Just how much Covid-19 impact AdEx in 2020?

16 Mar,2020

 

By Indrani Sen

 

Today, it is difficult to make any guess on when our country and the world at large will be free from the deadly attack of Covid-19. The UN Conference on Trade and Development estimated it may wipe off $1 trillion from the global economy in 2020. It is too early to estimate the effect of the pandemic on Indian economy and business and the consequences of the same on media and advertising industry.

 

Our economy has been slowing down from last year and now various manufacturing industries are facing a forced halt in production due to lack of supply of parts and ingredients which are usually imported from China. Recently, we have been witnessing a fluctuating Sensex in a jittery stock market which is unlikely to recover soon.

 

On March 12, the Indian government suspended issuing tourist visas till April 15 and on the next day BCCI postponed IPL 2020 till April 15. What miracle are we expecting to happen in next 30 days? Experts in healthcare have declared that this 30 days window is the most crucial period for India to control the spread of Covid-19 and stop it from getting into the third stage of community transmission, though some of them feel that community transmission of Covid-19 is inevitable (https://economictimes.indiatimes.com/industry/healthcare/biotech/healthcare/community-transmission-of-covid-19-is-inevitable-icmr/articleshow/74621197.cms).

 

In other words, by end-March/ early-April, we will know if we have been able to contain the progress of Covid-19 and escape from getting into the dreaded stage three of community transmission. If we fail to contain the disease in stage two of local transmission, then the current restrictions may be extended beyond April 15 till we are able to curb the growth of Covid-19. Considering that from January 30 when the first case of Coronavirus was reported in Kerala, it took 40 days for 50 cases to be detected in India and then in the next six days the number climbed from 50 to 108 cases spreading across the country, the virus is an active growth phase in our country.

 

What will be the fall out of Covid-19 on media spending by Indian advertisers? The industry sectors/ organisations whose production will be affected may start reducing their ad spend to mitigate economic losses. The sectors/ organisations who are dependent on Chinese supply chain, may also find their sales taking a dip as consumers are not likely to spend less and save more in the current situation of uncertainty. Some industries like travel, tourism and hospitality are already in severe loss and are unlikely to spend on advertising during the first half of 2020. Events have also taken a hit and are not likely to recover before the festive season. A lot of money rides on IPL and if BCCI is forced to cancel the tournament due to Covid-19, it will be a great loss of revenue for traditional as well as digital media.

 

As severe to moderate restrictions are imposed by different state governments on their citizens, they have started avoiding shopping in crowded malls and markets and are utilizing online shopping for purchasing daily necessities and other goods. Advertisers who would like to reach out to their consumers during the next six to eight weeks can ride on this wave of online shopping. E-commerce is likely to get a boost as people also try to avoid cash transactions in brick and mortar outlets.

 

With closure of schools and colleges in various states, there is bound to be an increase in content consumption across traditional media and digital media at home. It will be interesting to analyse the readership and viewership data for this period to assess if traditional media were able to get a share of the consumers forced to stay at home. Many organisations who have adopted digital technology are asking their employees to work from home which in turn can boost the other uses of internet for entertainment e.g. engagements with OTT platforms and other digital media.  However, given the current scenario of consumer spends across various categories of goods and services, it is unlikely that such consumer engagements will attract higher investment in digital advertising.

 

The two other media which are going to be affected are cinema and outdoor. As state governments close down malls and cinema halls to prevent spread of Covid-19, cinema will not only loose the ticket sales money, but also advertising revenue. Due to travel restrictions, social distancing and forced staying at home, the traffic on the roads, stations, airports etc. will be less having a negative impact on OOH advertising.

 

As a combined effect of all the above factors, it will not be surprising if the growth rate of AdEx drops from two digits (10.4% as per Pitch Madison Media Outlook 2020) to single digit in 2020. On the whole, 2020 does not promise to be an exciting year for media and advertising in India.

 

 

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