How the Coronavirus is Impacting the Advertising Business

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As of mid-May, the number of confirmed COVID-19 cases worldwide has surpassed 4.5 million, killing more than 310,000 people and upending every aspect of U.S. life as we knew it. Sectors of society most affected by this global health crisis have been the healthcare and educational systems, but efforts to “flatten the curve” and slow the spread of coronavirus have affected nearly every area of the economy.

The advertising business is no exception.

Even while online sales of essential products including food have skyrocketed, sales of discretionary items have plummeted. In the face of these challenges to their bottom lines, rather than ramp up their marketing efforts to encourage sales, many enterprises have greatly reduced or eliminated their advertising budgets as they struggle to prevail.

TV networks that pull down a large portion of their revenue from ad sales during major sporting events are facing a disastrous impact on their annual revenue. Centralized media brands resource and ad-buying agency MagnaGlobal predicts that the measures to slow or eliminate the spread of COVID-19 that have forced cancellations, postponements, and other modifications that will result in decreased viewership, fewer advertising contracts, and far less revenue for TV networks.

According to the think tank, cancelled NBA and NCAA events will cost TV networks up to a 25% drop in viewership. Major League Baseball in the United States and the European Formal One Grand Prix racing circuit have both proposed shortened seasons without fans in the seats. Perhaps most significantly, says MagnaGlobal, the International Olympic Committee and Japan’s Prime Minister Shinzo Abe’s decision to postpone the 2020 Tokyo Olympics— while a prudent public health measure— will force advertising projections that will have a deleterious effect on TV networks around the world.

Although one industry source estimates that cancelled ad campaigns have resulted in a reduction in advertising revenue approaching 60%, the good news is that advertising hasn’t completely stopped. Astute ad agencies are taking great care to be sure that all their clients’ messaging is right for the times— even if it means shelving entire campaigns for the moment. The most effective agencies are also making sure that they continue to stay in close contact with their clients through every digital avenue available, and that they are leveraging the most sophisticated video-conferencing applications available to keep their existing clients well-informed on real time changes. The current advertising climate is also a good time to foster relationships with potential clients who may need assistance navigating the post-COVID world of advertising and marketing.

Digital media companies like The Verge, Gizmodo, and others are facing the worst downturn in a generation. Silicon Valley startups launched on business models dependent on meteoric growth driven by online spending appear especially vulnerable as people reduce discretionary purchases and prepare for possible unemployment or furloughs.

According to industry insiders, advertising companies will not only sustain temporary body blows as the country weathers the current COVID-19 outbreak. Instead, the advertising companies should anticipate fundamental changes in how they do business, well past the resolution of the current pandemic.