The deeper and deeper we get into the economic and societal impacts of the Covid-19 pandemic, the more clear it is that the advertising industry, and the many different types of companies that advertise, are being hit hard.

Zenith, a respected media planning firm, released a new report today regarding the future of advertising expenditures worldwide. They project that total global advertising expenditures will decline just over 9% for all of 2020. In the U.S. they see the 2020 decline as being down 7%. In comparison they reported that the U.S. “great recession” impact on U.S. advertising was a negative 9.5% in 2009.

Zenith is forecasting a 5.8% gain in global advertising spend in 2021 partly because of the Summer Olympics in Tokyo which have been moved to 2021.

Earlier in the pandemic I wrote about the future for advertising expenditures, including coverage of a study of U.S. advertising executives. As I quoted Rob Norman, long-time digital advertising executive, using a long-standing sailors’ analogy, “It’s an ill wind that blows no one any good.”

Digital advertising continues to be a somewhat, though dim, bright spot, in the advertising eco-system currently. The growth of digital advertising is being affected by the pandemic, but overall digital advertising continues its march forward. Zenith said in their release of the report “that digital advertising will account for 51.0% of global ad spend this year.”

This is the first time that digital ad spend has been a majority of total ad spend worldwide. And it is going to continue to grow. “The coronavirus forced brands to embrace digital advertising even faster than expected and made digital transformation of businesses more urgent than ever,” said Jonathan Barnard, Zenith’s head of forecasting.

Zenith pointed out that the traditional media outlets like TV and radio have suffered less than other traditional advertising platforms like print and magazine advertising, both of which are predicted to be down 20% or more this year.

“In past downturns, ad revenue is quick to fall and slow to recover relative to GDP. And since in this case, the economy follows the uncertain trajectory of the pandemic, no one has good visibility into the timing and depth of this recession. What is clear from the past is that brands that maintain or increase their share of voice during the tough times earn lasting market share gains in the recovery – gains that often persist for 5 years or more beyond the crisis,” said Scott McDonald, President and CEO of the Advertising Research Foundation based in New York, and a well-known research expert who has worked at a number of prominent media companies over the years.

Another well-known advertising expert and long-time advertising technology executive, Dave Morgan, CEO of Simulmedia, looked into his crystal ball and saw a continued decline in traditional U.S. television advertising in the years ahead, with growth coming from the Connected TV space, “I think that U.S. TV ad spend this year will be down in the 15% range from last year. I think that 2021 will be down just slightly to 2019, and then decline 5% per year over the subsequent couple of years. Advanced TV ad spend – data driven linear, addressable and CTV – will grow 30% this year and 30-50% per year after that for the next five years,” Morgan concluded.

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Verizon VZ +0.3% announced earlier today in their Q. 2 earnings call with analysts and shareholders, that second-quarter revenue fell 5 percent to $30.4 billion. According to Verizon, this was largely because of “declines in wireless equipment revenue in the consumer and business segments, primarily due to limited in-store engagement and the impact of COVID-19 on customer behavior.” Earnings were up in Q.2 from $3.9 billion last year to $4.7 billion for Q. 2 this year.

Verizon said that they had net cancellations of 81,000 pay TV subscribers in the second quarter, which was an accelerating loss in comparison to the same quarter a year ago. In the first quarter of this year Verizon reported a loss of 84,000 pay TV consumers, almost exactly the same amount as this current quarter. Verizon, like other cable and satellite TV providers, have experienced cord-cutting substantially over the last few years and the cord-cutting behavior is still growing.

I conducted a national online study on cord-cutting in June of this year and the data shows even more households intending to cut their pay TV offerings. Many of the cord-cutters have, or will soon buy, Subscription Video On Demand (SVOD) services, like Netflix NFLX +0.6% and Disney Plus, but the traditional full-package cable and satellite providers are suffering from continuing consumer cancellations. Most recently, I saw 8% of pay TV subscribers indicate that they were “very likely” to cut the cord in the U.S. in the next 12 months. In the coveted demographic of 18 to 34 year old consumers, 17% percent said they were very likely to cut the cord which is twice the rate of the U.S. general population. It is not surprising that the 55 and older population are the least likely to say they will cut the cord.

Verizon, and their competitors in the cable and satellite content delivery service business, have suffered for many quarters with consumer cancellations and reductions in their pay TV service. Much of this has been driven by the attractive offerings from the SVOD services, as well as the Free Advertising-supported VOD services, like Pluto and Tubi.

