The Impact of COVID-19 on the Advertising Industry
Today, as the government and health workers are fighting passionately to save the economy and as many lives as possible during the coronavirus pandemic, businesses are equally fighting to stay afloat. Marketers and advertising firms fear that if the virus is not brought under control in the nearest future, a lot of businesses may drown. Questions are being asked, and at the core of all concerns is the need to brace for impact and adopt methods to weather the storm, regardless of the sector or industry your business operates in.
Particularly, for the advertising industry, the concerns are really worrisome. According to an analysis by SFWP Experts, most ad companies in the US have reduced their ad spending forecast by 692 billion in 2020. Obviously, traditional out-of-home advertising models are not as reliable in these times as they used to be before COVID-19. And companies are now dealing with a major shift in the industry; a shift that redefines their modus operandi. In other words, ad spends will be focused on models that will effectively reach the consumers. This is one reason why major online stores reduced Google and Facebook ads spend within the past months. Nielsen’s most recent consumer research shows that there’s been a drastic change in consumer behavior during the lockdown – spanning across almost all of the retail industry – and may become permanent. For instance, digital media consumption is increasing because consumers are spending more time at home; grocery stores have seen a huge spike in online orders because it’s the safest way to shop. This pattern though unusual will effectively influence how ad agencies will target their audience henceforth.
Billboards were already overrated
The US has the most vibrant advertising market in the world. By year end 2019, the ad spends by US companies could hit $200 billion. It comes as an icing on the cake of an industry that has seen growth in more than a decade. While the lion’s share of the total ad spends in the US could shift to online platforms going forward, legacy systems are still holding strong. Notably, traditional media like billboards are facing dire times ahead. It is because much of the attention of the target audience is on digital platforms.
Despite this reality, billboards are still in use. As of August 2019, there were just over 342,000 billboards on display on the side of US highways. However, billboard pricing is contingent on the location. Billboard pricing in US is extremely high. For instance, a single display in Boston costs between $11,000 and $23,000 for four weeks. In a medium city like San Diego, one needs at least $15,000 for a four-week display. However, in a small town like Milwaukee, just $4,000 is enough to pay for a billboard display for four weeks.
From the preceding, billboard prices punitive for businesses in large cities. Unfortunately, the correlation of the billboard pricing with audience targeting is low. In the US, many billboards appear on the sides of highways and huge buildings. Notably, the ads placed on the billboards target drivers and passengers in cars and trains. Unfortunately, many, if not all, drivers on busy highways would instead focus on the road than read a billboard. Otherwise, the inattention to the road might result in many accidents. On the other hand, many passengers on trains and cars focus on touching and swiping at their smartphones. In a word, the majority of the target audience is less attentive to billboards. The billboard pricing does not correlate with the brand recall.
Further, there is no way advertisers can say with much confidence that they know who will use a particular highway for four weeks. Therefore, it is merely a matter of faith, which does not convert to engagement for the message. Unlike other advertising techniques like ambient marketing, billboards cannot reach a specific audience. Instead, it relies on the generalization that, in the end, produces scant impressions.
Billboard pricing needs to be re-calculated
By the end of the crisis, billboard companies may not only be counting their losses in billions of dollars, many of their customers might have moved on to embrace other more pocket-friendly advertising alternatives. These alternatives are indoor-directed, and have proven to be equally effective, perhaps even more effective than the conventional outdoor methods. Aside from the fact that they are more expensive, it is difficult to track engagement for out-of-home ads. In fact, small businesses face more challenges trying to get a marketing space in the highly competitive ad industry.
The New York Times aptly described the effect of the pandemic on outdoor advertising as a ‘seismic shock’. Even Coca-Cola is among the companies that have limited their ad campaigns during the coronavirus crisis, the New York Times report says. Long story cut short; a lot of companies are hitting the brakes on billboard ads and other forms of OOH advertising, and are also pulling back until the coast clears.
The results expected from billboards usually will depend on the size of the audience viewing the displays each day. Out-of-home ad companies, especially those with a significant presence at major arenas like Times Square, will, therefore, need to re-calculate estimated traffic to capture current economic realities. Billboard pricing will need to be reviewed. This will serve as an indication to estimated ROI and may also provide insights to more strategic locations that they could migrate to or if they’d be better off by taking the wait-and-see position before crawling of their shells. Although re-calculating the numbers of impressions seem almost unrealistic because even when things were normal, a good percentage of people see billboards without actually taking in the contents, it still is a smart move to make because ad buyers will want to ensure that there is a measurable return on their investment.