Market trends

Coronavirus Impacts Advertising Spend Across Industries

Kailey Raymond

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March 27, 2020


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Blank billboards with blue city background.

Interested in staying up-to-date on COVID-19’s impact across sectors? Visit our Coronavirus Impact Tracker for daily updates pulled from earnings calls, press releases, 8Ks, and more.

As stores and operations shut, we’re picking up on sharp pullbacks in advertising, nearly across the board, as management teams look to shed variable costs. Autoweb, Regional Management, Luby’s,  Zillow, Uber, Marriott, Darden, Williams-Sonoma, and Tailored Brands all called out meaningful reductions in marketing spend in the last week. The cancellation of the Olympics alone affected $10 billion in advertising spend.

Crowdstrike and Five Below plan to shift more towards digital as customers spend more time online, potentially softening the blow for Google and Facebook.  Slack and General Mills – both beneficiaries of the work-from-home shift – seem to be the lone bright spots maintaining marketing spend plans.

AlphaSense can track management commentary on advertising spend plans in real-time across the entire market, by industry, or watchlist. We expect this to be an interesting theme to follow as Q1 earnings season begins in a few weeks.

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Autoweb Inc (Earnings Call – 3/27)

So in terms of our operations, we are more vigilant than ever about maintaining a lean efficient organization. We had already taken considerable cost out of the business prior to the COVID-19 pandemic, but we continue to target reductions in personnel-related expenses, marketing expenses and then, any other various other miscellaneous operating expense categories that we can become more efficient with.

Inuvo Inc (425 – 3/26)

 Because our company operates in the digital advertising industry, unlike a brick and mortar-based company, predicting the impact of the coronavirus pandemic on our company is difficult at this early stage in the viruses US expansion. Thus far, we have experienced a pause in marketing campaigns for two new IntentKey clients signed in March 2020 and a potential impact from a number of suppliers within ValidClick. Generally, marketing budgets tend to decline in times of a recession.

Regional Management Corp (PR – 3/26)

We have temporarily suspended all direct marketing to acquire new customers, including direct mail and digital campaigns. Our efforts are focused on supporting our existing customers and providing them with additional loan proceeds, when justified by our underwriting, to assist them through any challenges they may encounter.

Olympics (New York Times – 3/25)

Companies with billions of dollars tied up in the Olympics are now rushing to put backup plans in place after officials in Japan postponed the games.

More than $10 billion in advertising arrangements, sponsorship deals and promotional events were linked to the summer games, which had been scheduled for July, according to the market intelligence service Sportcal.

Luby’s Inc (PR – 3/24)

Further, the Company has determined to dramatically reduce its planned advertising expenses.

Marriott Vacations Worldwide (Business Update Call – 3/24)

The expenses in our development business are largely variable with noncash inventory costs being expensed only when a sale occurs in roughly half of the marketing and sales costs relating directly to the sale. For the remaining marketing and sales costs that we have historically referred to as more fixed in nature, in the near term, we have developed plans to reduce these costs to a level that would support any sales while these sales centers are closed so that the development — so that development is cash flow neutral or better.

Zillow (Business Update Call – 3/23)

Specifically, to this end: one, we have paused all hiring across the company; two, we have paused most marketing spend; three, we are cutting other discretionary spending as you may have seen in our press release this morning; and as you may have seen in our press release this morning, we have, four, paused acquisitions in our Zillow Offers business.

Crowdstrike (Earnings Call – 3/19)

We are aligning our resources to reach customers in light of the current environment, which includes shifting marketing investment more towards our digital channel for the near term. 

Ollie’s Bargain Outlet (Earnings Call – 3/19)

I think if we ended up having to or chose to close our stores, we would be able to decrease costs there, certainly on the payroll, certainly on the marketing so that, that 70% could go lower.

Scholastic Corp (Earnings Call – 3/19)

Similarly, we were reducing or eliminating scheduled promotions for our book clubs and anticipate some lost and postponed revenues in our education business, even while we are securing special orders from schools to provide books and online learning materials for kids at home or when they go to pick up meals at schools or centers which are opening to provide food.

Uber (Business Update Call – 3/19)

And to that, in all the areas of business, we’re taking action. As a proved first step, we’ve already frozen headcount. And in a period of just 2 weeks, we will have pulled back $150 million in incentives and marketing, which shows how quickly we can react. These are well-exercised muscles for us, and we’ve always managed a business city-by-city, day-by-day, hour-by-hour.

Marriott (Business Update Call – 3/19)

Let me also take a minute to talk about our efforts to reduce our costs that are reimbursed by the hotel owners. Many of the programs and services charges that the hotels pay us, such as marketing funds or loyalty charge out also vary with hotels’ revenues. Given the dramatic drop in RevPAR, we are taking substantial action to reduce the costs associated with running these programs by hundreds of millions of dollars to better align those costs with the expected revenue reduction.

But you think about these reimbursed costs for a second, we spend $1 billion or so on marketing annually. We’re not going to — why are we going to market in the midst of fear and when people are social distancing and not traveling? So some of these things — well, it would be a dramatic overstatement to say that they’re easy to recalibrate. It is obvious that they need to be recalibrated, and they will be recalibrated. And when we go through all of those steps, what we end up with is a risk of, in all likelihood, hundreds of millions of dollars of issues that we’re going to need to work our way around, not billions of dollars of issues that we’re going to work our way around. And given the likelihood that this is something that, again, we’ll work through this system, maybe not 100%, but overwhelmingly work through the system by the time we get into 2021, those are issues that we’ve got the strength to work through.