According to a recent report from Goldman Sachs’ lead media analyst Brett Feldman, Cord-cutting is not new, but it is materially accelerating. At an industry level, pay-TV subscribers have declined on a year over year basis every quarter for the last eight years from a peak of 101 million in 1Q12 to 89 million in 1Q20. This represents an aggregate decline of 11% in household penetration (from 88% to 75%) during this period. While this implies modest annual subscriber declines of only 1-2%, we note that over 50% of these subscriber losses have occurred during the last 12 months, with 1Q20 being the worst-ever quarter of cord-cutting. We believe these pressures on the overall pay-TV market are intensifying.”

Verizon reported that 10,000 new net customers were acquired for their internet access service in Q. 2, which was a smaller growth rate than the 59,000 new internet subscribers signed-up in Q. 1. To a large extent the future success of cable/satellite providers rests with their internet access offerings and related services, as well as “skinny bundles,” which are a smaller selection of channels than the traditional pay TV packages.

Verizon Media, which includes Yahoo and AOL, had revenues of $1.4 billion this quarter, almost 25% below Q. 2 last year. These internet units are largely supported by advertising, and many advertisers have cut back or eliminated advertising expendituresdue to the Covid-19 pandemic.

Even with more consumers at home consuming more TV and internet content, the traditional cable and satellite TV companies have major challenges with their current pay TV subscription offerings.

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Podcasts have been another source of fun, information, and something to do during our extensive time at home due to the Covid-19 pandemic. Recent data from a national online survey I conducted in June reported that 20% of American adults were listening to podcasts at least once a week or more, including those who listened every day (7%).

The Interactive Advertising Bureau (IAB), the leading organization for promoting digital advertising, and Price Waterhouse Coopers (PwC), the international consulting firm, recently released their annual study, U.S. Podcast Advertising Revenue Study, for 2020. The study predicts that podcast advertising revenue will increase by almost 15%, “nearing $1 billion in 2020,” according to the IAB and PwC.

In many cases advertising has been hard hit by the economic impacts of the pandemic and stay-at-home orders. For many industries—such as travel, hospitality, retail and others—the result of the current economic upheaval has been huge. The recent study on podcast advertising revenue documents an example of where advertising has been more robust. In general, digital advertising is being less negatively impacted than other forms of advertising during the pandemic.

The same partners in this study issued a similar study in 2019 and past years. In 2019 they estimated that podcast-related advertising revenue was $708 million and that in 2018 it was $479 million. The rates of increase are coming down as the total advertising revenue scales up. Nonetheless, it is clear that podcasts have become an important platform for advertising.

It is often said in the media world that advertising revenue follows eyeballs. In this case it is more that the advertising dollars are following the ears of consumers.

Some of the advertising categories that were strong on podcasting, according to the PwC and IAB report, include consumer brands, financial services, health, wellness, and home appliances. The top type of content on podcasts was news at 22%, comedy at 17%, and society/culture at 13%. It is interesting to note the breadth of podcast content on the top grossing podcasts, such as sports content and commentary from The Joe Rogan Experience or the Bill Simmons Podcast, to true crime podcasts like My Favorite Murder.

There are also other revenue streams growing in the podcasting world, including content licensing and consumer payments. Hernan Lopez, founder and CEO of Wondery, a major podcast company, said looking at the future, “Podcast ad revenues will grow faster than pretty much any other form of media in 2020; and ad revenue is only part of the story. For Wondery, licensing and consumer revenue will represent well over 20% of the total this year.”

In fact, 72% of podcast consumers over the age of 55+ believe in the mixed-business model of paid podcasts and free podcasts supported by advertising. Only 56% of podcast consumers in the 18-to-34 range believed in the mixed model, and 34% of the younger age group felt all podcasts should be free.

The podcast world is growing with major acquisitions, expanded marketing efforts, more distribution outlets, and a number of venture backed companies competing alongside huge companies like Apple and Spotify. For a thoughtful analysis of the larger ecosystem around podcasting I recommendthis article from fellow contributor Jay Kapoor. And if you are trying to find something new in the podcasting realm to listen to, Spotify has launched a series of charts in various countries showing the most popular podcasts, as well as the rising, up-and-coming podcasts.

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