Expert View: The COVID-19 Impact on AdSpends

While a number of brands roll back & re-assign AdSpends, many sectors have increased their spends in view of the Coronavirus outbreak. Experts decode the COVID-19 impact on AdSpends.

All the dystopian movies we saw weren’t enough that we decided to live in one. At least it feels like that as the second week of self-isolation & Work From Home begins. While work processes are definitely more streamlined (trial & error) we still don’t know how long we’re in this for. Subsequently we don’t know where exactly the industry is headed, but we do our best to anticipate. Let's discuss COVID-19 impact on AdSpends.

Volatile Times

In the beginning of the year, when we spoke to experts, almost everyone echoed with a positive sentiment. Ashish Bhasin, CEO – APAC, Chairman, India, Dentsu Aegis Network pegged Indian AdSpends crossing USD 10 billion mark, with digital as a major contributor. While it is too early to say if these projections will be impacted, a slowdown is inevitable.

Bhasin explains that India, as compared to other markets, is less integrated in the global economy, hence, as long as our macroeconomic situation remains favourable, the impact will be muted as compared to some other markets, in the medium term.

“As far as advertising is concerned, there is always a reaction,” Bhasin remarks. “Advertising is correlated to the GDP growth. The rule of thumb is that if the GDP grows by one percent, advertising goes up by one and a half percent.”

So, for example, if the GDP grows by 8 percent then advertising tends to go up at around 12 percent. It is a similar case when the GDP goes down. “If the economy does slowdown it will definitely impact Ad spends but I expect it to be relatively short lived. It depends on how long the impact of the virus lasts,” he says.

The ripple effects of events being postponed, launches being revised, and overall consumer sentiment are resulting in AdSpends being revised. What we need to factor in is whether the marketers will have products to advertise. It depends upon how much the delivery system of their products is impacted.

“We will see curtailing of spends because the need of the hour is to spread the message of caution via these mediums and brands will have to step down in most places for the same. So it is interlinked,” shares Rana Barua, CEO, Havas Group India.

Barua explains that anything involving production, shoot, planning will have to be pushed. “But I do not see any regular brand awareness messaging, communication or advertising stopping necessarily for the same,” he adds. In his opinion, it depends on how the situation is being handled.

GroupM TYNY Report 2020, forecasted India’s advertising investment reaching an estimated Rs. 91,641 crores this year. This represents an estimated growth of 10.7%, for the calendar year 2020. With IPL postponed, product launches pushed, and mediums being crowded by COVID-19 communication these numbers might differ.

Gopa Kumar, Chief Operating Officer Isobar India shares, “We are already seeing most of the advertisers pushing their spends by a month or two because of uncertainty in the market and COVID-19 impact. Primarily one because there is an issue with Supply for some of the categories and other is with sentiments down and people not venturing out and malls, Cinemas everything shut, there is nothing to advertise.”

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Digital Angle

In such a scenario digital proves as the most conducive medium for reaching out to the masses.

“While traditional advertising spends will take a hit, I see digital advertising spends remaining relatively stable in these times,” exclaims Ahmed Aftab Naqvi, CEO & Co-Founder, Gozoop. “Businesses with a time bound inventory are fine tuning spends, by switching from branding-led-spends to performance-led-spends.”

However, a number of small and medium have taken a severe hit.

On the condition of anonymity, a digital agency owner spoke about Service sector brands reducing retainers by nearly 50 percent. Many other agencies dealing with local and smaller restaurant chains are faced with withdrawal of account and non-payment.

Silver Lining

However, not all is lost for when certain industries are directly hit, others are experiencing an increase in demand. For instance, in the South Korean market digital & medium consumption spiked considerably, gaming being one of them. Additionally, categories such as travel & hotels face a direct hit, they might also bounce back quickly & sectors such as pharma might gain.

“Sectors like e-commerce, OTT Entertainment, Health Care & Pharma, Telecom, FMCG continuing their spending as usual,” Kumar remarks.

The digital economy too is slated to see a boost. As people spend more time in front of their screens, they look towards the digital world for social connectivity and entertainment. “This can lead to a boost in awareness spends on SVODs like Netflix, Amazon Prime, Disney+, Hotstar, Zee 5 and also social platforms like TikTok and YouTube, along with consumer, gaming, music and dating services. Brands like Alienware from Dell will see increased traction,” Naqvi chimes.

Also, with an increase in spends by Healthcare & Pharma brands in the coming quarter, with estimates stating that digital spending could see a boost of at least 15% in new budgets, he shares.

In the coming days, the industry might also witness revised axioms and look for innovative solutions to deal with the Corona economy. Marketers will change the way they distribute content, with great investment in the creation of content for education and awareness, along with personalization over the entire course of the buyer journey. “This could also place an emphasis on account-based marketing strategies, where marketers tailor content campaigns for smaller target accounts,” Naqvi adds.

“While it seems like everything is going downwards, I would like to emphasize it's also a good opportunity for brands to do brand building activities through digital and Content and Continue to be on top of mind of consumers,” Kumar concludes.