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Experts tell us about the impact the outbreak could have on the advertising industry and what to expect in the next few...

Here’s how the Coronavirus outbreak could impact ad spends, according to experts

Experts tell us about the impact the outbreak could have on the advertising industry and what to expect in the next few...
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  • In uncertain times like today, consumer habits are changing. With more people staying under a lockdown, the overall advertising pie will shrink.
  • Many mediums have already been impacted, and the effects might take this entire year to wear off.
  • As Coronavirus-fueled uncertainty further rolls through the global economy, we speak to the heads of Indian media agencies to find out the impact the outbreak could have on the advertising industry and what to expect in the next few quarters.
As Coronavirus cases continued to go up across the globe as well as in India, and Prime Minister Narendra Modi announced a 21-day complete lockdown of the country, its effects on the advertising industry could be massive. Media agencies are keeping a close watch on how things are playing out, even though one thing is for certain, the effects will definitely be felt in the industry for the next few quarters, if not more.

While people staying at home in an attempt to self-isolate could mean they will spend more time on the internet, on gaming and OTT platforms, which could directly lead to more ad spends on these platforms, it could also lead to a significant decrease in spends on mediums like OOH and Experiential.

A lot of mediums are already feeling the heat. Various industry bodies from the Experiential, Radio, Print and News Broadcast have already asked the government to intervene and help them out in the next few quarters with waivers and moratoriums.

Moreover, as the virus continues sweeping across the country, people might not even be interested in watching ads anymore. So, what impact do media agency heads think will the pandemic have on our AdEx this year? And how are media agencies working around the uncertainties that the current situation is presenting?

While it is difficult to predict the exact impact of the current situation on Adex in terms of numbers, it is obvious that the overall advertising pie will shrink. And this is going to have a long-term, pervasive impact on all mediums, albeit some mediums will be affected more than the others.

Whenever things go south, advertising budgets are the first to be slashed. And considering how things have been progressing, Ashish Bhasin, CEO APAC and Chairman India at Dentsu Aegis Network Asia Pacific, admitted that no industry will be ‘left unscathed’.

Bhasin said, “There is going to be a severe and immediate impact of the Coronavirus outbreak on advertising. Some of it is already being felt. For example, the events industry has already come down to near zero. Other sectors like hotels, airlines, etc, are also dramatically impacted already. Nothing is going to be left unscathed. There's going to be an overall significant decrease in advertising expense from what was originally projected. The health issue will hopefully get sorted out at some stage. Things will probably get worse before getting better but hopefully the Covid-19 infections will come under control soon."

Bhasin further said that while all mediums will be impacted, some mediums like Digital and online gaming could be impacted less. However, the overall slump in the economy will bring everything down, the effects of which might be felt throughout the year.

He added, “The scary bit is, its going to leave our economy pretty badly damaged. Advertising is very sensitive to economic growth. When growth is good, advertising booms and when growth is negative, it is one of the first expenses that brands cut down on. So overall advertising pie will decrease and all media will get impacted. Some mediums like digital and gaming might get impacted lesser because consumption has increased. But when the pie itself is reduced, the total money available will be less. I'm hopeful that the government will announce some stimulus package because people who are at the bottom of the pyramid like daily wage earners etc, are really feeling the heat. And this is going to impact everybody, from the richest to the poorest man in India. Also, with almost the entire country under lockdown, consumption is going to come down significantly. Nobody is going to buy a car or a washing machine or anything other than essentials at this point in time. Even after the infection is handled, the economy is going to take a long, long time to come back. When production is closed, factories are shut and the labor has gone back to the villages, you can’t just expect things to go back to normal in a day. So I think there are dark clouds ahead for advertising and we have to be ready for the worst. I don't think the effects of this will wear out this year."

Mohit Joshi, Managing Director, Havas Media Group, India, opined that the audience currently is more interested in the minute-by-minute updates on what is happening in the world and resultantly, are left with no room for consuming ads.

He said, “Yes, it’s an unprecedented situation. It sounds surreal at times. Content consumption is shifting for sure. Digital is definitely getting consumed more, however people are also latched onto news, current affairs and information around what is happening rather than spending long hours consuming entertainment content. Currently most of the advertisers are assessing the situation. With a complete lockdown, advertising itself will be impacted in the short-run. OTTs in the long run will gain. It’s too early to predict. It is all very uncertain at this stage. As somebody rightfully said, we will have to look at our strategies in 2 frames BC (Before Corona) and AD (After Disaster).”

Navin Khemka, CEO, MediaCom South Asia, also said that there is barely any appetite for advertisements at the moment, painting not a very encouraging picture. “This is not the time for building sales. With most of India under lockdown, there is sales pressure everywhere. A good time for brand building with increased time spent but people are not in the right frame with so much negative news around. I would say that we are looking at a period of increased time spent on media but decrease in overall spends. This is a tough year. The next 2 weeks will decide.”

So considering the uncertainty around everything, how difficult is a media planner's job right now? Bhasin said, "Not very difficult because nothing is happening. Everybody's cutting down their budgets and the difficulty lies in issuing cancellations. It is difficult because the budgets are under tremendous pressure right now."

COVID-19IndiaCases: 1.96MDeaths: 40.6kRecovered: 1.32M
COVID-19WorldCases: 18.35MDeaths: 696kRecovered: 11.30M
COVID-19USACases: 4.67MDeaths: 154kRecovered: 1.57M