Advertising in the Coronavirus pandemic: predictions & forecasts
With more and more people confined to their homes across the globe, we expect a huge spike in web traffic as people look for outlets to distract themselves from the boredom of quarantine. While some brands are wary of the crisis and are cutting their ad spending, we believe now is a great time to engage with your audience via digital advertising.
Millions of people in forced quarantine globally, hospitals filling up with patients, planes flying empty to their destinations, panic-buying in supermarkets, sports & business events cancelled worldwide, stock markets crashing: this is the reality we face in the Coronavirus pandemic. Late last year, it was expected that global media spending would grow 6% to $656 billion in 2020, but with the spread of Coronavirus, many analysts are now fearing ad spend could be much lower. For advertisers unsure of what the future will bring, here are our predictions for the months ahead.
Consumer Behavior is Changing
Your experience of Coronavirus so far will vary greatly, depending on which country you’re based in. At the time of writing, Coronavirus is present in 95 countries with 111,540 cases worldwide. In the countries most affected, consumer behavior has already started to change drastically, whether voluntarily or not. Some are in forced quarantine, as is the case for 60 million people in Italy. Even in areas where cases remain fairly low, consumers are choosing to prepare for the worst, stocking supplies and staying at home to reduce chances of catching the virus. There are reports of panic-buying at supermarkets, of companies telling employees to work from home, and of exploitative traders trying to profit from the needs of others.
Supply Chains are at Risk
In the world of marketing and advertising, brands are struggling to cope with supply chain issues, unsure whether to promote products they may soon have problems delivering, and are scared to engage with the subject of Coronavirus in case they appear to be profiting from the crisis.
For advertisers who are unsure how to tread in the next few months, what’s the answer?
Coronavirus impacts on the advertising world
1. Travel industry takes a hit – what does this mean for the travel ad industry?
It started with flights to parts of China being canceled, and now almost-empty flights are arriving at destinations around the globe as people avoid travelling to reduce their chance of catching the virus. The prices of cruise holidays and flights have slumped, and business travel is similarly affected. A survey conducted by the Global Business Travel Association showed 65% of respondents have canceled at least a “few” business meetings or events. According to industry group IATA, Coronavirus could wipe out between $63 billion and $113 billion in worldwide airline revenues this year. Already, United Airlines Holdings Inc.’s stock has fallen 39% and Deutsche Lufthansa AG has dropped 31% since the outbreak began.
In terms of advertising, Needham & Co. analyst Laura Martin estimates that spending on travel search ads may drop by $1 billion in Q1 and $3 billion in Q2. This will hit Google ad revenues hard as travel ads make up 10% of all search ads and accounted for $10.7 billion of Google’s $98 billion search revenue last year.
Luckily, the effect of Coronavirus on the travel industry is thought to be short-lived. Martin also predicts that consumer spending, and consequently, travel advertising will be back to normal by Q3 2020. Nevertheless, there’s still likely to be some victims along the way; airline Flybe collapsed last week and Coronavirus was named as the final straw that broke that particular camel’s back.
2. A change in shopping habits – how can advertisers take advantage?
As shoppers look to avoid contracting the virus, they’re limiting their time outdoors in supermarkets and shops. In the UK, online supermarket Ocado said demand for delivery slots was higher than normal and that customers “appear to be placing larger orders.” It’s a similar story in the US, with online sales soaring. According to Adobe Analytics, online sales of toilet paper went up 186%, and purchases of canned goods and other non-perishable foods rose 69%.
If we take China as an example of how things are likely to unfold in the next few months, this move to online will only increase. According to Carrefour, vegetable deliveries increased by a whopping 600% year over year during the Lunar New Year period. This is despite a previous prediction by emarketer that online sales would only increase by 23.7% in 2020.
On the contrary, physical retail stores in China such as Starbucks and Uniqlo saw a sharp dip in sales, and ended up closing during the outbreak period.
