Media & Advertising Industries

During the height of the SARS outbreak, fear of the unknown caused a widespread panic. People stayed at home because school and work were suspended. People are glued to their television set more than ever. However, increased viewer-ship does not guarantee an increase in advertising revenue. The slowdown in economic activities had created a negative impact on advertising spend. The usual top spenders e.g., property developers, banks and retailers had all been hard hit by the SARS crisis. Businesses were temporarily stopping advertising because there was no point in promoting amidst the crisis. Nevertheless, there were a number of SARS-induced hygiene and healthcare related products in demand for heavy media exposure. Home electronics and computers also recorded a surge in sales.

Although the threat of spreading SARS within the workplaces concerned all industries, the nature of the media business is not conducive to home office or reshuffling of teams. People need to meet to create the product. Hence there had been no relocation or split-team policies implemented in the industry. However, some advertising agents have encouraged staff to take holidays during this time of business slowdown.

Moreover, most of the advertising agents have a global presence and a geographically diversified client base. The impact of SARS on the advertising agents was not as gravely as the other industries. Nevertheless, business activities had slowed down because the jet-set advertising executives are all being grounded.

SARS' Impact on Media & Advertising Industries

1. As quoted in the South China Morning Post, Chief Executive Sing Wang of Tom.com said that some of its media businesses had suffered from the negative effect of SARS, particularly its sports-related advertising business. "Because of SARS, the Chinese authorities have cancelled or delayed sports activities." He estimated sales in sports-related business had dropped at least 10 per cent, partly offset by a growth in telecom value-added services, in the first quarter. The publication business, which accounted for 46 per cent of Tom.com's sales last year, had not been affected by the SARS outbreak.
2. According to AC Nielsen, total advertising spend was down about 10 per cent over the first two weeks of April. The decline was for all media. The numbers showed a 20 per cent fall-off in spending on newspaper advertising. TV was least affected as advertisers tried to reach audience staying in their homes at the onset of the crisis.
3. At the beginning of the year, there were signs of growth in all media (TV, Print and Outdoor). Individual ad agency recorded an increase of 18%, February with 6%, March with 10%, but in April, there was a 2% decrease as compared with corresponding months last year. The decrease was attributable to the fall in advertising revenue from restaurants, travel related entities e.g., hotels, travel agents and property developers, they have either withhold the advertisement or minimised the corporate message to information-typed advertisement. Although these categories experienced a decrease, there were increase in the following top four categories after the SARS outbreak (1-13 April 2003 vs. 1-13 March 2003): household (+114 per cent), leisure (+74 per cent), toiletries (+51 per cent) and pharmaceuticals (+15 per cent) and healthcare, food (health supplements). With the increasing demand from these crisis-derived products, advertising sales in May would likely to be stable although the product mix will be different from the usual pattern.
4. According to AC Nielson, despite intense competition in the respective sector, telecommunications, banking/finance/insurance, and real estates are no longer spending heavily on advertising or running any aggressive advertising campaigns. Ad spending for these industries dropped between 10 to 60 per cent, with the real estate sector falling the most.
5. Taking the biggest hit, the travel and tourism sectors have cut ad spending most, falling by as much as 72 per cent from HK$53 million to HK$15 million.
6. Compared with last year, ad spends on TV, Radio and Newspapers have dropped by 1 per cent, 5 per cent and 21 per cent respectively. Only Magazines recorded a growth of 5 per cent. Television Broadcast Ltd. forecasted on 28th May 2003 that ad revenue will be restored to pre-SARS level by June 2003, there will be no adjustment to the year round target.

Positive Outcomes of the SARS Crisis

The most obvious positive outcome was the increase in ad spends for certain categories. Comparing the ad spend between 1-13 April 2003 and 1-13 April 2002, leisure items (including CDs, DVDs). Toiletries including healthcare products have increased by 44 per cent. Pharmaceuticals and household products increased by 38 per cent and 36 per cent respectively.

Actions

Advertising sales were driven by the marketing budgets of different industries which in turn, were driven by the economic condition, therefore, advertising agents are in a rather passive position. It would be difficult to forecast future earnings as the potential negative impact of SARS were just beginning to take a toll.

As large corporate campaigns are now on hold, the impact is still regarded as potential rather than actual loss. By and large, the advertising industry is optimistic that SARS' impact would be short-term, once the tourists are back, the premium brands and luxury goods business - the bread and butter for the advertising industry - would be revived.

Last Modified Date : Tuesday, January 27, 2004 5:09:20 PM

Sources of information:

1. Interview with Mr. Mike Wong, Committee Member, Association of Accredited Advertising Agents of Hong Kong,15 May 2003.
2. South China Morning Post