The outbreak may have a cooling effect on a year that was forecast to see greater media investments, and highlights realities unique to the digital age.
Feb. 28, 2020
Coronavirus is spreading at an alarming rate around the globe, unsettling the stock market and causing operational disruptions to industries spanning retail to travel and hospitality. In a year where analysts expect to see an uptick in media investments from marketers eager to capitalize on events like the 2020 Tokyo Olympics, the outbreak could have a cooling effect and perhaps some less predictable consequences distinct to the digital age.
“As travel is curtailed and supply chains are impacted, [and] if you can’t get your products to market, what do you do? You stop marketing,” Bruce Biegel, Winterberry Group’s senior managing partner, told Marketing Dive. “Short-term marketing dollars can be wasted, so you watch people start to pull back a little bit.”
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Advertising reverberations of coronavirus — which causes the illness COVID-19 — are already evident on platforms like Amazon, where many merchants rely on Chinese suppliers. Some sellers spent 6% less on Amazon advertising in the last two weeks versus that period in 2019, according to a Quartile Digital analysis cited in Bloomberg. Tech giants like Microsoft and Apple have begun to issue warnings that coronavirus could impact their sales outlook for 2020, and Facebook on Thursday announced the cancellation of its closely watched F8 conference.
As bad news snowballs, some analysts remain cautious in adjusting their advertising forecasts, especially as the status of events such as the Olympics will depend on whether the worst of coronavirus burns off with the summer season. One thing to keep in mind, Biegel said, is how the particulars of today’s unprecedented digital connection impact marketing, especially if consumers decide to stay inside en masse.
“We’ve never been through this type of GDP slowdown or crisis environment in this type of e-commerce market, with so much direct-to-consumer and so much focus on ordering and shipping” Biegel said. “What happens if, all of a sudden, your commercial audience is going to be at home more? It doesn’t mean they don’t want to buy those things … they’re going to turn online.”
Potential safeguards — barring things don’t get ‘severe’
Agility is one aspect of digital marketing that could act as a safeguard against some of the consequences of coronavirus. Businesses feeling a pinch to profit margins might freeze variables like marketing budgets as a reactive strategy in the near term, per Biegel. But that doesn’t mean those dollars disappear forever.
“I’m sure ad spend will be impacted if opportunities dwindle, but they could also just get reallocated,” Dipanjan Chatterjee, VP and principal analyst at Forrester, said in emailed comments. “Other than that, many will question their China dependency, which will probably have more of a sourcing impact and opportunities for smaller countries like Bangladesh and Vietnam.”
A focus on marketing reallocation was echoed in a report by WARC on Thursday. The group expects global advertising spend will rise 7.1% to $660 billion this year, supported by strong growth of 13.2% in internet investments.
“We are yet to amend our forecasts in light of the COVID-19 situation, as we would expect — if the crisis is contained — displaced spend to be reallocated later in the year,” James McDonald, WARC Data’s managing editor, wrote in statement. “Advertising’s relationship with GDP is strong, but a slowdown in economic output as a result of the virus will not necessarily translate into reduced advertising investment.”
Even as e-commerce supply chains are strained by the spread of coronavirus and subsequent factory closures in key regions like China, marketers should recognize that more people will shop online and may be active during dayparts when they don’t typically browse, according to Biegel.
“We could see an acceleration of a shift out of store and into e-commerce,” Biegel said. “That means those people who are in the e-commerce space for marketing — and think of channels like affiliate [marketing] — they might not see the same level of an impact unless it got very severe.”
Events get hit hard
Yet, it’s easy to imagine a more severe scenario. Several high-profile marketing events, including Mobile World Congress (MWC) Barcelona and Facebook’s Global Marketing Summit and F8 conferences, have been called off due to coronavirus concerns, and others could follow.
In MWC Barcelona’s case, this has resulted in sunk costs for would-be attendees, and perhaps more significantly for the events space, lost deal-making opportunities and product announcement hype that can be harder to quantify.
“If major events are cancelled, you don’t get that money back,” Biegel said.
But confabs like F8 and MWC Barcelona cater to the business end of things, when the real impact would hit marketers if destination live events are affected. Early indicators of this shift can be seen around Europa League soccer matches, some of which are being played behind closed doors without a live audience to prevent the virus’ spread.
“It doesn’t mean that fans aren’t going to want to watch,” Biegel said. “It means they’re going to stream. Live event amplification minus the ‘live’ part of the event is something that we’re watching.”
The most significant advertising stage that could be affected is the 2020 Tokyo Olympics. Broadcaster NBC said in December it had secured $1 billion in advertising commitments ahead of the summer games, a steep pool that could be shaken in the case of delay or shuttering.
“If events such as the Tokyo Olympics and UEFA Euro 2020 tournament are postponed or cancelled […] we would expect a notable impact,” WARC Data’s McDonald wrote.
Even if an Olympics closure remains an unlikely scenario, it’s the type of situation marketers should prepare for to avoid seeing their media strategy and campaigns completely upended by coronavirus.
“If you’re a smart marketer or a supplier right now, you will start thinking about: ‘What’s our contingency plan?'” Biegel said. “You don’t change what you’re doing, but you start to make sure that you’re doing the right scenario modelling.”
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