Ad revenues are projected to contract by $20 billion this year alone, with no clear insight into the lasting impact of COVID-19 on the $690 billion global ad industry (source: eMarketer).
Setting aside the human costs of the pandemic, businesses in general and, advertisers in particular, face some startling decisions as the world implements various forms of social distancing in an effort to stem the spread of the virus.
In the U.S. alone, the NBA and NHL have suspended their seasons, the NCAA Basketball Tournament has been cancelled, Major League Baseball has delayed the start of its regular season and The Master’s Golf Tournament has been postponed. We reference sports for one simple reason, the level of 2020 marketing sponsorships. Advertising and promotional dollars invested by advertisers in these properties alone was estimated by Kantar Media to be $2 billion.
Undoubtedly, advertisers will be seeking answers to the following questions as they begin their contingency planning efforts this week:
- Of the marketing and advertising commitments we’ve made, what can be cancelled outright?
- For those commitments that we’ve made in events, sponsorships or programs that have been suspended or postponed, can we recoup the impacted pro-rated investment amounts?
- How will media owners/sellers address upfront or volume-based commitments when it comes to media valuations in the context of advertiser rebates and or cancellations?
- If we pull-back on our marketing and advertising activities, what will the impact be on our annual statement of work, agency deliverables and associated fees?
Complicating this assessment for advertisers is the fact that so much of the industry operates on an estimated billing basis. Unfortunately, the advertiser’s line of sight is limited as to what percentage of estimated and pre-paid costs have been spent versus that which remains in the hands of their agents and intermediaries.
It would clearly be ideal to make go-forward decisions with a solid financial understanding when it comes to exactly how much budget can be pulled back and or quickly re-allocated. The risk of a bad decision in this area can often outweigh the costs of a delayed response. To assist in this area, marketers may want to consider conducting billing and agency fee reconciliations to help clarify where on the annual spending continuum they’re at when determining how best to approach potential budgetary reallocation decisions.
The time and cost required to conduct mid-year status checks and financial reconciliation work is nominal versus the inherent risk of making decisions without a complete picture. Importantly, engaging an independent firm to undertake these endeavors allows the marketing team members and their agency partners to focus their collective efforts on reviewing plan commitments, escape clauses and assessing resource re-allocation decisions.
Prudent, measured action in this scenario is a win-win for all parties.
“Prudence is foresight and far-sightedness. It’s the ability to make immediate decisions on the basis of their longer-range effects.” ~ John Ortberg