Wednesday, December 1, 2021

    How the US government’s $2 trillion stimulus package could impact advertising and media

    How the US government’s $2 trillion stimulus package could impact advertising and media

    In an attempt to combat a coronavirus-induced recession, the US Senate passed a record-setting $3 trillion stimulus package on Wednesday, according to Politico.

    Real US GDP Growth Versus US Advertising Growth

    Business Insider Intelligence

    Among other provisions, the congressional measure includes attempts to boost consumer spending with rebate payments of $1200 ($2400 for couples) for all US residents with adjusted gross incomes up to $75,000 ($150,000 for couples), as well as an expansion of unemployment benefits with an additional $600 per week for up to four months. And as an attempt to reduce unemployment growth and maintain business investment, the package also includes a $500 billion loan program for impacted industries.

    We don’t expect the stimulus package to mitigate the downward pressure on consumer spending or marketing budgets — that means a major reduction in ad spending over the next several months is all but certain: 

    • The direct payments are unlikely to meaningfully change consumer behavior. The stimulus checks are a one-time payment that is not expected to arrive for several weeks, despite many consumers already suffering the consequences of a recession: Last week, weekly jobless claims reached their highest point since the Department of Labor started tracking in 1967. And even when they arrive, consumers plan to use them almost exclusively for essential payments —just 2% of respondents to a YouGov poll conducted earlier this week said that they would spend such payments on non-essential goods, like electronics or books. And in high cost-of-living areas like San Francisco — where the average price of a one-bedroom exceeds $1,200 — this one-time payment will likely have a negligible effect on financial decision-making.
    • And there’s no gurantee that businesses participating in the loan program will allocate any of the funds to marketing budgets. The immediate concerns for most larger companies will likely be split between paying off recently accumulated debts and keeping employees on the payroll, not expanding marketing efforts. As a case in point, 69% of ad execs anticipated a major impact on Q2 as a result of ad spending cuts, according to an Advertising Perceptions poll conducted last week. And the assistance provided to small business will likely have minimal effects as well, according to eMarketer principal analyst Nicole Perrin, who said “The small-business assistance will likely not be enough to keep that sector of the economy afloat and spending on advertising — especially since, in many cases, the businesses remain shuttered and unable to operate. And the downstream effects on consumers, millions of whom already filed for unemployment, will remain.”
    • As a result, the media and advertising industry is still likely to undergo a significant contraction over the next two quarters, as the recession seems likely to get worse from here. Last week, eMarketer lowered its global ad spend projection for 2020 by approximately 3%and that is yet to account for the loss of the Summer Olympics and other major sports league cancellations. And for some perspective, at the height of the last recession, US total media advertising declined 17.5% according to eMarketer estimates. Out-of-home ad spending will likely continue to be the hardest hit, consumers are already avoiding large public places — and leaving their homes in general. And even digital channels like social and search, which have historically been a refuge for advertisers during turbulent economic periods, are seeing slowdowns in ad revenue — both Twitter and Facebook have recently downgraded their expectations for ad revenue over the next quarter. 

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