GroupM: United States Will Recover More Slowly Than Other Ad Markets

groupm global forecast


The ad market will pay for the United States government’s late lockdown in response to the coronavirus pandemic, according to GroupM’s midyear global ad spend forecast.

The US advertising market will shrink 9.9% this year to $207.3 billion, excluding political ad spend, which will buoy the market by $15 billion in 2020, according to a US-focused ad spend forecast released by GroupM last week.

But South Korea, which reported its first confirmed COVID-19 case on the same day as the United States, will only see its ad market shrink 1.8% to roughly $9 billion this year – a result of its rapid and aggressive response to the virus.

“You’ve got overlapping issues of the societal and economic toll of the pandemic,” said Brian Wieser, head of global intelligence at GroupM. “The US never shut down to the same degree other countries did, and that has consequences. We’re not tamping down on the virus.”

Other markets that have imposed loose lockdowns – or no lockdown at all – will see major economic impacts in 2020. In Brazil, for example, ad spend will decline 29% to $7.3 billion this year.

But even markets that handled the initial outbreak well will suffer economically in 2020, depending on the breadth of government stimulus packages, the availability of universal basic income and how heavily dependent the market is on exports. Japan, for example, locked down quickly, but will still see ad spend decline 20% this year to $31 billion due to the Olympics postponement.

Markets that did lock down quickly and stringently will see a sharper recovery in 2021. Japan will grow 15% to $35.7 billion, while the United States will shrink 0.9% to $205.5 billion, minus political ad spend.

“The rebound will be more dragged out in a market that has managed this crisis worse,” Wieser said.

Total global ad spend will decline 11.8% to $517.5 billion in 2020, excluding US political ad spend, dropping sharply from 6.2% growth last year. That’s better than many expected early on in the pandemic, as advertisers and small businesses were able to pivot their businesses online.

“Most categories have found ways to adapt,” Wieser said.

The forecast, however, assumes that a vaccine will be widely distributed by the middle of next year, and is subject to change if that does not happen. A delayed vaccine “would drag out the weakness for quite a long time,” Wieser said.

Digital stays strong

Digital advertising is not immune to the pandemic, and will shrink 2.4% this year to $277.8 billion, after nearly a decade of double-digit growth. But it will increase its overall share of the ad market from 48% to 54% in 2020.

In the US, digital advertising will remain flat, thanks to a $3 billion boost from political advertising, per GroupM’s US forecast. Digital would have grown by double digits in the US this year if not for the pandemic.

Ecommerce is also partially to thank for that boost, as businesses both large and small pivot to selling online. Another factor is marketers shifting spend out of sports and live events and into digital.

“Businesses transitioned online and ended up with more digital advertising,” Wieser said. “Put that together and you have a market that’s not down as much as it could’ve been.”

Digital spend will rebound next year, growing 11.3% to $309.2 billion, but at a more modest rate than previous years, Wieser said.

“It’s a law-of-large-numbers issue,” he said. “You can drive some incremental growth if you can bring in new categories, but traditional media still has value for many brands.”

Traditional craters

Traditional mediums already in decline will not fare well through the pandemic.

Linear TV will shrink 17.6% to $135.5 billion globally this year, minus US political advertising, before rebounding to 5.9% growth, or $143.5 billion, next year. Linear TV’s share of advertising will slip from 37% to 26% in 2020, although big brands still consider it a valuable medium and will continue to spend.

Out-of-home, meanwhile, will decline 25% this year to $30 billion globally, and rebound to 15% growth next year. Audio will also shrink 23% to $25 billion in 2020 as people cut out their daily commute, and advertisers that typically go big on radio, such as local retailers and auto dealers, cut their spend. Print will decline 25% to $49 billion in 2020 with “really no rebound expected globally,” Wieser said.

But as traditional declines, “digital extensions,” which refer to hybrid digital and traditional activities, are growing stronger.

Streaming ads, for example, a digital extension of TV, will remain resilient through the pandemic, growing 3.7% this year to $11.7 billion, and 11.4% next year to $13 billion. This year, streaming ads will account for 9% of total TV ad spend.

In 2020, digital extensions in print, audio and out-of-home will equate to 31% of the total ad market at $31 billion, up 7% from last year. This category will account for 16% of total traditional media spend by 2024.

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