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The U.S Ad Industry Stages a Remarkable Comeback from Covid-19

Lockdowns during the height of the pandemic were devastating to the U.S. ad industry, as they were for the economy and society as a whole.

But advertising has made a remarkable recovery with growth now nearly in line with spend projections from before the emergence of Covid-19.

Standard Media Index (SMI) estimates that the first 19 months of the Covid-19 pandemic cost the U.S. advertising industry at least $17 billion in money not spent by the biggest advertisers in the market. The worst impact was in the spring of 2020, which saw a 38% year-over-year drop from the same period in 2019, as measured by the SMI Pool of invoice details from all major ad agency spending.

Our analysis looks at what the market lost in comparison to a projection of what the industry should have spent by 2021 had Covid not occurred. The SMI Covid Deficit Backcast reveals the scale of 2020’s second-quarter spend gap, with a rebound catch-up at the end of that year. Into 2021, a gap from the projection remains, but in recent months the trend line of actual spend has nearly caught up to the projection.

Source: Standard Media Index, SMI Covid Backcast

Figure 1 shows a black trend line of actual SMI Pool market spending back to Jan 2017, and, in blue, our model’s projection of expected market spending had Covid not happened.

While $17 Billion is a significant loss, in comparison to past economic crises, it could have been much worse.

For historical context, the downturn for ad spending during the Great Depression didn’t hit bottom for four years (ultimately down 54%) and didn’t return to 1929 spend levels again until 1945. The Great Recession of 2008 similarly took two years to reach its nadir, “only” 19% down from 2007, and took another eight years to recover. That the Covid ad recession fell by 38% in a single quarter YoY but rebounded to 2019 levels within one year is extraordinary.

By comparison, we estimate the total effect of the losses to ad markets in the Great Depression and Great Recession to be on the scale of hundreds of billions of inflation-adjusted dollars. In that light, the $17 billion hit to the SMI Pool from Covid so far seems like beyond a best-case scenario.

Our view is that the worst may be already behind us. This is based on the rapid recovery as shown by this analysis, along with the underlying health of the U.S. economy and the trajectory of media trends.

You can read our full analysis of the impact of Covid on the U.S. ad market, including how major media platforms performed and how leading product categories adapted their spend below.

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