Coronavirus and digital media industry trends: 3/12/20

Over the last few days, and likely for weeks or months to come, the first thing on many of our minds is the same: Coronavirus.  Not only how we take the right precautions to protect our families, friends, and communities, but what impact this could have on the economy. 

Given the volatility and declines in global stock markets over the last few weeks, financial analysts clearly believe that the world economy is in for a rough patch. There could certainly be a recession caused by this. What does that mean for digital publishers who rely on advertising as a revenue stream?

Considerations and Preparation

Because of the uncertainty around the overall impact of the virus on the economy, we are cautious to forecast what the future might look like. Instead, we want to focus on some broad expectations and preparations publishers can make to be ready for any future downturn.

The short term

Digital advertising as a preferred marketing channel. Compared to other traditional channels for marketing (television, radio, print, out-of-home), digital advertising tends to be the most flexible option. Between its efficiency in cost, targeting and measurability, and the fact that spend can be paused at will, we expect digital advertising to be a channel of focus, even as advertisers may take precautionary measures and cut budgets in other marketing areas. As advertisers decide what they can spend and where to do it in the coming weeks and months, digital advertising will remain at the forefront, but will likely still see some volatility.

Ad spending heavily depends onconsumer behavior. We’re seeing the travel industry’s ad spending impacted the most so far as travelers postpone or cancel trips and pull back from new bookings. However, ad spending could increase in areas with new opportunities as consumers spend more time at home and online.

It’s early to tell, but we do see the potential for strong short term impacts as major spending-events are canceled, people start to lock-down, and more cases are reported. It is very possible that many advertisers press pause in the short term to sort things out and see what happens next.

The longer term

The Coronavirus may impact the global manufacturing of products, limiting the stock available for advertisers to sell. This could affect 2020’s holiday ad spending as marketers won’t spend money to advertise products they weren’t able to manufacture or get into stores.

If we enter a recession, it’s likely that RPMs trend down for a period. The March 9, 2020 market impact due to Coronavirus was the largest stock market decline since 2008. In 2008, the recession led to a 13% decrease in ad spending overall, although it only saw a 2% decrease in online ad spending.

The Myers Report predicts a $3 billion reduction in ad spending this year, with another $6.2–9.3 billion reduction in 2021, depending on the continued impact of the Coronavirus. Those sound like big numbers, but keep in mind that global digital advertising spend is forecast to be over $220 billion this year — and the Myers reports forecasts that digital advertising will grow, just $3 billion less this year than they thought. A -1% impact on revenue is bad, but bearable.

Stay flexible

While we don’t know exactly how this is going to unfold, we’re prepared for each contingency and focusing on efficiency and maximizing revenue for publishers. Right now, since things are moving so quickly, we haven’t seen any measurable negative impact from Coronavirus on advertiser spending. We have built relationships with so many advertisers over the years that a few pulling their spend don’t have any impact on the overall numbers. 

We’re continuing to monitor on a day-to-day basis but we believe that our investments in technology, team, unique partnerships, and our publishers over the last several years put our community in a position of strength to face this uncertainty together!