Advertising in times of crisis - statistics & facts
As recession clouds gathered by mid-2022, uncertainties hit the advertising industry. Still recovering from the disruptions caused by the pandemic, the ad world started 2023 facing threats associated with mixed economic signals. In the face of surging inflation and higher interest rates, consumers have adjusted spending. Consequently, brands and advertisers felt the pressure to review media budgets. Midway through 2023, expectations have been adjusted and, despite more optimistic forecasts, advertising spending will have a flat growth in the next five years. While the ad industry navigates headwinds, one question remains: is holding ad and marketing expenses during a recession a successful strategy?
Ad spend falls in a period of crisis but bounces shortly after
Turbulence times are not unknown in the ad industry, especially when the world undergoes major crises. Advertising spending worldwide greatly diminished during the Great Recession, recording its steepest fall when the financial crisis reached its nadir in 2009. More recently, the pandemic drove cuts in media budgets, resulting in a 3.7 percent decrease in ad spend in 2020 compared to 2019.
When looking back to the last two decades, the trend is clear: ad spending falls during crises. The favorable news is that the advertising industry quickly recovers by resuming or even surpassing previous spending levels one to two years after the downturn. Specifically in the United States, world’s largest ad market, the industry has generally shown resilience after crises. Investments in advertising in the U.S. shrunk by 18.2 percent in 1933 amid the Great Depression. One year later, ad spend rebounded by 24.5 percent. In 2021, advertising expenditures in the American market increased by 19.5 percent, followed by an eight percent growth in 2022. Previously, due to the COVID-19 outbreak, U.S. ad spend decreased by 7.5 percent.
To spend or not to spend - a growing dilemma faced by advertisers
Decreasing ad spend during crises seems tempting. However, it might be inefficient. An analysis covering the recessions that occurred between the 1980s and early 2000s has shown that sustaining advertising expenditures during a downturn paid off in the long term: Brands that maintained or raised spending during tough times saw higher increases in market share once the slowdown was over, compared to those that slashed marketing expenses. Additionally, while avoiding to opt-out of advertising, brands must also adapt their messages to be in tune with consumer sentiment. In times when the audience feel worried, reassuring ads have an appeal. Among U.S. adults, nearly 40 percent ranked advertisements with messages that make them feel safe and good as the most engaging.
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