Ad spends set to be another coronavirus victim

Amrita Nair-Ghaswalla Mumbai | Updated on March 30, 2020 Published on March 30, 2020

Q1 set to see a dip of over ₹10,000 crore in advertising across all media

The advertising industry is steeling itself to take a heavy hit this year. Depending on how successfully the virus is contained, ad industry sources are predicting advertising expenditure growth to slump to 3.9 per cent this year from 11 per cent in 2019. The forecast is based on dull performance from the start of 2020, and the likely pull-back on spending from some brands.

That Covid-19 is set to impact global ad spends is well-known. There is a clear reasoning why this could happen in India, apart from the ongoing country-wide lockdown.

“In the first quarter, approximately 28 per cent of annual budgets are spent for all summer season brands,” says Sandeep Sharma, President, RK Swamy Media Group. “It is the first quarter, companies are fresh with their annual budgets and draw out a strategy for the entire year and are keen to begin on a strong note. This time though, it is different as most will be cautious,” he adds.

RK Swamy Media Group is an integrated media unit of RK Swamy Hansa.

Noting that it would be some time before the factories and dealers reopen and business demand slowly starts coming back, “one can safely assume that it will not happen before the July-September quarter. Hence, the first quarter will see a dip in advertising of over ₹10,000 crore across all media,” Sharma told BusinessLine.

Outlining that news channels, regional entertainment channels, movie channels on television, print dailies and some digital media would attract advertising budgets over the next three months, the official says, “Events, research and specialist offerings will be badly hit. Most messaging will be in context to Covid-19 or informative, with brand building and corporate advertising happening selectively in some categories,” he says.

At best, there would be selective messaging in select media, he says.

The immediate casualty is IPL, with the official noting there is only a remote chance it will take place on schedule.

Other experts state ad revenues could bounce back, though it all depends on how effectively the virus is contained. In its Global Ad Trends report, the World Advertising Research Centre said advertising spends could be pushed to later in the year as long as the crisis remains contained.

James McDonald, Managing Editor of WARC Data, also admitted that a major disruption from coronavirus could lead to long-term restrictions on movement and large gatherings, impacting spends in areas such as cinema and out-of-home advertising.

With a hit on cashflows and demand, advertising budgets are likely to be cut across the board, points out RK Swamy’s Sharma. “Some categories like travel, airlines, hotels, automobile and related sectors, real estate and allied sectors, consumer durables, furniture, and retail (non-food consumables) are going to be hit the most. The BFSI sector will be defensive and cautious,” he adds.

Organisations are likely to focus on cashflows and cost cutting, with talent cost and advertising comprising a significant portion of their costs, adds the official.

However, there is a silver lining to the dark clouds. Sharma says advertising from government, ministries and certain PSUs could be strong, “as there will be an urgent need to disseminate information”.

“I expect advertising to start picking up from September onwards. If things get normal in the next three months, then we could see a high level of advertising investment in the October-March period,” he adds, with Diwali, World Cup T20 and Budget being the big events to help loosen up purse strings.

Published on March 30, 2020

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