Dive Brief:

• Total media owner advertising revenues, which includes linear and digital formats, are expected to decline by 7.2% in 2020, according to a new Magna report shared with Marketing Dive that reflects the media landscape after COVID-19. A rebound is expected in the second half of 2020 and will continue into next year, with 2021 ad revenues forecast to grow 6.1% for a total of $573 billion. However, that total is still $9 billion less than the market pre-COVID-19.
• The U.S. market could be less impacted than other geographic regions, with Magna forecasting it to only shrink by 4% as political ad sales of $5 billion and the strength of digital formats help mitigate weakness elsewhere. For example, media owners' advertising revenues from linear ad sales are forecast to decline 16% in 2020, including a 22% drop for out-of-home sales.
• Digital advertising sales, which include search, video, social and banners, are expected to increase 1% to $302 billion, with a second half recovery making up for declines during the first half. The growth will be driven in part by how COVID-19 has impacted consumer habits, with increased usage of streaming video and e-commerce. Search is expected to shrink 1% this year, social media and digital ad formats to grow by 8% each and banner ads sales to drop by 11%.

Dive Insight:

Magna's numbers point to an acceleration of troubles for advertising sales volume, which is now expected to shrink by 7.2% in 2020 compared to Magna's previous estimate of a 2.8% drop. For the linear advertising landscape, which was already in trouble before the pandemic took shape, things have gotten worse as consumer digital usage has grown during lockdowns. The drop in ad sales revenues now forecast by Manga for the segment is more than the organization predicted in March, with the latest figures expecting revenues from linear ad sales to decline 16% in 2020, instead of the previously predicted 12%.

Digital remains the most solid in terms of ad revenues, as consumers spend more time online. The question is whether this will hold even as people return to physical businesses.

Despite the strength of digital formats, COVID-19 is likely to have a long-term impact on the overall advertising industry, with Magna reducing its three-year growth forecast to 3.5% per year, with the global ad market expected to be 14% smaller than previously forecast.

"Beyond the short-term V-shaped recession/recovery impact on the economy and the advertising market, the COVID crisis will have global and long-term effects on society, business models, consumption habits, mobility and media usage, all factors pointing to a more subdued economic growth and advertising spend than previously forecast for the 2022-2024 period," Vincent Letang, EVP of global market research at Magna and author of the report, said in a statement.

The presidential election later this year could help the U.S. ad business fare better than other regions of the world. However, current instability on a number of fronts makes any forecast more tenuous than usual. Unemployment is still high and if consumers don't have money to spend, then advertisers may have to cut back. Additionally, social unrest could impact what is deemed appropriate in terms of advertising.

Next year's expected rebound is based on the premise that a global economic recovery will take place, with major sports events such as the Summer Olympics and the UEFA Football Championship in Europe driving advertising budgets.