As advertisers get over the initial shock of the rapid rise of the coronavirus, there’s an unexpected sting in the pandemic’s tail – the economy is sliding into another recession.
The dizzying number of suspended events, postponed launches and disrupted travel over the last week doubled as a series of epiphany moments for many advertisers. Initially, advertisers thought the coronavirus would have a short, sharp shock to economy whereas now they’re braced for its effects to linger for months. The economic tea leaves of a recession were there in the global stock markets last week when listed companies on the Dow Jones, S&P, Nasdaq and FTSE 100 stock exchanges were hit by steep daily falls in value as investors feared the coronavirus would stunt economic growth. For most advertising execs, the coronavirus pandemic now means normal business is on hold indefinitely.
One ad exec said that three new business pitches worth approximately $2 billion in total media billings had been recently postponed until the coronavirus stabilizes. Subsequently, agencies will win fewer media dollars during a time of unprecedented uncertainty, said the exec.
While it’s too early to predict the ultimate economic impact of the outbreak, economists like the IAB Europe’s Daniel Knapp warn it could be comparable to the 2008 recession. But whereas that recession was driven by problems in the financial system, the coronavirus is causing a collapse in aggregate consumer demand across a multitude of industries that are freezing the wheels of economic activity around the world.
“I’ve had some clients asking me whether the agency can not bill them for April because they’ve got no stock to sell, which could have a knock-on effect on our business if more of our clients ask the same,” said the CEO of a digital agency on condition of anonymity.
The grim economic effects of the coronavirus pandemic are beginning to sink in across the advertising and media landscape.
“We are facing unprecedented market conditions and many advertisers have sensibly focused on protecting key business and commercial requirements,” said David Indo, CEO of ID Comms. “A significant number of pitch plans are being paused and placed on hold until the situation clarifies. The result could be an avalanche of reviews through the second half of the year or perhaps a delay until the beginning of 2021.”
“There’s no point in spending marketing in the last four weeks in China because everything was closed,” Adidas CEO Kasper Rorsted told analysts on the company’s earnings call last week.