Report: COVID-19 causes Hong Kong ad spend to plunge more than during SARS

Hong Kong's ad spend over the COVID-19 pandemic has dropped more significantly than during the 2003 SARS outbreak, as the landscape of the ad industry has changed a lot over the years. This is according to a new report by AdmanGo who has conducted a study delving into how COVID-19 has impacted Hong Kong's ad market.

The report finds that fear of the novel coronavirus in Hong Kong started in January with public anxiety continuing to rise over the following month. Hong Kong's total ad spend during February 2020 dropped by 30.6%. 

Several industries cut their ad budgets sharply during February. The ad spend of the travel and tourism industry came down 72% YoY, while the cosmetics and skincare sector was down 64% YoY. Retail (-48%), entertainment (-51%), and jewellery, watches and luxury products (-55%) were other major categories that recorded significant decreases in ad spend as well.

However, this is markedly different to the reaction during the 2003 SARS outbreak, when YoY growth in ad spend was still recorded when the first few SARS case were confirmed in February and March of that year. While a drop in ad spend was recorded in both April and May, the worst weekly YoY drop in ad spend was recorded in mid-April at -13%. By June, ad spend had rebounded by 6% YoY growth and even marked a significant 17% YoY boost in July when the crisis was resolved.

The report suggests that the Hong Kong media scene has changed a lot in 17 years as desktop, mobile, and social advertising have become even more popular than in 2003. 17 years ago, advertisers were bound by TV commitments and longer-term bookings on print and outdoor ads, resulting in a more stable ad spend during an economic downturn. Conversely,  current-day desktop, mobile, and social ads offer flexibility since advertisers can purchase them on an ad hoc basis. Such convenience brings greater fluctuations to ad spend.    

Not all industries are cutting back during the COVID-19 outbreak. Recently, citizens were asked to stay at home and avoid contact with other people and in response some industries have increased their ad spend, namely the games and hobbies sector (+4% YoY), and the health and beauty food sector (+4%, YoY).

The report said the significant year-over-year drop was due to a high base in the first half of 2019, but several industries increased their ad spend significantly in February 2020. These included insurance (+35%), especially medical insurance, retirement insurance, and income insurance.

The beverage industry showed an over 40% MoM increase with a major boost in milk powder for adults and water. Health and beauty food also saw a 16% MoM increase as companies focused on herbal, lingzhi and yunzhi, fiber, and vitamins and health supplements.

As for media, while almost all media types recorded a decrease in ad spend in February 2020, mobile was the only media format recording an increase as it enjoyed a 15% surge in ad spend, taking up 24% of sharing of voice - one percentage point behind TVC.

A number of categories increased their ad spend, particularly in mobile in February 2020. Banking and investment services saw a 24% YoY increase in mobile ad spend which was mainly contributed by asset management, mutual funds and ETFs, as well as securities, brokerages, and investment services. Medical insurance and life insurance also increased mobile ad budgets as mobile ad spend from the insurance category soared by 162% YoY.

Lastly, admanGo said the ad market would improve quickly if the pandemic comes under control in the next few months.  With previous social unrest setting a low base for ad spend in the second half of 2019, the report expected that there would be a lot of room to grow during the second half of 2020.

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