Publicis CEO says ad spending fallout from coronavirus could dwarf ’08 crisis

Dive Brief:

• Publicis Groupe CEO Arthur Sadoun cautioned that the coronavirus pandemic will lead to a more severe pullback in ad spending than the industry has experienced before, according to The Wall Street Journal. Sadoun described the current crisis as “unprecedented by its magnitude, complexity and length​.”
• Sadoun said that measuring the situation against the Great Recession, which at its worst point led to a 10% drop in ad spending, does not capture the scale of the problem, noting that there is “no comparison” and the pandemic reverberations will be “steeper.”
• The executive’s comments came as Publicis released its Q1 results early, reporting an organic growth decline of 2.9% to $2.7 billion. Those figures were in-line with pre-pandemic projections. The world’s third-largest ad holding group also pulled its 2020 guidance and enacted salary cuts, including for Sadoun and executive chairman of the board Maurice Lévy, per AdExchanger.

Dive Insight:

Sadoun’s comments offer a bleak outlook for the ad industry, one that indicates the worst of the pandemic fallout is yet to come and that the impact on spending will be more severe than any period in modern memory. As noted in the Journal, 2020 was previously expected to provide a boost to marketers eager to capitalize on events like the Olympics, but any optimism has been sidelined in the wake of mass postponements and cancellations.

Anxiety is particularly high for marketers and their agency partners since marketing departments are often among the first to experience cuts in a downturn. Sixty five percent of CMOs are already steeling themselves for reduced budgets, according to a recent Gartner survey.

Agencies could have it worse. The category for years has struggled with returning to growth and achieving digital transformation. Publicis, before pulling its outlook, expected growth between -2% and 1% in 2020 — hardly a sunny forecast, but one that falls in line with general trends among the major ad holding groups.

Such problems will likely be compounded as the economic slowdown continues and more brands eye shifting work in-house as a cost-efficiency play. The Association of National Advertisers earlier this month reported that 55% of its member marketers believe in-house agencies are the most important partner for producing new creative assets during the pandemic, while 42% cited other forms of internal teams.

A clearer picture of the economic consequences of the pandemic is starting to emerge as shelter-in-place orders continue and non-essential businesses remain closed. The International Monetary Fund on Tuesday said that the global economy will this year likely be roiled by the worst financial crisis since the Great Depression, CNBC reported. The group expects the global economy will contract 3% in 2020 amid what it is calling the “Great Lockdown,” with a potential partial recovery in 2021.