News publishers expect double-digit declines in advertising through year’s end as a result of the coronavirus impact, according to an informal survey of INMA member media companies late last week. Meanwhile, publishers are getting a handle on advertising categories impacted, trying to re-connect with advertisers, seeing challenges with sales reps, and eyeing revenue diversification.
Arc of the advertising crisis
Twenty news publishers surveyed internationally last week by INMA expect a median of a:
- 16% decline in advertising sales in the first quarter, with declines concentrated in March.
- 30% decline in the second quarter.
- 20% decline in the third quarter.
- 15% decline in the fourth quarter.
For all of 2020, surveyed publishers expect a median 23% advertising sales decline — factoring in the impact of COVID-19.
To be clear, publishers didn’t enter 2020 with great optimism for advertising. According to the informal INMA survey, the median advertising budget for the whole year was a 2% decline. The quarterly median budgets mostly stood true, too: 1% in the first quarter, -5% in the second quarter, -2% in the third quarter, and -2% in the fourth quarter.
As for best guesses for 2021, the median answer was “too early to tell,” though an 8% decline was the median answer among nine publishers willing to venture a guess. By comparison, that’s about four times the decline from the 2020 median budget of a 2% decline.
This roughly tracks on the low end of what we are anecdotally hearing from INMA members outside of this survey: 30% to 55% advertising decline through June 30.
So generally, expect a ferocious impact from shutdowns to impact the second quarter of 2020 with close to a return to normalcy by 2021.
Budget impacts are what will matter in the days ahead
Publishers are re-thinking their forecasts and adjusting their cost structures to the new reality. You can overlay those general expectations with specifics for each publisher:
- What percentage of revenue does a publisher garner from advertising? Publishers in South Asia, Latin America, and North America remain far more dependent on advertising in their revenue mix than publishers in Europe and Asia/Pacific. Internationally in the INMA survey, the median reliance on advertising was 55%, but the range of reliance was between 33% and 90%.
- What is the COVID-19 impact on your core advertising base? An Italian publisher, for example, will experience a greater impact than, say, a Russian publisher (at least as of today). This is as much about government responses country to country than coronavirus impact.
- What types of advertising does a publisher rely on? All advertising will be impacted, but the heavier the reliance on local advertising, the bigger the repercussions. National advertising is seeing message changes because of the crisis, while local advertising is being zeroed out because of lockdowns.
- What percentage of advertising revenue comes from print vs. digital? Again, all advertising is impacted, but the heavier reliance on print, the bigger impact.
What categories are getting negatively impacted worldwide?
According to INMA survey respondents, the most hit internationally are real estate, cars, events, retail, restaurants, travel, hospitality, tourism, jobs, and culture.
Somewhat positively impacted are government and finance (due to increased public messaging), anything in-home, and e-commerce. One respondent pointed to the 3 Gs of positive impact: government, guns, and grocery. Yet INMA hears grocery stores are so overwhelmed by traffic that they’ve cut advertising altogether in some markets.
We found some nuances in the responses that should be questioned on your end: Big-ticket items like real estate and cars will take longer to recover than, say, retail.
One INMA member publisher explained their situation: “Advertising and inserts have already been cancelled. Functions, weddings, agricultural shows, expos, sporting fixtures are all suspended or cancelled and will not be generating advertising. Lack of goods to sell, people staying in, and not shopping locally, or doing out are impacting the local economy.”
Another publisher suggested it’s too early for predictions, as publishers and markets are in chaotic states: “At this point trying to build business around a forecast is not the best approach. Especially as brands themselves are in a state of frenzy. No one can forecast, and those who say they can are not being honest. Instead, our focus is on maintaining effectiveness and a revenue stream. We are supporting clients in need, building new audience profiles, and advising our customer base on how best to use our channels at this unprecedented time. Perhaps as the weeks roll on, forecasting will be more scientific. But today is not that day.”
Perhaps that’s true. Consider this informal INMA survey a “first draft” of expectations for the year ahead. No doubt there will be many revisions as the COVID-19 story — and its ripple economic impact — unfolds in the weeks and months ahead.
What are publishers doing specifically to keep or expand advertising contracts?
The common themes in the responses were discounts, bundles, time extensions, and special packages. One publisher had a more concrete plan: “Bundle deals across digital. Small investments from restaurants to keep them going for delivery business. Focus on key categories with packages relevant to their requirements. In short, even more bespoke based on the industry needs.”
What have publishers been surprised by in their advertisers’ reaction to the crisis?
Mostly, everyone remains in a state of shock and they are in the process of formulating strategies and executing plans. There is a lot of innovation happening: restaurants reinventing themselves in takeout, curbside, and delivery wrappers. Livestreaming “in-person experiences” such as church services, mini-concerts, and more. On the negative side, some are simply withdrawing paid advertising and using Facebook while others are closing altogether. Some report a slowness among local retailers to embrace online shopping.
One publisher nailed it in terms of messaging with advertisers: “How strong our relationships are with clients actually and how many want to keep investing, not just for their business because they want us to keep in business and maintain our role in delivering factual information. It is a collective goal to get through this.” Tying back the advertiser relationship not only to ROI but to their support for real news in a crisis can be an importance nuance.
The challenge with sales reps
All publishers described a chaotic situation whereby all communications are moving virtual, everyone is working from home for the first time, and advertisers are re-evaluating everything.
Yet there seemed to be an underlying frustration with their sales forces. One publisher, talking about the re-deployment of reps to different categories, lamented that because sales reps are focused on commissions, they are spending more time on cancelled orders than hunting for new leaders. Still another was more blunt: “Sales reps are mainly young and greedy and lack customer empathy and an understanding of the virus implications to business and their ongoing employment.”
Will your response be more about selling advertising or diversifying revenue streams?
We were surprised that 60% said revenue diversification was more emphasised than intensifying advertising sales.
But whether a revenue diversification idea requires a long runway or a short runway was not specifically asked, so the answers had a wide range. Many said digital subscriptions, for example, but if that means starting or accelerating then that’s a one- to two-year ramp-up.
Among the revenue diversification ideas that stood out in the survey were syndication, licensing, new products and services (i.e., insurance), digital/video, sponsored columns on home advice, online shopping lists for smaller players, directory listings for useful services, working with government on advertising, collectibles, podcasts, and events.
The INMA survey shows an advertising revenue forecast arc of collapse through the second quarter, the beginnings of recovery in the third and fourth quarters, and some semblance of normalcy in 2021. Yet let’s face it: Advertising was not an optimistic sector in the best of times.
How this impacts each publisher depends on pre-existing business model reliance on advertising, local categories, and print. Obviously, it depends on the COVID-19 impact and each country’s degree of lockdown.
Categories most hit are real estate, cars, events, retail, restaurants, travel, hospitality, tourism, jobs, and culture.
Companies that spent the past decade diversifying away from advertising revenue and print and toward reader revenue and digital are less impacted than others in today’s crisis. Publishers that didn’t make those moves are rapidly considering fast tracks in these directions today.