Insight

Advertising companies: Managing through market disruption and beyond

Being prepared for COVID-19 changes to customer behavior and preference.

Per Edin

Per Edin

Principal, TMT Strategy, KPMG US

+1 408-367-6080

COVID-19 has caused a rapid, unprecedented impact to the Advertising industry, creating business continuity uncertainty driven by a dramatic shift in consumption. Response planning to the COVID-19 disruption will require a multi stage approach.

  1. As companies reduce discretionary expenses in response to COVID-19 pressures, Advertising spend could potentially drop significantly consistent with previous financial downturns. Nearly 70% of surveyed companies have already indicated adjustments in advertising spend
  2. Demand and marketing spend is projected to recover in late 2020 and throughout 2021. In the two recent financial downturns, advertising spend recovered slower than other sectors, taking 4 - 7 years to reach prior spend.  Advertisers should, accordingly, prepare for sustained budgetary pressure
  3. Advertising spend of certain sectors is expected to be impacted more heavily by social distancing (e.g., Travel, Automotive, Entertainment, Health & Fitness, etc.), while advertising spend of other sectors is expected to be more resilient (e.g., Telco, OTT, Online Retail, etc.)
  4. Advertising spend is expected to be optimized across mediums, with digital mix increasing.  Digital channels provide more flexibility and targeting on average than traditional channels, and are expected to be prioritized as uncertainty remains over recovery timing and pattern
  5. To manage through the downturn, advertisers will need to drive ROI with lower budgets and streamlined MarTech.  Analytics will enable better targeting and ROI, while supporting agencies and partners will be held to higher levels of transparency 

What are the core stages and activites of response planning?

Response planning such as remote life, everything-as-a-service, digital acceleration, market consolidation, and altered risk conditions should address 3 distinct stages, that may overlap.

 

Resilience

Resilience: Rapid mobilization and stress testing

  • Safeguard employees/assets
  • Assess impact to revenue/payments
  • Protect customers and manage churn
  • Control use of cash
  • Stress test the business

Recovery

Recovery: Improve performance under new conditions

  • Adapt go-to-market to customer/partner needs & conditions
  • Take steps to reduce cost as appropriate
  • Manage working capital and debt
  • Re-prioritize capital investments
  • Evolve risk and compliance controls

New reality

New reality: Capture value from pervasive changes

  • Shift talent/capital towards growth
  • Adapt offers to new sources of demand
  • Innovate new capabilities and solutions
  • Enter adjacent markets to capture additional value
  • Take advantage of M&A opportunities