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The Reported Side Effects of Coronavirus on the Ad Industry

The Reported Side Effects of Coronavirus on the Ad Industry

What we know: the good, the bad, and the ugly

The good: Clorox, Lysol, and Purell are in high demand, short supply, and so their shares are on the rise. Good for P&G, Reckitt Benckiser, and Pfizer.

The bad: Elsewhere, in the non-disinfectant product sectors, many industries are already seeing declines, which have contributed to the stock market’s recent slide. According to Vox’s Matthew Yglesias, “COVID-19 doesn’t have to get significantly worse in the US to impede the economy. If people start going out less or if the government encourages ‘social distancing’ to reduce the likelihood of an outbreak, that’s going to hurt companies across many sectors”—from travel and tourism, to entertainment, to the alcohol industry. Not to mention the yet-unrealized effects on the global supply chain that could impact many consumer packaged goods.

The ugly: Recent “social distancing” policy has already begun to make a major impact on industry gatherings, cultural events, festivals, conferences, and subsequently many local economies who rely on those events to drive spending. With the cancellation of SXSW announced on Friday, the event organizers issued a press release stating "The 2019 event delivered the greatest economic impact to Austin, Texas's business and residents in its 33-year history. SXSW's 2019 impact on the Austin economy totaled $335.9 million."

What we don’t know: how much, how long

For how long and to what extent will the viral threat continue domestically and abroad? For how long will it dominate the 24-hour news cycle, social media, and dinner conversations?

According to a new analysis of 62 marketing and media categories from The Myers Report, coronavirus fears could potentially reduce total U.S. 2020 marketing communications investments by anywhere from $1 billion to $11 billion. On the high side, an $11 billion marketing reduction would equate to approximately a $3.1 billion reduction in media spend nationally.

What we predict: some unexpected winners

Beneficiaries of the shift in media investments, The Myers Report says, will be broadcast network television (excluding potential Olympics and major event losses), local newspaper advertising, content marketing, and public relations. As people opt to isolate in the safety of their own homes, media channels that serve the “homebody economy,” will thrive. While the broader market is tumbling, stocks for the homebody economy—which include the video-conferencing service Zoom, the fitness equipment maker Peloton, and technology companies like Netflix and Amazon—are rising, as reported by Yahoo Finance.

According to AdWeek, the consensus from TV ad-sales professionals contacted by the publication was a combination of optimism—fueled by a belief that a rating increase between the 2020 elections and coronavirus coverage should translate to an increase in ad revenue—and “it’s too early to tell.”

The TV industry traditionally sees rating spikes when major events like bad weather keep people indoors for extended periods, but those could be less noticeable now as TV viewing has become so fragmented. “I think we’ll see an increase in time spent with video, but that will happen across live, delayed, VOD and streaming, so the impact will be tough to measure solely by Nielsen ratings,” said David Campanelli, co-chief investment officer of Horizon Media.

Still, “any time people are at home, there’s a chance their video consumption is going to go up,” said Steve Nason, a research director at Parks Associates, a firm that specializes in entertainment and content services. “So in a way, it could actually boost viewership numbers for a lot of these companies, a lot of these video-on-demand services or even services like Xumo or Pluto that lend themselves to continuous play.”

The bottom line

The coronavirus picture changes day by day, hour by hour. It’s developing at a rapid pace and it can be a full-time job to stay on top of the latest news. There are still many unknowns, most of all, how widespread COVID-19 infection will be, what government response will look like, and for how long the virus will continue to be viewed as a major threat. But, we believe, when it does pass (and it will), people will emerge from their homes with a desire to experience life... and spend money on things other than hand sanitizer and toilet paper.

For our clients—across a diverse group of industries—we are recommending a measured, prudent response that in most cases, means that we stay-the-course. For the past 43 years, Karsh Hagan has supported and led our clients from travel and tourism, healthcare, financial, and retail sectors, among others, through natural disasters and financial challenges. And we will continue to lend our expertise to adjust to this particular situation. We will keep you informed as we learn more and remain committed to helping all of our clients get through this uncertain time. Of course, we share in the concerns about the impact of the virus but we will keep doing what we do best: providing data-based recommendations and strategies.

 

 


Sources

AdWeek 
Vox 
MediaVillage 
Digiday 
Skift 

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