Dive Brief:
- Search advertising spending in the U.S. could decline anywhere between 8.7% and 14.8% in H1 2020, according to a revised forecast from eMarketer that takes into account the impact of the coronavirus pandemic. Those declines represent $6 billion to $8 billion less spent on search than the researcher previously projected.
- In Q2 alone, search ad spending could plunge between 20.2% to 29.4% year-over-year, as marketers in categories like travel and media and entertainment tighten budgets. Most advertisers are expected to pull back search spending in some form, though keyword bidding will prevent pricing drops from being as steep in search as they are in display advertising.
- Search is typically well-suited to weather a recession, eMarketer said, but its position at the lower end of the funnel could prove a pain point, as driving conversions like in-store traffic is difficult during the pandemic. Search campaigns can also be paused or pulled at any time because the channel does not require upfront commitments, making the hit more immediate.
Dive Insight:
Search drives a considerable portion of the digital economy and a large share of marketing budgets, so a heavy blow to the sector offers a gloomy signal for the rest of the industry. In its previous forecast completed on March 6, eMarketer expected search ad spending would grow 14.4% in 2020, but now those figures have been upended. The coronavirus pandemic has quickly pushed the U.S. toward a recession, but the particulars of the public health crisis, including mass retail closures and the prevention of travel, are disrupting even predictably sturdy, performance-led channels.
Uncertainty around how to advertise during the pandemic and growing operational pressures have led some companies to freeze their marketing entirely. Coca-Cola last month suspended all marketing in the U.K. through Q2. Home-rental startup Airbnb, operating in one of the categories hardest hit by the coronavirus, reportedly halted all marketing spending as well as it looks to save $800 million. Travel accounted for 8.4% of total digital advertising spend in the U.S. in 2019, making it the sixth-largest vertical overall, per previous eMarketer estimates.
Yet, even companies receiving something of a windfall are adjusting their approach to search. Amazon, for example, has reportedly seriously cut back on Google search ads to avoid driving extra demand as it experiences product shortages and grapples with supply chain and warehouse issues, eMarketer said. E-commerce comprises a significant portion of search spending, according to the report, and others could be following Amazon's lead.
While tech giants are better-primed to endure the pandemic, the hits to business will be severe. Google, which runs the largest search engine by a wide margin, could see $28.6 billion in lost revenue in 2020 due to the coronavirus, according to a recent estimate from Cowen & Co.
