MAGNA Report Predicts an Advertising Comeback
By Brendan Gill |
Despite a gloomy first half, advertising’s market decline will rebound in Q3 and beyond, buoyed by digital media and record political spend, according to a new forecast from MAGNA, Interpublic Groups’ strategy and intelligence resource. The report, published in mid-September, outlines how a resilience in digital media mitigated massive declines in the first half of 2020, and how by the end of the year, a reopened economy and increased consumption could almost stabilize the market. Political spend is reaching record numbers, and will nearly triple in online advertising compared to 2016. Beyond this year, MAGNA predicts a rebound for 2021, related to further consumption and continued reopening of the economy, plus a return to normalcy in domestic sports, followed by the Olympics. Some markets will struggle, but seven of the top ten industry verticals will return to their normal ad budgets, leading to a complete rebound.
The pandemic and its attendant public-health-related shut-downs forced most of the United States’ economy to suffer its greatest crisis since 2008, or, according to some, The Great Depression. As the economy goes, so goes advertising. With lockdowns beginning in March, Q1 was widely unaffected. Q2, however, saw advertising revenues drop by 17%. Were it not for a near-6% growth in digital media sales, this decline would have been much steeper. Linear media still saw a 23.1% decline, and national TV posted its worst-ever quarter. Print, radio, out-of-home, and on-screen cinema advertising also endured heavy losses, in many cases because stay-at-home orders keep people away from those channels. In addition to digital, upfront sales, where ad packages are negotiated long term, helped soften the impact.
Still, because of both reopened economies and a heavy influx of political advertising, MAGNA says we can expect the second half of the year to rebound for advertisers. Vincent Letang, EVP and managing partner at Magna, estimates that political ad spending could reach a record $5 billion. Digital spend will be north of $1 billion for the first time ever. A heated presidential race, plus competitive Congressional duels will likely help local TV, where campaigns often prefer to spend their money. Digital marketing is expected to surpass Direct Mail as the second-largest political format after TV. In addition to political advertising, Letang also points out that low-funnel marketing is receiving a greater portion of ad budgets, with brand messaging being cut in favor of e-commerce and digital as consumers adjust to a new normal. Both cost-cutting and an effort by consumers to stay safe has allowed e-commerce to surge 44% in the second quarter, a massive acceleration that is consistent with (but outpacing) predictions. Says Letang: “the fact that it’s up more than 5% for the first half of this year– that is really strong, all things considered.”
Election season will end in November, but expect the rebound to continue into 2021, says MAGNA. The digital-media resiliency was helped by increased content consumption as people stayed home, allowing Facebook, YouTube, and Amazon’s live-streaming video platform, Twitch, to increase revenue. GDP in 2021 is expected to grow by more than 3%, allowing the economy to stabilize, and the Tokyo Olympic games will create almost a billion dollars in incremental ad revenues. Of course, this is all dependent on the pandemic coming under control through either a vaccine or other methods, and big-ticket items like cars and travel are expected to take longer to “return to normal.”
It has been a tough year for Americans and their families, not to say anything about brands and advertisers. Still, there’s light on the horizon. Because of politics and digital content, the advertising industry has stayed somewhat stable through 2020, and will improve in the new year. Says Letang: “The sheer size of digital advertising in 2020 — approximately 55% of the US ad market — and its resilience in this economic environment explains the relatively modest decline Magna forecasts for the whole year despite the severity of the economic recession, compared to the double-digit decline in 2008-2009 when digital media was still nascent. For linear media, however, 2020 remains brutal, but Magna is confident that ad revenues will stabilize and recover in 2021.”