Viral, Marketing: How The Coronavirus Is Impacting The Economics Of The Ad Industry
The economic cost of Coronavirus remains uncertain, International Monetary Fund (IMF) spokesman Gerry Rice told reporters Thursday in Washington, DC — but that hasn’t stopped advertising industry insiders from speculating about the impact. On Friday China disclosed 1,716 medical workers have contracted the virus and six of them have died, according to one report.
Few want to place a number on the impact of the virus that initially broke out in Wuhan, China, but a report on Seeking Alpha puts estimates on overall impact to businesses at $280 billion in the first quarter of 2020.
Given the uncertainty, it seems the best insiders can do is make predictions and analyze numerous possibilities to see how they play out.
“We undoubtedly will see effects, but it will depend on how long this persists,” said Brian Wieser, global president of business intelligence at GroupM. “There are not a lot of signs of optimism. It’s still expanding and getting worse. As we continue to see disruption in imports out of China and exports into China, it will have an effect on the broader world.”
China represents on average between 2.5% and 3% of imports and exports for every country on earth, he said — even a country like the Netherlands. South Korea, Thailand and Australia are probably the most connected in terms of a percentage of that country’s GDP, via trade for imports and exports.
“If it disrupts the county’s supply chain, it could impact advertising budgets in that country,” Wieser said. “It depends on how long the virus continues and how broad it grows. The only thing you can say with some certainty — it’s difficult to imagine there will be no impact if things get worse.”
New products launches will be delayed, predicts Adam Simon, SVP, executive director of strategy at IPG Media Lab.
“One concern is the impact of products being delayed,” he said. “Right now Apple would be with Foxconn, their contract manufacturer, setting up product lines for the iPhones scheduled to ship in the fall. Obviously we’;re not seeing that now or anytime in the near future. The Coronavirus will have less of an impact on advertising unless it goes on for a longer period of time.”
When Omnicom Group reported fourth-quarter 2019 earnings on Thursday, the company’s Chief Financial Officer Philip Angelastro warned of softening revenue in China during the first half of 2020, due to uncertainty regarding Coronavirus.
“We, like most other people, are playing [this] day to day,” said John Wren, Omnicom Group CEO. “Our primary focus is the safety of our employees. … [In] January, which we know, the results were fine. It wasn’t until after that this became a full-blown public crisis. It depends on how long it goes on.”
The events business in China is one area during the first quarter that will likely be impacted, Wren said, because so many planned events have been cancelled. Mobile World Congress, which is held yearly in Barcelona, was canceled Thursday.
Some industry executives compare the outbreak of the Coronavirus to Severe Acute Respiratory Syndrome (SARS), which also was a Coronavirus that originated in China.
“You have to go back to the days of SARS,” said Jeff Greenfield, chief attribution officer at C3 Metrics. “That was the last time we saw anything like this, except that now our economy is more linked to China.”
He hasn’t seen companies cut advertising just yet, but as the industry nears the end of the first quarter in 2020, Greenfield believes marketers will make adjustments.
Yangtze Memory Technologies, a semiconductor memory company located in Wuhan, hasn’t seen a disruption in its fab operations, said Gaurav Gupta, Gartner senior research director, but they only account for about 1% of global production of nand memory.
“Unless the Coronavirus extends for too long there shouldn’t be a disruption in supply,” he said. “The issue may come in another two to three weeks when the trucks carrying the raw materials cannot come in or out of the city.”
On LinkedIn, Ted Gaubert, CTO at Noodle.ai, pointed to a real-time tracking dashboard and open-sourced the data on GitHub developed by John Hopkins University.
The dashboard is tracking confirmed recoveries, along with infections and deaths. As of Thursday, however, the data has not been adjusted to account for the change in infection classification on Feb. 12. The Wall Street Journal reported this week that new cases jumped after Chinese authorities changed the criteria for diagnosing the illness, raising questions about when the outbreak will peak.