Three Views of the Global Advertising Market: An ARF Virtual Town Hall

Hosted by ARF president and CEO Scott McDonald this town hall polled three industry experts on the subject Laura Martin entertainment and media analyst at Needham ampamp Co Brian Wieser global president business intelligence of GroupMamp160and Christian Polman chief strategy officer at EbiquityLaura Martin Appraises the Market Challenges in PredictingFor Martin past market predictions were not prescient Back in December 2019 both Zenith and WPP were predicting global ad spend increases of over 4 percent yearoveryear But Martin anticipates that by April huge losses will result in the GDP cratering as unemployment claims skyrocket quotEconomies are shutting downquot she stated adding that it is not easy for professional forecasters to look ahead with any certainty regarding GDP Challenges abound First they must be able to predict when the infection rate will peak in every country Then they need to see how long it will take for consumer demand to return after each peak Following that they would need to know what percentage of small businesses will fail before consumer demand returns quotSmall businesses are a large part of overall advertisingquot she explainedThe US Is in Better Shape Than Other CountriesUsing the stock market as a predictive indicator and considering its current huge declines and high volatility Martin explained that quotthe market is telling you to expect a negative 6 trillion forecast But how much of that decline is consumer sentiment and how much of it is actual fundamental deteriorationquotThere is cause for some optimism however even if only relative to other countries The US stock market represents 44 percent of the world39s market capitalization amp8212 20 percent of all listed companies amp8212 and has more highlyvalued companies on average This means that the US is better prepared to become more dominant over time compared to other countries Martin said quotbecause the rest of the world39s businesses are all a third of the sizequotSo while we may be worried about small businesses in the US quotthe rest of the world is actually in worse shapequot she asserted Another factor in our favor is that the US is more productive than most other economies But now may not be the time to buy she warned We don39t know how long it will take for the virus to dissipate and consumer sentiment is currently quotantiexuberancequot meaning depressed and cautiousUneven Impact on Global AdvertisingMartin used the travel category as an example of how the global advertising market could be negatively impacted Travel and hospitality which has effectively shut down was projected to edge out CPG in 2020 as the fifth largest digital advertising category representing 86 percent of ad spend Because half of all travel spending is on digital media Martin posited that the impact of travel advertising shutting down is three times worse on digital than it is on offline media Further Google search represents 70 percent of travel digital ad spendThe takeaway is that quotwhen travel silos turn off different media are affected in different waysquot In addition Martin noted that because 50 to 70 percent of TV inventory is bought in the prior May and is contractually obligated TV is in better shape than digital which is bought in scatter and by auction and can be canceled immediately to withstand market volatilityBrian Wieser Sees Cause for OptimismOptimism With a CaveatWieser is seeing some hope for optimism in the virus trends He has been monitoring China where the latest reports show the spread slowing quotChina has turned a cornerquot he explained quotIt39s a baseline to think about how this plays out in different countriesquot But Wieser noted there are three different kinds of countries and each type needs to be taken into account when projecting the impact on global ad spending For Wieser countries divide into quotthose who were hit with the crisis and immediately took appropriate aggressive steps to address the matter amp8212 among those are Japan Singapore and South Korea There are those countries that messed up for a month and then took aggressive steps China is probably the best example And then there are countries that messed up for multiple months and are hopefully taking the right steps Italy is pretty clearly in that category It remains to be seen how exactly different countries will followquotSmall Businesses Have Severe RisksWieser believes that small businesses are the most immediately impacted and often quothave the fewest resources to see them through a crisis such as this one with a limited ability to tap into the financial systemsquot for help Unfortunately these companies to date aren39t receiving a lot of support quotThis is where the most severe risks arequot he said quotSmall businesses are being hit first and fastquotLessons from past financial crises are not always the same lessons for today he added Countries with a solid safety net provide some relief for small businesses but this not ubiquitous worldwideSupply Chain ConsiderationsBecause China is getting back to business Wieser is less concerned about lost output that could disrupt the supply chain which at the time of the initial outbreak seemed inevitable quotThe bigger threat is that other countries around the world don39t take the right actions and then become the risk for China if demand doesn39t reemergequot he said quotThe bigger point is that we can actually make this worsequot Specific public policies and actions by citizens and individual countries will drive much of the outcome which at this point is an unknownWhat Should Brands DoIn this time of uncertainty brands should focus on ways to stay relevant and be helpful to consumers Some companies are pivoting in ways that change their business in socially positive ways Take for example quotcompanies with alcoholbased products finding ways to convert their production lines to hand sanitizer manufacturing Anyone with a capacity to produce heavy metalamp8211based hardware can produce ventilatorsquot Wieser explained quotBut even brands that have nothing to do with the physical needs of emergency professionals are finding ways to be helpfulquot by altering their creative messaging to encourage social distancing such as Coca Cola39s billboard in Time39s SquareChristian Polman Takes a Pragmatic View No SurpriseAny pandemic outbreak shouldn39t come as a surprise because Polman asserted if you go into the archives policy health experts have been talking about this for a long time Four primary factors he suggested have created a perfect stormPoor planetary health which risks the spread of infectionAn unsustainable interconnected global supply chain particularly the food supply chainThe rise of nationalism and unilateralism quotcoming into mainstream politics which divides populations at a time when we need cooperationquotThe low levels of trust in institutions which is only getting worse quotat a time when trusted information is critical to inform the public and to guide policymakingquotLong Term and Short TermPolman believes that a longterm need is finding a sustainable and affordable food chain In the short term pressing needs include quothaving a vaccine a preventative treatment as well as longterm testingquot He noted that consumer confidence is essential But this will be problematic as the latest studies show that confidence is in freefallThe longterm trend for GDP growth and ad expenditures quotis yoyoed over a long period of time and quite consistently over the economic cycles The rule of thumb is to expect a downturn every 10 yearsquot Polman said quotWe were due one but I don39t think anyone foresaw how this one would be happeningquot We always bounce back he added so those who can afford it should start to plan for the recoverySuccess FactorsBrand relevance has never mattered as much as it does now Take for example hand sanitizers which are according to Polman countercyclical quotMedia is a more normal examplequot he stated quotMedia consumption has been going up dramatically as it typically does in a down cycle as a function of more people who are unemployed In this case people unemployed and people stuck at homequotAgility is another success factor where making decisions fast is a big differentiator Risktaking is another quotIt39s not just making decisions quickly but also being able to take risks to take advantage of any opportunitiesquot he addedLongterm orientation matters a great deal quotThe companies that are longterm oriented are the ones that are going to winquot Polman said adding that quotconsumer trust has never mattered more It will be criticalquot He advised that brands depending on the category maintain their market share of voice quotwhich you can do even with a lower budgetamp8230 It could take three years for brands to see the full impact of their investment That39s why it39s such a key longterm gamequotIn a parting word of advice Polman offered the following quotEvery one of us has a role to play when it comes to leading and driving corporations A lasting message from all of this is in any crisis the rate of change will acceleratequot I wonder can we handle any greater rate of changePictured above clockwise from top leftamp160 Brian Wieseramp160Laura Martinamp160Scott McDonald and Christian PolmanDon39t stop now Stay in the know on industry strategies and trends with more from ARF InSitesClick the social buttons to share this story with colleagues and friendsThe opinions expressed here are the author39s views and do not necessarily represent the views of MediaVillagecomMyersBizNet

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Three Views of the Global Advertising Market: An ARF Virtual Town Hall

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Charlene Weisler

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Three Views of the Global Advertising Market: An ARF Virtual Town Hall

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Charlene Weisler

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