U.S. And China Could Face Steep Cuts To Advertising Spending In 2020, Analysts Say

Topline: The coronavirus outbreak will take a toll on the amount companies are willing to spend on media advertising in China this year, according to a new report from eMarketer, which could portend what is in store for the advertising market in the United States.

• Even as streaming has boomed in China, economic uncertainty exacerbated by the coronavirus means advertising revenue will grow at a slower rate this year than initially expected, says eMarketer analyst Jasmine Enberg.
• The firm lowered its 2020 estimate for media ad spend in China from $121.1 billion to $113.7 billion.
• Ad spend will grow at 8.4% in 2020, the lowest rate since 2011.
• The virus is not the sole reason for decline, as the Chinese economy was already showing signs of weakening, says Enberg.
• The U.S. could see a dip in ad spend as well, according to a note by MoffettNathanson analyst Michael Nathanson, with a potential loss of nearly $26 billion this year.
• Digital platforms could experience the greatest loss, potentially seeing a $11 billion decrease in ad revenue.
• On March 2, New York Times CEO Mark Thompson said the outlet was already seeing a slowdown in advertising revenue due to concern about the virus, even with strong subscription numbers.

What to watch for: How damaging the dip in ad spend could be for the television industry, as well. Nathanson projects a possible $8 billion loss in TV ad spending, and things so far are looking rough. For the time being, networks cannot rely on live sports for viewers and ad dollars: Major League Baseball has delayed Opening Day until mid-May at the earliest and there is increasing pressure to postpone the Tokyo Olympics. The outbreak has even forced the upfronts, the elaborate presentations in May during which networks reveal their new lineups to advertisers (last year’s brought in north of $20 billion in ad spend), to go remote.

What we don’t know: If the U.S. advertising industry will weather the storm. “With most ad spending happening towards the end of the year, we are cautiously optimistic that there could be a turnaround,” says Enberg.