Fears of an economic crisis are mounting this morning as Europeans digest the implications of a surprise travel ban to the United States in a last-ditch effort to contain the spiralling Coronavirus outbreak.
Concerns are growing that the ban announced by President Trump to the surprise of many, is the latest travel headache with an expectation that an accompanying collapse in travel ad spend will have a knock-on effect for media companies around the world.
Analyst Rob Sanderson of Loop Capital Markets is among the first to predict a brutal outcome for the sector, forecasting a 15% year-on-year slide in revenue for the first quarter followed by an eye-watering 20% collapse in the second quarter.
While travel is obviously bearing the brunt of the current crisis no sector is immune from the contagion with a pessimistic Sanderson predicting ‘contraction across the board’.
Such a prognosis is by no means unique with Needham analyst Laura Martin also adopting a downbeat note, pointing out that travel constitutes the sixth-largest online advertising category, bringing in an impressive $20bn of spending over 2019. Moreover, Martin warns that the category is also the most ‘search-heavy ad vertical’, generating 54% of all digital ad spend on search, significantly higher than the 42% for all industries combined.
This importance is hammered home by eMarketer research indicating that travel ads constituted 10.9% of all search ad spend last year. This brings Martin to suggest that Alphabet generated $10.7bn of search revenue from travel last year, drawn from a total pot of $98bn for search revenue as a whole.
This year that figure could have been even higher at around $11.6bn of revenue had the Coronavirus been stopped in its tracks. Wall Street has already been in the process of downgrading Alphabet’s outlook with its NASDAQ stock price falling over 5% to $1,215 yesterday before the travel ban was even announced.
Airlines are expected to bear the brunt of the crisis with weaker providers such as Flybe having already collapsed while ITV has reported ill-effects of its own as ad revenues show signs off retreat. A ripple effect has already seen staff from ad agencies worldwide warned not to travel with many offices already in lockdown.