Aldo Agostinelli

The COVID-19 infection has hit the world and financial scenarios we were used to, have changed completely : shops have closed, restaurants, pubs, bars, boutiques e and the whole retail sector has been put on a stand-by. Offline retail at least. On the contrary, the on line sector is still working. The digital world has not been affected by the virus, because diseases cannot spread online.

Everything has to be reprogrammed, reviewed. Even advertising.

A pandemics is a rare event. Actually, covid2019 has been defined the “Event” destined to revolutionize people’s lives and global economies.

How can we react and make forecast in such a scenario? James McDonald of  Warc has taken what happened in 2003 in Asia with the Sars and in 2005 in the Middle East with the Mers, both of them acute respiratory syndromes, as two possible examples of something similar to what is happening now (COVID-19: Three scenarios for the impact on media planning).

The scenario during the Sars epidemics

The sale of luxury goods and services, entertainment activities, dinners outs and all other outdoor activities done outside home dropped by  55-56%.

Online sales rocketed up to +63%. Let’s take Lotte Mart in  South Korea as an example: they recorded -10% in physical shops, +27% in its e-commerce.

And now during the covid-19 epidemics

A similar situation is occurring now due to the spreading of Coronavirus: people tend to buy essential goods – or those goods which have become urgent and indispensable, such as sanitary products – and, if possible, they do it online.

Today like yesterday, sectors which have been suffering the most are tourism, restaurants and the entertainment business.

Coronavirus spreads three times more rapidly than its predecessors and is much more dangerous.  However, on the basis of past experience, we may try to outline three possible scenarios to help companies plan their advertising budget.

First scenario

The advertising budget is devoted to different things but the annual growth stays the same.

The Warc  Global Marketing Index shows that budgets have been reduced and the decrease in Asia affected especially traditional media. However, in the second part of the year costs may increase.

Second scenario

Expensed are significantly redistributed because brands make short term investments.

Cinema, outdoor entertainment and the radio all suffer from the huge decrease in the entertainment activities ( with reference to the radio we shall consider commuters who are  now mostly working from home and have stopped listening to their favorite radio while driving to work).

On the other hand, though, the fact of being all locked in has forced us to watch TV more often and longer. In China the average time spent watching TV per day has increased by 50%. And the same can be said of news and online video watched by young people.

Other relevant increases have been recorded in the use of messaging services and social media.   

We will soon find out whether brands will decide to advertise products connected to the Easter period, along with discounts and special offers, not to record further delays in the sale of products linked to such a special period.

In general, we can say that if e-commerce volumes are definitely going to increase, investments will be diverted towards digital advertising to make purchases through social media easier.  

Third scenario

Long sales interruptions increase the risk of advertising recession.

If we consider the big sport events which have been cancelled or put off, the entertainment activities blocked as well as the sales activities, the global economies are losing  GDP points and advertising may follow.

Despite the fact that the money invested in online advertising has increased six times faster than global economy over the past years, Big Tech companies such as  Google, Alphabet, Facebook and Amazon may suffer from the situation, too. Part of their advertising revenues are indeed based on small and medium companies, that is to say the most vulnerable advertisers in case of a financial recession.

Revenge Spending

In a critical situation which is evolving continuously, nothing is certain and nobody knows what the truth may be. Still, there are some clues and we need to take them into consideration and interpret them. In China, for instance, the worst part of the crisis seems to be over, and in a sort of counter-reaction rich people are willing to spend. And they have started investing in luxury goods. This is what is called “revenge spending” however, the important thing is that Made in Italy must keep up (In China after the Coronavirus revenge spending is taking over)

That is why reprogramming advertising should be a priority for brands wishing to go back to business on time.

Which scenario do you think is the most likely to take place? Have you noticed any changes in the world of advertising? Tweet @agostinellialdo.

To find out more about the digital world, you may read my latest book entitled: “People Are Media” 

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Aldo Agostinelli