When Will Ad Revenues Recover?
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Read the complete transcript of this video:
Eric Schumacher-Rasmussen: We all know that advertising in general took a dive when the COVID pandemic hit, not because of a lack of inventory necessarily, because viewing skyrocketed, but because brands were pulling back on their own spending. What's your sense of where the advertising market is headed now, are those dollars going to come back? Are they coming back? And what's the future look like?
Sara Fischer: Well, advertising generally tends to grow at the same rate as the GDP. If you want to understand how the ad market's going to grow, you have to talk to an economist. If you talk to most advertising-buying agencies--the big global ones like Magna or Zenith, those are the ones that we rely on for most of our predictions. And some of the big networks, they say that they expect a pretty much full recovery in 2021. However, a lot of that recovery is going to be biased towards digital. Digital will continue to grow. Linear television, radio, and print are expected to continue to decline. The only type of traditional media that's going to continue to grow is out of home. And that's just, quite frankly, because a lot of out-of-home screens are going digital. In terms of what that means for television and theatrical cinema there is a lot of cinema advertising, and that's what this panel is talking about.
You're going to see us stark divide between recovery and local and national television in the U.S. National television is expected to continue to recover in 2021. And a large part of that is because the Olympics have been shifted to 2021. We're also going to see sports mostly come back, and that's a huge boost to national television advertising. Local TV is going to struggle, and that's because it's going to be an odd year. We won't have many federal elections to boost political advertising, and that's typical. We always have ups and downs for local, but it's going to be really stark.
The other reason it's going to be stark is because while most advertising verticals are expected to come back and recover, there are two that are not: autos and retail. Retail, we know, is not going to recover as much one because we still expect a lot of footprints to be closed until there's a widely distributed vaccine.
Auto is because in a time of economic struggle, big-ticket items take a nose-dive--things like timeshares, things like cars. And that's going to have a tremendous effect on the local ad market. That matters for OTT and all these streaming players because if you are a streaming player, like a Hulu that doesn't typically do too much geo-targeted, advanced TV advertising, it's more personalized and customized to interests. You'll probably be okay, but there are some OTT ad platforms that do think about more geo-targeted-by-locality advertising. And they're going to struggle. Local TV ads are going to be a big, big problem in 2021. And then also, just a reminder, cinema advertising is going to be a mess too. There's a lot of ads that run before you see a movie in a cinema, and with cinemas still operating at 40-50% capacity, we're going to expect some of that advertising to go down.
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