• April 27, 2020
  • By Leonard Klie, Editor, CRM magazine and SmartCustomerService.com

No Surprises, Ad Revenue Shrinks

As the coronavirus continues to significantly impact the U.S. economy, BIA Advisory Services has adjusted its revenue projections for 2020 local advertising. The company now estimates the total local advertising market for 2020 will be $144.3 billion, a 10.6 percent decrease from BIA's prior estimate of $161.3B in November. The new estimate also represents a 3.6 percent decline from 2019, even with the added political advertising revenue of $7.1B anticipated this year.

"To formulate the update to our local advertising estimates, we considered all the different angles of the economic impact of COVID-19 on the economy, including unemployment, local market specific factors, and the declining ad spend of key business verticals," Mark Fratrik, senior vice president and chief economist at BIA Advisory Services, explained. "A realistic view of the virus is that it will continue to have a negative impact on the second quarter, with some continuation into the third quarter. We have assumed that there will be a strong rebound in the latter part of the year, but we will have to re-evaluate as the on-going economic impact becomes clearer."

BIA's forecast tracks spending across all media platforms. BIA's pre-COVID and post-COVID estimates indicate that advertisers are pulling back on spending (see chart above). Media is being impacted by different verticals, including the following:

  • Local radio andtelevision, both effected by decreased ad spend by leisure and entertainment, restaurants, and retail companies, as well as sports cancellations.
  • Direct mail, impacted by a considerable decrease in ad spend by retail and financial companies.
  • Out-of-home outlets impacted by decreases in spend from leisure and entertainment companies.
  • Online (desktop) ad spending is showing a significant decline because it's largely driven by SMBs.
  • Local cable systems are seeing a decline as the lack of live sports has affected their viewing and selling advertising time.

One encouraging element is that political advertising will keep the decrease in both local cable and local OTA television smaller than other media. Other media, without that buffer, will see larger percentage decreases from what BIA originally projected for 2020. The health sector business vertical is also expected to see a slight increase in ad spending, as hospitals and health professionals will become highly sought after.

"As this situation unfolds, we are continually running our forecast models to make sure our estimates reflect economic conditions," said Thomas Buono, CEO and founder of BIA Advisory Services, in a statement. "This unprecedented moment is greatly affecting our clients' revenue opportunities, and we believe businesses can use solid data and insights to take steps to minimize their losses and take steps to plan for the recovery."

Buono has been advising clients to take several steps to keep their companies going and prepare for the economic rebound by preserving liquidity, emphasizing and managing relationships, and, thinking forward.

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