How A Global Pandemic Is Impacting Ad Spends

April 10, 2020

This Coronavirus pandemic has brought the global economy to a grinding halt bringing businesses on their knees. The United Nations Trade and Development Agency said that the slowdown in the global economy caused by the coronavirus outbreak is likely to cost at least $1 trillion. 

As all businesses, small, medium and large are struggling to cope with the economic crisis, marketing spends are no exception. It is estimated that COVID19 could slash the marketing budgets in the United States by $3 Billion, bringing the total spend to $224 billion, according to the Myers Report. The earlier prediction of $227 billion in Ad spends in the US this year was a 6.2 % increase from 2019. The corrected estimate of $224 billion in Ad spends means it will still be up by 4.8% compared to the previous year. 

While Ad spends are being impacted by the pandemic and the economic slowdown, market research has shown that the Ad budgets will shift from traditional media to digital platforms. 

According to a survey by  IAB, COVID-19 has pushed Marketers in the US to slash traditional Adspend by 39% and digital by 33% than originally planned for March to June 2020. While both will continue to see a dip, digital advertising will be more resilient in terms of Ad spends.

Some sectors have fared better than others. Advertising in key sectors like travel, tourism, and luxury has been paused completely. Fast Moving Consumer Goods(FMCG) and technology companies like Zoom, a video conferencing software and Houseparty, an online gaming platform that allows you to play games with your friends and family online have seen an unprecedented spike.

As major sporting events, concerts, live events, and major conferences have been canceled, consumers are turning to digital platforms such as e-sports and webinars. Dramatic changes in media consumption habits will further accelerate the shift in budget spends. 

WARC  still expects to see an annual increase of 7.1% in global media spend this year. Ceteris paribus, with the expectation that Marketers will simply shift budgets to the later part of the later. 

The primary drivers of advertising growth are online platforms like Amazon, Facebook, and Google. Marketers are able to enjoy success at a lower cost. High ROI that digital, social, and e-commerce advertising are able to offer is accelerating the shift of budgets from Below-the-Line marketing to Above-the-Line marketing.

It is not just the Ad spends that have been affected due to the global pandemic, brands have had to pause and pull out their Ads mid-campaign.

KFC, owned by the Yum! Brands coined its famous phrase “finger-lickin’ good” over 60 years ago. Recently, a TV ad campaign featuring people eating KFC’s fried chicken and licking their fingers has been pulled out in light of the Coronavirus outbreak. Finger licking is against the public health advice of WHO to keep washing your hands and not to touch your eyes, face, or mouth to stay protected from the virus. 

Let’s say KFC took 5 months in bringing this particular Ad on air: from the first idea to conception to scripting to shooting, and finally producing, which would have cost them millions of dollars and a few more in buying the spots. However, there was no way of knowing that a global pandemic will put over a third of the world population on lockdown and washing one’s hands will become the top health priority for the human race 5 months back. 

It is not just KFC, Hershey and Cadbury have also paused their Easter Ad campaigns to support social distancing.

Some brands came out winning, at least in the short term. Nando’s, famous for its peri-peri chicken, tweeted “Turns out finger-licking isn’t good. Rather reach for the soap.” as a response to the KFC Ad. The simple tweet garnered high engagement on social media. 

PizzaHut that shares the same parent company with KFC, won the hearts of netizens by their simple yet effective #QualityTimenotQuarantine campaign on Social Media.

Due to the nature of the pandemic, we expect a rise in social media marketing with social messages and user engagement, but not promoting brands blatantly. While we have seen a gradual increase over the years, Myers estimates that Social Media from platforms like Facebook, Instagram, and Snapchat could see a surge of 12% in ad spending to $30.8 billion.

What kind of Ads should a brand run during a crisis? 

To start with, be cautious not to look opportunistic, irrelevant, and insensitive. Provide real solutions and build brand equity rather than hard-core selling. 

Focus on public interest than a brand interest

Follow science approved, fact-checked information and find creative ways of sharing it. McDonald’s Russia launched a 20 seconds Ad campaign on washing hands. It creatively played with YouTube’s Skip Ad function. They have communicated the most important public health safety information while imbibing on the company’s value of hygiene. 

Brand communications that are perceived to benefit the brand more than they benefited its consumers would backfire. This is not the time to launch a new product. Unless it is a new mask, PPE, ventilator, or the new product has been specifically designed to help your consumers with pandemic-related life challenges. Like Google launching new features of Duo, Google video chat App to tackle its new rival Houseparty. And Louis Vuitton producing face masks. 

Recycle old Ads

The human behavior triggered by shelter-in-place orders is encouraging consumers to return to their childhood favorites and relive those memories. Look out for platforms that may be relevant for your brand through which you can reach out to your consumers staying home.

In India, several old shows have made a comeback on national television. Some of these include adapted classics like Ramanand Sagar’s Ramayan and BR Chopra’s Mahabharat, and more. Amul, an Indian dairy and chocolate brand has recycled its old ads to rerun them during these times. Amul was top trending on Twitter and the Netizens loved it.

The new CTA for brands during a crisis 

The new CTA: Communicate. Trust. Action. 

Do not go dark! Use this time to communicate, build trust, and tell stories about the actions that your brands are taking to tackle this human crisis.

  • If you are a brand selling goods and services, which are deemed essential, inform your consumers about how to get access to your goods and services.
  • If you are a brand selling products and services, which are not deemed essential but are making changes to your businesses to accommodate the demand for essential goods and services during the crisis. Let your consumers know about your actions.
  • If you are a brand that is not in either of the categories mentioned above, communicate empathetically and send out messages of hope. Avoid communications that cause anxiety and concern about the crisis without offering any value add to the consumers.

Every brand, regardless of the nature of the product should use this time to build trust with your consumers, let them know how the crisis is affecting your employees and your company as a whole. And communicate how you are dealing with it. 

Future of Ad Spends Post Coronavirus 

Ad rates typically follow the general economy. Given the economic situation of companies around the world, there will be a vacuum in the Ad spends.

Digital ad budgets are the fastest and easiest to pull out. This will impact the Ad Spends and rates until there is more clarity on the virus and subsequent economic recovery. With lower ad budgets, it is important to dive deeper into segmentation and targeting to achieve the optimal results. Focus on quality over quantity. 

And as the world slowly starts getting back to normal and businesses start reopening, marketers will look at mediums that are quick to scale. Digital ads will enjoy a good comeback because as easy it is to pull them out, it is equally easy to put it back up. Agility, scalability, and a high ROI that it offers are bested suited for campaigns with a limited budget. Online advertising will experience a quicker recovery than traditional media.

As we continue to learn the shifts in consumer behavior, it is important to be mindful of the consumer’s state of mind and wellbeing.