Magid: Local TV To Feel ‘Devastating’ Ad Impact
So how bad is it out there?
Bad, very bad, say Bill Day and Jaime Spencer of the Magid research and consulting firm whose job is to guide broadcasting clients through the pandemic and the resulting economic disruption.
Despite a surge in viewership, TV stations have been seeing a loss of between 40% and 60% in advertising revenue in April and May, Day says. “The impact has been devastating across the board.”
The depth of the losses has not come as a complete surprise to Magid, Day says.
The firm continually tracks advertiser and consumer sentiment through surveys, he says. On Feb. 1, before anybody was taking the COVID-19 seriously, advertisers were saying they were going to pull back on their broadcasting buys by 5% this year — in line with what they have been saying for the past five years.
But by March 19, after the president’s declaration of a national emergency, the 5% had jumped to 36%. “It is the largest change in advertiser confidence and sentiment we have ever measured,” Day says.
“The advertisers are relatively confident that [the country] is going to come out of it in short order,” he says. “What they are not sure of is can they survive the disruption. So, they are aggressively hoarding cash.”
Magid’s April survey of advertisers found that 61% have shut down and only 44% of them are completely confident of reopening, Day says. What worse, the survey found that 20% of the advertisers in its panel have “simply gone dark.”
Advertisers are coping mostly by slashing marketing and advertising budgets, Days says. That’s different than in the 2008-09 recession when they tended to offset lost revenue by cutting staff.
Advertisers don’t want to have to go through the trouble of restaffing and retraining after the pandemic plays itself out, he said. Staffing has long been on advertisers’ “top five list of challenges” for a while.
“The stimulus bills and the other government interventions designed to keep people on payroll [are] definitely part of it,” he says.
Magid is also warning that the economic disruption could have a long tail.
In the 2008-09 recession, the country experienced a 5% loss of GDP over 18 months and an 11% drop in advertising over that same period, he says.
The GDP bounced back quickly, but it took nearly a decade for advertising to rebound to the pre-recession level when the dollars are adjusted for inflation.
“We never quite climbed out of that dip because when advertisers pull back that deeply, they often don’t go back into the same legacy media platforms they had been in,” Day says.
According to the Magid tracking studies, he says, while 44% of advertisers say their businesses will rebound quickly, only about 11% of them say they are going to increase their spending at the same rate.
Day says his biggest concerns are the retail and auto ad categories.
“A retail apocalypse has been rolling quietly across the country for the last six or seven years largely unnoticed,” he says. “It is likely that that will accelerate. There will be fewer store fronts — fewer potential advertisers.”
Auto dealers have been aggressive in using digital to lower their cost of sale for every vehicle, Day says. “It is highly likely that the trend will accelerate coming out of this.”
That doesn’t mean it’s “rational,” he says. The dealers may save money on advertising but lose on the ROI.
The other auto concern is the emergence of online-only sellers like Carvana that are taking the Amazon approach to selling cars.
Prior to the pandemic, they had not gained much traction with consumers, Day says. “I fear that coming out, as consumer behavior changes in ways that are semi-permanent, we are going to see the online dealerships do better and take share away from the local dealerships. The local dealerships spend with local TV stations and Carvana doesn’t.”
Magid’s job is not only to bring the bad news to its station clients, but also to offer advice on how to cope with it.
Spencer says it starts by simply reaching out to advertisers. “You can’t overestimate the importance of letting those small business owners know that you get that they are hurting.”
Then, stations can help with the ad messaging, Spencer says. Many advertisers and their agencies are offering feel-good spots “chock full of soft music” aimed at reassuring and comforting consumers.
But that might not be the best approach, he says. “Consumers tell us they are just as interested in wanting to know how they can still shop or use an advertiser’s business. They are interested in deals and discounts on products and services and delaying or deferring payment.”
Day says AEs should fully understand their advertisers’ business so that they can advise them how to market during the pandemic and how to use TV in that marketing.
Most AEs don’t, he says. “First, they are not built to do it. Most of these sales teams are transactional in nature. They are built to respond to in-bound requests from agencies and advertisers.
“The second problem is they are not equipped to do it. So even if you had a rep who is interested in getting on the phone, they don’t have the research and other resources to walk somebody through a business conversation that says, ‘George, your furniture store is shut down in the real world, but we can keep it open online. And so here is how we are going to help transition you to an online contactless delivery model.’ ”
Magid can help AEs make the right pitch by providing the resources and ideas, Day says. “We are not talking about a long-term reassessment of their business, but rather a short-term how do we make this work right now.”
Day says stations should take a cue from their advertisers that are extending credit to their consumers and offering other financial incentives, he says. “It’s not unreasonable that those same advertisers would expect similar concessions from their media partners.”
Some media companies have relaxed their credit requirements and extended credit for 90 days, he says. They should go one step beyond that and make such concessions a “brand position” just as many auto dealers have, he says.
“Position yourself as a preferred partner, build the sales brand in a way that you haven’t done up until now.”