How Long Will it Take for the Global Ad Market to Recover?

Exactly three weeks left for 2020 to come to an end. The effects of the pandemic have been plentiful for a variety of industries. For the advertising industry, 2020 was the worst year on record for traditional advertising media, while the online market failed to record growth for the first time since the Dotcom crash. Global marketing intelligence service, WARC highlights the state of the industry in their latest report along with forecasts on what ad spending will look like in 2021.

The global ad market is set to fall by 10.2%- $63.4bn- in 2020

The global ad market is now on course to contract by 11%(- $68.3bn)- to $552.3bn in 2020. This is worse than the 2009 recession when advertising investment fell by $61.3bn (-12.9%) worldwide. The report predicts that global ad spend is set to rise by 6.7% next year, which means only 59% of 2020's losses will be recouped. Ad investment would need to grow by 4.5% in 2022 to top the peak recorded in 2019.

Sharp cuts to ad budgets have been seen across the board

WARC’s Global Marketing Index (GMI), recorded a mild recovery in October after a prolonged period of the worst results in its history. Already in modest decline since mid-2019, marketing budgets recorded sharp and sustained cuts across all regions from March of this year – in line with the spread of the virus. Data shows that offline media was adversely affected by the downturn – partly for practical reasons – though online formats also recorded losses.

Developing markets have been hit hardest by the downturn

In Asia, where initial containment of the virus was more effective than in the West, economies are now faltering due to a downturn in global trade. Consumption-oriented economies are also set to suffer from a squeeze on personal finances in the coming years. While all regions are expected to see their ad markets grow next year, this is more a reflection of comparison to a tumultuous 2020 than a marked recovery.

Trends by media and format

Linear TV: Spend is set to fall 16.1% - or $29.9bn - to $155.6bn this year, 27.9% of all global ad spend. This means 2020 was the worst year on record for TV. Despite a fillip from presidential campaign spending, the US TV market - the world's largest - still fell by a tenth this year to $54.4bn. Globally, TV ad spend is expected to rise by just 1.1% in 2021, leaving the market 15.2% lower than its pre-COVID total in 2019.
Out of home: The OOH sector has suffered from a severe lack of reach during international lockdowns - spend is on course to fall by 27.3%, or $11.3bn, in 2020. Out of home is then forecast to be the second-fastest growing medium in 2021, with ad spend rising by a fifth (20.2%), though a total of $36.3bn will be 12.7% lower than in 2019.
Cinema: Like out of home, cinema advertising has been heavily impacted by lockdown conditions. Brand investment has fallen by almost a half (-46.5%) this year, but cinema will lead 2021 growth with a 41.2% rise.
Linear radio: Investment in radio ads is projected to fall by 18.4% - or $5.9bn - this year, before rising by a mild 4.6% in 2021. This will put 2021 radio spend 14.7% lower than in 2019.
Newspapers: Spend on print newspapers is down by $9.8bn - or -25.5% - in 2020. This is the worst performance for newspapers in more than 40 years, and the market is expected to be largely flat (-0.4%) in 2021.
Magazines: Like newspapers, print magazines have been heavily impacted by reduced circulation. Advertiser spend has fallen by a quarter (-25.4%), or $4.0bn in 2020, with a similar level of investment forecast next year.
Social media: Social formats, combined, were the strongest performers in 2020, recording total growth of 9.3% to $98.3bn. Social spend is then set to rise 12.2% in 2021, pushing the market to a value of $110.3bn, almost a fifth (18.6%) of all advertising spend.
Online video: The only format to have its growth prospects upgraded spend is on course to rise 7.9% to $52.7bn in 2020. Online video is also expected to be the fastest-growing format in 2021, with spending up by 12.8%.
Paid search: The search market is expected to decline by 1.9% this year before rebounding in 2021 with a growth of 7.0%. This would push the market's value to $130.6bn in 2021, more than a fifth (22.0%) of all advertising spend.

Trends by region

Middle East: While not as severely impacted by COVID-19 as other regions, ad spend in the Middle East is still set to fall by a fifth (20.2%) - or $2.9bn - to $11.3bn in 2020, as oil-rich economies suffer from falling commodity prices. Growth of 7.0% is forecast for next year.
Africa: Spend is expected to fall by almost a quarter (23.3%) to $5.0bn this year, with a mild rise of 2.1% expected in 2021 as key markets start to recover from sustained recessions.

Trends by product category

Media & publishing: Advertising spend from media brands is expected to top $70bn worldwide next year for the first time, growing 8.4% (up from $5.5bn to $71.4bn). This follows a projected 4.6% decline in 2020 (down $3.2bn to $65.9bn). TV advertising is expected to see the softest decline among traditional media this year (down 10.9% to $16.1bn) but is also forecast to see a 1.4% contraction next year.
Business & industrial: Investment is projected to remain relatively flat for business advertisers, with an expected drop of 2.7% (down $1.7bn to $60.8bn) this year being the softest rate of decline among all categories. Growth of 5.3% (up from $3.2bn to $64.0bn) projected next year means 2021's investment will be only 2.5% higher than in 2019.
Retail: Advertising spend from retailers will see one of the softest rebounds next year. Total investment is forecast to fall 16.2% this year (down $10.5bn to $54.3bn), with only an increase of 5.9% projected for 2021 (up from $3.2bn to $57.5bn). Online spend is expected to drop 3.4% in 2020 but see 6.9% growth next year.
Automotive: Social lockdowns have limited travel this year, though health benefits from private vehicles and delayed purchases mean 2021 is key for automotive brands. Advertising investment is projected to fall by one-fifth (-21.2%, down $11.0bn) to $41.1bn in 2020, one of the steepest rates of decline. However, the automotive category is one of few to see double-digit growth in 2021, rising 14.1% (up from $5.8bn to $46.9bn.)

State of the industry in 2021

A survey of 1,360 practitioners for WARC’s Marketer’s Toolkit suggests the current global downturn will instigate a shift to performance formats in 2021. Digital channels are set to dominate media budgets – the easier measurement of online video in real-time, combined with the growth in consumption, means a big year ahead for online video. Conversely, the outlook for traditional channels is net down. Just one in five (19%) intends to raise TV spend, compared to one in four (26%) making cuts. A balanced media mix is key. Constrained consumers are more likely to be omnichannel shoppers, and an omnichannel campaign can lift ROI by a third.