Will digital advertising wade through COVID-19 crisis?

As per industry sources, the digital advertising industry may have to settle for a 15-20% growth this year as compared to the 27-30% that was predicted before the Coronavirus crisis broke out

e4m by Shikha Paliwal
Published: Mar 25, 2020 8:34 AM  | 5 min read
Digital Advertising

The coronavirus outbreak has hit all sectors globally with the advertising industry too beginning to feel the pressure. However, the digital arm of advertising may have walked away a little less bruised compared to its traditional counterparts.

According to industry experts, digital will feel the pinch of tightening of purse strings but it will be in a better position compared to other mediums as digital advertising platforms have so far been spared the wrath of COVID-19. Given the severity of the financial impact that is expected to hit India Inc, marketing budget cuts are already in place. There is a freeze on campaigns given shooting of ads has been put on hold.

Sources say the digital advertising industry may have to settle for a 15-20 per cent growth this year as compared to the 27-30 per cent that was being forecast before this crisis broke out.  

In order to give a better perspective of the impact of the coronavirus crisis on the overall industry, Ashish Bhasin, CEO, APAC and Chairman, India - Dentsu Aegis Network, said the impact will be ‘significant’ and a lot of it will be ‘irrecoverable’. “Some of it has already happened. The impact will hit certain sectors of the business much more. For example, events businesses will be hit more, parts of Out Of Home will be hit because the cities are in a lockdown. But in general, every aspect of advertising will be affected, simply because at times like these consumption goes down, clients become cautious. They like to conserve cash. We are already seeing a significant impact of that this month itself. Fortunately, so far, things haven't been that bad in India, that doesn't mean that we are out of the woods. But the worse it gets, the bigger will the impact be.”

With consumers now restricted to the safe confines of their homes, the obvious inference being derived is that a spike in online activity – OTT, gaming, social media and e-commerce – will benefit digital advertising. While this has ensured that the digital medium faces less of a brunt, companies are still sparingly investing in new campaigns.

Elaborating on this was Vishal Chinchankar, Chief Digital Officer, Madison: "Early indications are that overall ad spending could take a hit, at least temporarily. While consumers may be staying home, watching OTT content and tuning in to news and movie channels, GECs may feel a greater impact due to repeat programming. While the demand across traditional and digital ad spends are muted, the overall pricing across mediums has been status quo. We anticipate a drop on biddable platforms with increased supply. However, this could be a temporary phenomenon."

Sharing further insights on how digital will be able to scrape through, Bhasin said, “I think digital advertising will be less impacted because particularly when the revival starts, the clients will want quick sales and more of performance media. But I think it will not be wise to expect that there will be any medium which will be totally unaffected.”

The uncertainty around the Indian Premier League, India’s biggest advertising blitz, has further dampened the sentiments of the industry. According to media reports, the target for Star India was approximately Rs 3,000 crore in terms of advertising sales. Their digital platform Hotstar alone was expected to bring in around Rs 600-700 crore. Marketing budgets are especially set aside and pre-planned for this event. For now, the dates for IPL have been postponed to April but if cancelled altogether, it would spell further trouble for the industry.

Talking in terms of numbers for the overall industry, Bhasin further said that the industry could be staring at single-digit growth this year. “A revival before the first half of the calendar year is the optimistic scenario but we can now expect a revival only the third quarter onwards. While most agencies were forecasting a 12% kind of growth for the advertising market this year, I will be surprised if we end the year with a growth that is more than low single digits.”

According to Shamsuddin Jasani, Group MD, Isobar South Asia, “One of the major spenders for us are mobile handset manufacturers like Apple and they have delayed the launch of their products because of the coronavirus crisis. So it's already impacting us in terms of spends. If IPL, for example, gets postponed or doesn't take place this year at all, it’s going to turn into a major problem. There's a lot riding on the league even for digital.”

On a more optimistic note, Jasani said they will be able to wade through the crisis. Although the revival is expected to take at least 2 to 3 months after the crisis is over, Jasani advises that agencies should keep working with clients in helping them invest in creating, building and perfecting their assets for digital.

Most digital agencies agree that these are uncertain times for brands and hence speculation on whether ad spends would move to digital will be futile, says Sanjay Mehta, Joint CEO of Mirum India. “It is a very dynamic scenario and any guess on where the advertising spends will go is speculative. Once the problem is behind us, and we return to relative normalcy, it will be time to assess the impact and the likely changes will project in the digital media spends.”

Agrees Samarjeet Reen, Chief Strategy Officer at Update Geotarget, “An honest assessment is that the demand story and business impact in the present COVID-19 environment will impact all forms of advertising in the near term. Critical decisions will be deferred and strategic investments will be reassessed till the impact and scale of the slowdown is understood in the weeks and months to come.”

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