Advertising sales plummet

Newspapers have devised digital strategies of their own over the years, including setting up paywalls and pursuing other innovations like sponsored content. Photo taken from goffpublic.com -
Newspapers have devised digital strategies of their own over the years, including setting up paywalls and pursuing other innovations like sponsored content. Photo taken from goffpublic.com -

KERRY PETERS

Traditional advertising sales have fallen more than 50 per cent in the last two months as the fallout from the covid19 global pandemic has forced some agencies to cut employee salaries and rethink business models.

It’s also further endangering media companies, which have struggled to reverse a multiyear slide in revenues that has reduced profits, forced layoffs and lowered growth projections.

“Even before covid19, the industry had been under pressure, a combination of the recession and other things,” said Dennis Ramdeen, founder of Pepper Advertising. “With covid19, it has become even more pronounced in terms of the decline.”

President of the Advertising Agencies Association Tony Inglefield told Business Day the protracted weakness in ad spending had forced a number of agencies to explore cost-reduction strategies like salary cuts and pausing contributions to pension plans.

President of the Advertising Agencies Association Tony Inglefield. Photo courtesy IOM -

“The kind of numbers we’re talking about is between 50 and 70 per cent,” said Inglefield. “Obviously, the implications of that are quite disturbing and unsettling.”

Inglefield said at a meeting of agency heads last week, several companies confirmed that they were also contemplating other compensation adjustments, like withholding travel and phone allowances in a bid to reduce costs. And given the nature of their portfolios, some of them took action early.

A recent report by Media InSite, a media monitoring firm, confirms the revenue slide.

The report said advertising across legacy formats such as radio, television and newspapers was already trending downward before government issued the initial stay-at-home order in late March as part of its public health response to the outbreak. But the lockdown dealt a massive blow to already diminishing revenues, which hit an industry-wide low of $10.5 million in the second week of April before making a modest recovery two weeks later. By the end of the first quarter, total ad spend was down 54 per cent compared to the same period last year.

The report found the decline in advertising spending started in earnest across all formats beginning in March. By the end of April, radio was down 63 per cent, newspapers had seen a 60 per cent drop, and TV experienced a 37 per cent contraction.

Across all media types, some 60 per cent of brands that had active advertising campaigns in 2019 pulled the plug on campaigns and paused spending during the first quarter of 2020. And among those that remained active this year, Media InSite recorded a 70 per cent decline in paid ad space in 2020. The total number of advertisers, the report said, dropped from 1,408 in 2019 to 885 in 2020.

Allison Demas, Media InSite’s chief executive. Photo taken from LinkedIn -

In the same report, a survey of top advertisers found major brands like Prestige Holdings, TSTT, Carib and the National Lotteries Control Board had made double-digit reductions in their ad buying across radio, television and print from March 22 through April 18.

Banks, traditionally among the big spenders, also reportedly made deep cuts to radio and TV spots for the same period. But this was offset by a sharp increase in newspaper ads, likely announcement and explainer ads that have become a go-to for brands trying to connect more deeply with audiences during the pandemic.

More broadly, ad spend across the financial services sector, including insurance companies, has been one of the bright spots for April. There has also been a surge in advertising among hospitals and clinics seeking brand visibility during the heightened covid19 health crisis.

And another much-needed boost for media companies has come from what the industry defines as direct advertising.

“I think directs are doing much better, because they are more in charge of their own business and they make decisions faster,” said one senior ad executive at a top media company, speaking on condition of anonymity. “Through the agencies you have to wait for approvals, and that hurts sales.”

Still, media companies with large exposure to ad dollars in categories such as retail, trade groups, fast-moving consumer goods, and hospitality have taken the brunt of the covid19 hit, the report showed.

Advertising spend by quick-service restaurants was down 61 per cent for the first three weeks of April, down 68 per cent for furniture and appliance dealerships, down 44 per cent for eye care companies, and negative 27 per cent for supermarkets – which are enjoying a near monopoly on food following the closure of restaurants.

“There has been a significant decline because of covid19,” said Guardian Media Ltd’s managing director Nicholas Sabga. “It has impacted our business because marketing is one of the first places people look to cut.”

Sabga and other media owners may rightly attribute the latest contraction to covid19, but the slide in advertising started years ago. In fact, Media InSite’s report comes amid an emerging picture of an industry in crisis that some media cognoscenti speculate could see a major collapse inside ten years without structural shifts in the way media companies operate.

Going by the numbers, the grim reaper will likely come first for print newspapers, where advertising collapsed 37 per cent between 2015 and 2019, based on Media InSite’s calculations.

As a source of information in the public interest, newspapers are arguably unmatched in terms of the depth and quality of their reporting. But the problem they face on the revenue side is a widespread belief among advertisers that they have lost the one thing that made them both relevant and valuable in years past: their once sizeable audience, many of whom have now migrated to digital outlets.

As a result, advertisers have redirected ad dollars to behemoths like Facebook and Google in a bid to reach prospects and customers directly.

A key competitive advantage with taking this digital route is that they can track just about everything.

Mark White, head of CMB advertising agency. Photo courtesy CMB -

“It’s very hard to track traditional media,” says Mark White who runs CMB, a leading ad agency. “Radio, TV, press, out-of-home – you can’t get the kind of granular data that you can get from a digital campaign which gives you all the numbers and impressions and click-through rates.”

Newspapers have, in fact, responded with digital strategies of their own over the years, including setting up paywalls and pursuing other innovations like sponsored content.

But those digital revenues are still a fraction of traditional advertising sales and the problem has been compounded by decisions among major advertisers like Courts to bring some of the work in-house.

Still, it may be too early to call time.

“I don’t believe traditional advertising is dead,” said Allison Demas, Media InSite’s chief executive. “I think the challenge is really how to monetise and add value in the digital space.”

Dennis Ramdeen, founder of Pepper Advertising. - Jeff Mayers

Given the symbiotic nature of their relationship, media companies and advertising agencies face similar threats and finding new revenue streams will mean a rethink of business models, not least because the pandemic has exposed serious flaws in the existing ones.

For Ramdeen, digital transformation is his top priority. Five years ago, his firm had 22 employees. Today that’s down to 11. He is hoping Pepper doesn’t meet the same fate as Mical Marketing and Rostant Advertising, two agencies that were forced to close a couple years ago.

Ramdeen thought he understood why that happened.

“We resist change. We’re accustomed to one way. Even with embracing digital, many agencies took a long time. They said, ‘Nah, that will go away’ – but it didn’t go away.”

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