of the industry, it reflects significant deceleration versus prior years.
Additionally, e-commerce growth in the U.K. has seen accelerated growth—53%—economy-wide during the third quarter. We anticipate that e-commerce-related advertising will continue to experience rapid growth, rising around 50% this year and 66% next year, reaching £2.4 billion in media owner ad revenue by 2024.
In television, for 2020, we estimate it will fall by 10%, the worst rate of decline since 2009, but better than we anticipated earlier this year. Our 2021 forecast now anticipates a 10% gain and a return to 2019 levels in 2022. Although streaming services receive much of the industry’s attention, traditional ad-supported television continues to do the bulk of the work supporting marketers’ brand-building efforts. SVOD is drawing consumption away from conventional TV, at least in line with the heightened levels of investment going into the new offerings from the media owners themselves. But legacy media owners’ platforms are finding ways to add value for their customers.
Some other key takeaways:
Print media, including newspapers, magazines and their digital extensions, will account for 7% of media owners’ ad revenue in 2020, down from 9% last year. We expect a decline of 23% this year, followed by a rebound of 13% in 2021.
Out-of-home advertising is set for a decline of 45% in 2020; however, much of that loss should be regained next year, when we expect the medium to expand by 31%. Digital formats, which now represent around 60% of the medium’s activity, will continue growing next year and beyond.
Cinema has been most heavily affected by the pandemic, with an estimated decline of 80% for 2020; however, we expect a strong rebound of 160% in 2021 as film studios seek to monetise their backlogs with a surge of highly anticipated launches. While this rebound may seem optimistic, we note that it only brings cinema back to 52% of pre-pandemic advertising spend.
For 2020, we think audio will fall by 16%, and we expect growth of nearly 12% in 2021. The bigger question is what happens in the years beyond? The effectiveness of audio-based media has rarely been in doubt, though its appeal has been somewhat limited, as the medium commands only 2% of industry spending. Arguably, this presents opportunity for growth over time, especially as new digital formats emerge.
For 2021 and beyond, Brexit uncertainty still weighs on the British economy. While the implications for media might not be obvious, the macroeconomic impact is potentially significant. At a minimum, our forecasts anticipate some degree of disruption to the economy in the early part of 2021 as adjustments are made; however, we think Brexit’s impact on the advertising market will be limited to a shift in spending away from the first quarter rather than meaningful full-year cuts. More generally, we continue to assume that “normal” activity will return by the second half of the year, which pre-supposes that Brexit will not cause ongoing problems and that an effective vaccine will be widely distributed across the population.
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The US: Digital Advertising is the ‘Bright Spot’
Despite a pace of economic decline that will produce the worst economy since the Great Depression, the ad market might end up falling by little more than we saw 2001. It will certainly be better than in 2008 during the fallout of the global financial crisis.
And much like the overall economy, the advertising industry is experiencing a K-shaped recovery – the pandemic has seen rapid acceleration for e-commerce and advanced digital services and cratered industries like restaurants, bars, travel, entertainment and traditional retail.
The bright side, though, is that the underlying rate of decline for advertising is not quite as bad as we thought it would be in our June forecast when we predicted a 13% decline. We think the decline will be closer to 9% because of the strength in digital advertising in particular or, more specifically, the unexpected pace at which digital’s small-business-skewed customer base expanded its spending.
Digital advertising is the “bright spot” in an otherwise dark year for the industry. We estimate that pure-play digital advertising will grow by 5% during 2020 on an underlying (ex-political advertising) basis, following on 2019’s 17% rate of growth. During 2021, we estimate that digital advertising will account for 55% of all advertising we track. Political advertising has proved to be an important source of growth for digital media during 2020 as roughly 4% in total digital advertising was for political candidates and issues advertising, representing around 3% of the year’s gains.
National TV advertising will see a decline of 7.9% during 2020 and rebound to grow by 6.6% during 2021 before returning to a flat or slightly declining longer-term trend. At this pace, national TV is faring better than every other category of media other than digital. Post 2Q, advertising has held up well because most of the dominant advertisers adapted their behaviors, at least on an aggregated basis, which translates to national TV ad spending at levels that resemble pre-pandemic levels.
Underlying (ex-political) advertising for local TV will see a decline of 21% this year after a flat 2019 but, next year, we should see a 2.7% underlying gain. Revenue for political and issue advertising reached record levels by the end of November, with the hotly contested run-off elections for Georgia’s Senate seats still to come. If trends play out as expected, political and issue advertising on local broadcast and cable could reach approximately $7 billion for the year.
Some other key takeaways:
Print media is expected to decline 20% for magazine publishers and a 30% decline for newspaper publishers. It is our view that neither the magazine nor newspaper sectors will ever exceed $10 billion in ad revenue in their current forms, even including existing digital properties.
OOH advertising, including its digital extensions, will decline by 31% during 2020 on an underlying (ex-political advertising) basis, following on 2019’s 10% rate of growth. Next year should see a partial rebound of 23% growth, which tapers off toward 5% in subsequent years.
Cinema advertising is unlikely to see any meaningful rebound until traditional movie-going returns, and this will require studios to resume launching their major titles in theaters rather than via direct-to-consumer platforms. Even once the virus has receded, it seems unlikely studios will release as many titles in theaters as they did in pre-pandemic years, meaning admissions are likely to remain below 2019 levels for some time.
Audio advertising, including its digital extensions, will fall by 27% during 2020 on an underlying (ex-political advertising) basis, following on 2019’s 2.1% rate of growth. Next year should see muted growth of around 6.6%, reflecting a weak local market for advertising and a first half that will probably be particularly negative for locally oriented media.
Direct mail is estimated to generate around $13 billion in revenue during 2020, down 26% on an underlying basis but only 21% including political advertising. We expect to see a partial rebound next year for 17% growth, or 10% including political, before resuming single-digit declines.
2021 and Beyond: Looking at 2021, an assumed second-half return to normalcy paired with the significant growth that followed the trough of 2Q this year leads to expectations for robust growth of 11.8% on an ex-political basis, or 6% including it. For subsequent years, we anticipate slightly higher growth than we previously forecast—now 5% in 2022 followed by 4% in 2023 and 2024—to reflect what we think will be an accelerated pace of investment in digital media by marketers of all sizes.
