Large global brands are to cut ad spend harder – and for longer – in response to the coronavirus pandemic, according to fresh research from the World Federation of Advertisers (WFA).
89% of large multinational companies have deferred marketing campaigns this month, up from 81% in March, found data from the trade body’s Covid-19 response tracker.
52% of marketers at these companies said they’ll now hold back ad spend for six months or more, compared to just 19% who mulled taking similar medium-term action last month.
The WFA’s research was conducted in the last full week of April and attracted responses from senior marketers in 38 companies across 17 sectors with a total annual global spend of $46bn. 61% of respondents held global positions, with 39% in regional roles.
The data gives some insight as to what lies ahead for the remainder of the year as the industry grapples with the possibility of an ad recession. In the first three months of the year, the UK alone saw the slowest uptick to ad budgets since the 2008/2009 financial crash.
In line with advice to keep spending in a time of crisis, some 62% of respondents agreed it was critical for brands not “to go dark” during this period. However, there were still dramatic cuts to spend overall in April.
As already detailed by giants like ITV and Channel 4 in the UK, the squeeze is being felt hard by TV, traditionally the biggest media. US broadcasters such as ESPN, CBS, Turner and NBC – which rely on live sports to boost their ratings and advertising hauls – are also expected to take a hit.
Globally, the WFA says TV investment will be down 33% across the first half of the year. Print (down 37%), out of home (down 49%) and events (down 56%) are suffering the most, though.
Digital is boosting its share of ad spend by virtue of the fact that spend falls in this area are less dramatic, with online video down 7% and online display down 14%. Other channels such as radio (-25%), point of sale (-23%) and influencer marketing (-22%) are expected to experience significant cuts.
While 68% have some kind of crisis response campaign now running (up from 32% in March), this activity will not compensate for the cuts to other campaigns.
Global ad budgets are now expected to be down 36% in the first half of the year (up from 23% in Wave I) and 31% for the full year.
The global numbers fall in line with a recent report from E-marketer, which suggested that China – the epicentre of the coronavirus outbreak and second-biggest ad market after the US – would see total media spend reach $113.7bn , down from a previous estimate of $121.13bn.
What does all this mean for agencies?
With the world’s biggest ad networks, including WPP, Omnicom and Publicis Groupe, continuing to make financial and staff cuts to safeguard their businesses against the impact of Covid-19, the latest data from the WFA shows those who service big multinational clients are set to face further challenges.
As global marketing teams take drastic action on the number of ads seen by their target consumer audiences, the global trade body says its members are also viewing the situation as an opportunity to make radical changes to the way they operate, both internally and in partnership with their agencies.
Some 92% agree that this crisis will have a long-term impact on the way they operate and 84% agree that this is an opportunity to ‘rethink everything in terms of our marketing organisation’, with the same number saying they have already accelerated digital transformation.
“Marketing leaders are fully aware that the crisis is having a major impact on their teams and their external partners,” said Stephan Loerke, the WFA's chief executive.
"Many are making significant efforts to support their agencies by finding projects for their key people to work on while spend is low or by changing their payment terms when they can.
"Our research shows that such efforts are widespread and reflect how much brands value the contributions that agencies can make to their businesses," he finished.