For ecommerce advertisers, the pandemic can present significant opportunities, especially in communities that still look at online shopping with suspicion. Whether this trend will continue post-Coronavirus will very much depend on the customer experience they encounter during this period. If the supply chain remains intact, these ecommerce retailers may have found new and loyal long-term customers. If it fails, consumers may rush back to their reliable physical stores.
3. Some channels to see less ad-spend – what should you avoid in the next few months?
With a move away from physical shopping, at least in the short term, there are some obvious losers in the advertising world. First of all, the use of geo-fencing and drive-to-store technology are no longer likely to feature high up in brands’ advertising strategies right now.
As James McDonald, WARC Data’s managing editor, pointed out, a major disruption from Coronavirus could lead to long-term restrictions on movement and large gatherings. As a result, with people staying at home, out-of-home advertising is likely to see budgets temporarily slashed, as people are simply not traveling around to see the ads.
Additionally, as companies look to limit their exposure to the virus, many are pulling out of events worldwide and so far we’ve seen Mobile World Congress, Facebook’s F8, Cloud Next 2020 and most recently, South by SouthWest all fall victim to the crisis. These events represent important touchpoints for many brands to engage with their clients, and many will now be wondering where to put ad spend to offset the lack of in-person engagement.
4. The importance of digital advertising – why rich media provides an opportunity to advertisers
We’ve already looked in-depth at how rich media ads lead to higher engagement levels, and we believe there is an opportunity for digital advertising to step in and fill the void that other channels may leave.
Again, if we take China as a sign of things to come, according to QuestMobile, mobile internet usage rose from 6.1 hours daily in early January to 6.8 hours during Lunar New Year. This increased further to 7.3 hours a day when people were in quarantine.
People at home, particularly those in quarantine, will be crying out for some creativity to entertain and distract them. In particular, video rich media could see a rise as people stuck at home look to entertaining media to keep them engaged throughout the day. As Steve Nason of Parks Associates explains, “any time people are at home, there’s a chance their video consumption is going to go up.”
The move towards digital advertising has already started, with 14% of brands from a Dentsu Aegis survey responding that they were shifting budgets from offline media.
Whether or not this is a long-lasting trend remains to be seen. The survey suggests it’s a short-term move, with 61% making changes for the near-term and just 9% making amends to longer-term plans. Here at Nexd, we believe it will depend on the results brands see from digital campaigns over the next few months. If they’re able to use the tools they have at their disposal wisely and increase engagement rates, the shift may prove permanent. More on optimizing your rich media ads here.
5. The rise of VR – is it yet again “the next big thing”?
Another area that may benefit from the Coronavirus crisis is virtual reality. For the same reasons as rich media advertising, VR may well see a surge over the next few months as people are at home, unable to go to the office, to a bar, to the gym.
There are already reports of Facebook’s VR headsets flying off the shelves as people prepare to spend much more of their time indoors. And on a more niche note, VR services are being offered to patients quarantined in hospitals in Israel.
While we highly doubt VR services will become the norm in the near future, the sales and investments made now could greatly help to advance the industry in the long term.
6. A move back to good-old TV advertising – should you consider moving your ad budget to TV?
And finally, we shift from futuristic VR to good old-fashioned TV. Industry experts are predicting a rise in media budgets for traditional TV advertising and streaming services are also expected to see a rise in demand.
This is based on previous data which show spikes in TV advertising during periods in which people tend to stay at home, for example, during times of bad weather. It’s expected the same could be seen when Coronavirus hits its peak. That being said, TV execs so far have said it’s “too early to tell” whether this prediction will become a reality.
Strange times are these in which we live
One thing’s for sure – the world is facing a major crisis and consumer behavior will certainly, at least temporarily, change as people try to cope. Whether these little habits we’ve initiated of washing our hands as soon as we get in the house, shopping online and maintaining our distance in public places will turn into long-term norms still remains to be seen.
Nevertheless, for advertisers who manage to engage with their audiences now, the benefits could be huge. Consumers have a long memory and they will remember the brand that kept them entertained during their days of solitude at home.