Dive Brief:

• Digital video ad spending in the U.S. could drop as much as 5.2% year-over-year in the first half of 2020 as the coronavirus continues to slam marketing budgets, a revised forecast from eMarketer said.
• The category still has the potential to post gains of as much as 7.8%. However, any growth would be modest compared to eMarketer's pre-pandemic projections, coming in around $3 billion to $5 billion less than initially expected.
• The trend is a comedown from Q1, when video advertisers upped their spending between 10.5% and 17%. EMarketer now forecasts Q2 video ad spending could decline anywhere between 1.3% to 21% from the year-ago period.

Dive Insight:

EMarketer's forecast signals that, while digital video may take a considerable hit in a worst-case scenario for Q2, it could also weather the volatility brought on by the coronavirus better than other channels. The wide gulf in expectations for the period — where ad spending could drop anywhere between 1.3% and 21%​ — ​suggests the situation is up in the air, and that digital video's overall health will depend on marketers continuing to push new efforts as the pandemic stretches on.

Even as brands in categories like travel and hospitality pull back hard on ad spending, others are launching campaigns to reassure consumers and raise awareness for their pandemic relief efforts. Many are relying on video to get their message across, and have received favorable marks from consumers in addressing the coronavirus.

Focusing on brand building now — during a sharp economic downturn and period of uncertainty — can establish equity with consumers that will last once the pandemic passes and businesses start to resume normal operations. With traditional brand-building channels, such as out-of-home and radio, experiencing disruptions as people stay sheltered in place, digital video might serve as an alternative method, according to eMarketer.

The digital video segment also has the benefit of riding a long-running boom. Consumption of streaming and digital video, including from ad-supported services, is only on the rise amid mass lockdowns, but a combination of increased inventories and decreased advertiser demand has resulted in a drop in ad prices, eMarketer Principal Analyst Nicole Perrin explained in the report.

"However, video is more insulated than other formats because it has long been in greater demand," Perrin wrote. "Falling prices due to reduced overall demand will make video placements even more attractive compared to static banner ads. The qualities that make video stand out to advertisers — sound and motion — are especially appealing for branding-oriented efforts, which many companies are now focused on."

As categories with a heavy retail or experiential focus turn the taps off, some newer players are also ramping up their marketing activity. Communication software companies like Zoom and GoTo Meeting spent a collective $45 million on ads in Q1 2020, triple what the category spent in any quarter last year, a recent MediaRadar analysis found. The sharp uptick comes as these firms, typically targeted at enterprise clients, see increased consumer adoption with people putting on virtual happy hours and video hangouts to stay connected.

Meanwhile, lower-funnel channels are projected to take a more serious blow from the coronavirus. EMarketer now sees U.S. search advertising declining between 8.7% and 14.8% in H1 2020, and up to 29.4% in Q2 alone. Display ad spending could drop between 19.4% and 38.4% in Q2, the researcher said.