Darden Restaurants (Earnings Call – 3/19)

Andrew, with the sales results we’re seeing now, we are focusing any advertising that we do on To Go, especially for Olive Garden and LongHorn. But we have dramatically reduced our advertising spend. Without getting into too many other things that would be competitive, we have significantly reduced our advertising spend or we plan on significantly reducing where we can. But it would be focused on — anything we do would be focused on our To Go experience.

Destination XL Group (Earnings Call – 3/19)

Where we can, we have almost eliminated paid marketing efforts and expense and expect we will maintain a significant reduction over the remainder of the year until business normalizes.

Williams-Sonoma (Earnings Call – 3/18)

And then the second part is to what extent could you shift your marketing just to almost advertise to consumers that this new, hopefully very temporary, the new operating structure of your company, which is much more online focused?

Answer – Laura J. Alber: Yes, sure. So the stores are closed, right? So I just want to make sure, when you’re modeling that they’re closed, you can make assumptions based on your crystal ball and when they’ll open. And that’s what we’ve done. We’ve done a few scenarios there. And so, of course, online is really important, and it’s our key channel, and I’m going to let Felix, who’s actually on the call answer the marketing question.

Answer – Felix Carbullido: Sure. So to your question, as Laura mentioned, we are aggressively cutting nonessential expenses throughout the company, including a number of marketing line items. That said, some are more obvious than others. That said, we are still continuing to invest in our D2C business, where we see strong results.

How flexible are we? As a reminder, over the past few years, we’ve built our own in-house advertising team, which allows us to react quickly to changing dynamics in the market and consumer behavior and even during these times. So we feel very confident of cutting back where we understand it’s not business-critical and for investing where we see an efficient ROI.

Guess (Earnings Call – 3/18)

It’s hard to estimate exactly how much we can adjust SG&A given the situation. And as Carlos said, we’re looking at everything. We’re looking at supply chain and distribution costs, we’re looking at marketing, we’re looking at corporate expenses, consulting meetings. And in a situation like this, even what you would normally consider fixed costs or maybe not fixed, Carlos mentioned rent. If the landlords can’t provide us with an environment that we can do business, then we’re going to have to talk about that. So we’re considering everything to try to reduce G&A, and we’re taking this very seriously, and we want to protect the long term of our company.

Five Below (Earnings Call – 3/18)

Paul, thank you. So let me just discuss the marketing efforts. As it relates to first quarter, that’s really the only place we’ve made any changes. At this time, we have pulled back on TV and the circular that will not run for Easter this year. We are leaving in place our digital efforts and are focused on our e-com in that case. We are seeing an increase in e-com business and are having no problems keeping up with it.

Tailored Brands (Earnings Call – 3/18)

The second thing we are doing to increase liquidity is eliminating or deferring all discretionary spending. We are significantly reducing inventory buy plans, capital expenditures, advertising spend and store and headquarters overhead costs. These actions will meaningfully reduce cash outlays. We also have contingency plans for deeper cuts if our stores are closed beyond March 28.

General Mills (Earnings Call – 3/18)

In terms of how we think of marketing for the fourth quarter, that’s a good question. I mean the first thing I would say is that as we look around the world, we have made sure that whatever marketing we have, that the messaging is appropriate. It’s a unique time. And we need to make sure whether we’re doing — we’re talking about our brands on social media or we’re doing it through broad scale like TV, first of all our messages has to be appropriate for the time. And I can tell you we’ve done that worldwide and we feel like it is. Second is that [highly appropriate for] that message I think includes not talking about stocking up and that kind of thing. We see consumers doing that already. Having said that, for us brand building is a long-term investment. It’s not only what we do this quarter. So we’ll continue to build our brands in appropriate ways, because the impact is not only for now but it’s 3 months from now and 6 months from now. In addition, and this is only one man’s opinion with very little data to back it up, but I think it also can convey a sense of normalcy for people as their lives are anything but normal in many parts of the world. And so for us, we think if we have a responsibility to do that, whether it’s delivering our products or whether it’s advertising Cinnamon Toast Crunch.

American Express (Business Update Call – 3/17)

So in traditional marketing, sure. Are we liable to run less TV advertising and do a little less kind of digital advertising in today’s environment because it might clang with the environment? Absolutely.

Slack (Earnings Call – 3/12)

So the plan is to continue to run ad programs, marketing programs, both on the brand side of things as well as overall enterprise support through the first half of the year. And then we’re going to continue to invest in other ways throughout the remainder of the year as well. So I would just look back at our growth phase targets, somewhere in the high 40s percentage range is the right steady state for us in terms of sales and marketing investment.

Harte-Hanks Inc (Earnings Call – 3/12)

Most businesses are facing the impact of the virus. This risk we see lies more in the marketing spend decline and items specific to our business or our operating model. While all client categories vary, our portfolio is highly diversified and we believe that serves as somewhat of a hedge against what is happening in the market today.

Clear Channel Outdoor Holdings Inc (Earnings Call – 2/27)

But as he will discuss, the exceptional results we delivered as a result of our digital investments and execution primarily in the Americas has been offset by the impact of the continued weakness in China’s consumer economy on Clear Media with their revenues down 20% in 2019. As reported in Clear Media’s trading update issued this morning, they expect coronavirus could further slow China’s economic growth and negatively impact consumer advertising spend in 2020.

New York Times (10K – 2/27)

 Among other things, an economic slowdown or other negative impact on worldwide economic conditions from the outbreak and spread of the coronavirus (COVID-19) could materially adversely impact our advertising revenues.

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Kailey Raymond

A customer-obsessed and data-driven marketer, Kailey Raymond leads Customer Marketing at AlphaSense. Previously, she was an early employee at two high-growth tech startups, in charge of launching new markets and building local communities.


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