5. Ad market expected to take a big hit in 2020
Analysts expect overall global ad revenue to be down roughly 4.4% for 2020 because of coronavirus, excluding cyclical events like the election.
Why it matters: Global advertising revenue tends to grow at roughly the same rate as GDP, so any global economic slowdown is likely to depress the advertising market. Big tech giants are expected to take the brunt of that loss, as they are the biggest entities in the global ad economy.
By the numbers: Analysts at Cowen & Co., an investment management and banking company, predict the following losses:
- Facebook: roughly $15.7 billion, 18.8% down from its original estimate.
- Google: roughly $28.6 billion, 18.3% below estimate.
- Twitter: roughly $701 million, 17.9% below estimate.
- Snapchat: roughly $977 million, 31.8% below estimate.
The big picture: Traditional media advertising, like TV and print, on a full year basis will go down by about 15% if you exclude cyclical events. But digital media advertising will grow slightly, by about 3.5%.
Be smart: Advertising on social media and search, which is how the dominant tech platforms make their money, is expected to take a big hit in the short term for two reasons:
- It is self-serve, meaning anyone can buy those ads through an automated platform at any time without a prepared contract. As a result, unlike with TV ad contracts, there are no cancellation policies that brands have to adhere to when pulling the plug.
- Those ads are mostly purchased by small businesses that are shut down. "Hundreds of thousands of small businesses who probably count for 70% of social and search, they will stop advertising for weeks as they are closed," says Letang. "For some of them, it will be hard to come back, as many won't have liquidity to start marketing."
What's next: Growth in the ad market, and particularly in the digital ad market dominated by companies like Facebook, Google, Twitter and Snapchat, is expected to come back strong in 2021.