With the coming U.S. presidential election and Summer Olympics, 2020 was expected to be a good year for advertising. Then came the coronavirus.
One of the world’s largest ad buyers plans to lower its forecast for global advertising spending, which is often among some of the first things cut by companies looking for short-term fixes.
As recently as December, Zenith, a
Publicis Groupe SA
ad-buying firm, had expected global ad spending to rise 4.3% to $666 billion this year. But on Monday, Jonathan Barnard, Zenith’s head of forecasting, said that number would be revised lower in the coming weeks because of the virus.
“Obviously, we weren’t expecting anything like this when we said 4.3%,” Mr. Barnard said.
The New York Times Co.
said it was already experiencing an impact: It cut its first-quarter advertising-revenue forecast on Monday.
“We are seeing a slowdown in international and domestic advertising bookings, which we associate with uncertainty and anxiety about the virus,” New York Times Chief Executive Mark Thompson said in a regulatory filing.
The Times now expects total ad revenue to decline in the mid-teens in percentage terms this quarter, with digital advertising revenue expected to shrink 10%. It previously had been anticipating total ad revenue to drop about 10%, with digital falling in the mid-single digits.
The warning from the Times suggests that companies are beginning to rein in spending because of worries over how the spread of the coronavirus will affect consumer behavior.
A spokesman for The Wall Street Journal declined to comment. A spokeswoman for the Washington Post declined to comment.
Media companies with large exposure to travel and retail ad dollars will likely take the brunt of the hit, said Michael Nathanson, an analyst at MoffettNathanson.
Some travel companies, such as airlines and cruise lines in the U.S., have already begun to cut back on spending, according to an ad buyer.
Digital advertising might be more vulnerable because digital ad spending can be canceled more easily than other media. Outdoor media companies also might be hurt, because of a decline in foot traffic in many places.
Television tends to be more resilient because campaigns are planned and booked further in advance, according to ad buyers and analysts. Many companies have already made yearlong upfront ad commitments to TV networks for this year, and only some of those commitments can be canceled.
Several TV-network ad-sales executives said they haven’t seen any cancelations, but are planning for cuts.
Media and advertising companies don’t just rely on ad spending for growth: Some have fairly large events businesses, which could be vulnerable as companies begin to place travel restrictions on employees.
Ad giant
Interpublic Group
of Cos. has experienced some pullback on its events business, said Michael Roth, Interpublic’s chief executive, during the Morgan Stanley Technology, Media and Telecom Conference, on Monday. Still, Mr. Roth said he doesn’t see the fallout from the virus having a material impact on the company’s overall business.
Other revenue streams are less likely to be affected by virus concerns. The New York Times said Monday it has seen “no adverse impact on subscription growth, or on the expected rise in subscription revenue.”
On Monday, MoffettNathanson lowered its target prices for advertising firms such as
WPP
PLC,
Omnicom Group Inc.
and Interpublic because of virus concerns.
“Given concerns around coronavirus and potential global economic weakness, we expect this very weak trend in agency growth may very well persist into 2020,” Mr. Nathanson said in a note to investors.
Brian Wieser, global president of business intelligence for GroupM, a WPP- owned company that buys roughly $50 billion in ad space and time for marketers around the world, said he expects ad spending in China to decline by double digits in percentage terms this quarter. He said it is unclear whether that spending will come back later in the year, and it is too early to predict what the fallout will be for other countries.
Write to Suzanne Vranica at suzanne.vranica@wsj.com
