Ad spend by major brands in China has dwindled significantly in the wake of the COVID-19 pandemic, and could be a sign of what’s to come across the rest of the world.
EMarketer slashed its October China ad spend forecast by 6.2% on Tuesday, bringing annual media spend projections down from 10.5% growth to $121 billion to 8.4% growth to $113 billion. The new figures represent the slowest growth rate since 2011, when eMarketer began tracking ad spend growth in China.
Because China is the world’s second-largest ad market, a slowdown there will have ripple effects across the globe. EMarketer has not had sufficient time to assess the impact of COVID-19 in other markets, but it is lowering its global ad spend forecast from 7.4% growth to $712 billion to 7% growth to $692 billion based on declines in China.
“If we remove spend in China, it’s going to affect the total global figures as well,” said Jasmine Enberg, principal analyst at eMarketer.
EMarketer measures ad spend growth in China twice per year, and was able to factor in some of the impacts of COVID-19 because the outbreak began there and has been going on for about three months. China’s economy and ad spending was already slowing, and COVID-19 just added to ongoing declines, Enberg said.
For now, eMarketer expects a return to business as usual in China by the second half of this year. But the situation is fast-moving and subject to change.
“We’re monitoring the situation,” Enberg said. “We’re cautiously optimistic there will be a turnaround. We’re seeing signs of that starting in China, where it seems like the worst of the outbreak is almost over.”
China as a case study: Which media is hit the hardest?
In China, COVID-19 accelerated the decline of traditional media.
Print ad spending will take the biggest hit, with newspaper ad spend projected to drop 16% in 2020 to $2.4 billion, down from previous projections of an 8.6% decline to $2.3 billion. Magazines will drop 12% to $450 million, down from estimated 5% decline to $500 million.
“As people are forced to stay at home, they aren’t going out to buy newspapers,” Enberg said. “They may not be delivered to their houses. That results in a lower demand.”
Out of home (OOH), previously the only real bright spot in traditional media, will also be hit hard. If people are avoiding public places and transit, then advertisers will too. EMarketer revised its OOH spend forecasts in China for 2020 to 0.7% growth to $9.85 billion, down from 2.5% growth to $10.5 billion.
Even digital media, which has been on an unstoppable growth trajectory for years, will be impacted by COVID-19. Marketers are cutting ad spend across the board as the economy flounders and the supply chain halts. Digital campaigns are also one of the easiest channels to pull.
EMarketer lowered its digital ad spend forecast in China from 15% growth to $86 billion to 13% growth to $81 billion in 2020.
“[Digital campaigns are] much easier to change than a TV ad commitment, so those are some of the first things to go,” Enberg said.
At the same time, marketers are watching digital consumption habits closely as people spend more time with media while locked down or in quarantine. Streaming consumption is already up in China and will likely follow suit in other markets.
In uncertain times, advertisers in China are directing digital spend toward trusted platforms such as Weibo and Alibaba. Global marketers are likely to do the same with Facebook and Google.
“We’ve seen in other times of economic uncertainty that advertisers turn to platforms that have proven ROI,” Enberg said. “These are the big walled gardens like Google and Facebook.”