An Ad Agency & Business Outlook 2020 #CovidEdition #JAPAC
Already reaching for a cold glass of water after watching how things have unfolded so far in 2020?
I recently took part in a survey regarding forecasts for the world of advertising and marketing, basically the State of the Industry.
I am summarizing my commentary and initial perspective contributed there. Having seen the rise and fall of agency business in Japan / APAC, I am convinced that much like the original .COM bust of the late 1990s, the Lehman Shock of 2008, and the disasters of Tohoku 2011, the Corona Virus is a yet another profound game changer.
What is your perspective? Let me know in the comments. Also feel free to connect on LinkedIn.
#TheCrunch
The transformation began with smaller reverberations – a cluster of cases, a warning from the WHO, the world economy braced. Making up 16% of the global economy, China's economic downturn was quick to spillover to outside markets – a local problem was soon to turn into global catastrophe.
Once the commercial world's logistical hubs were hit, supply shortages quickly followed. Before long, many advertising accounts were impacted with both domestic and international assignments being thrown consecutively off-track.
Though the effects of the outbreak were starting to be felt from as early as January, it was only when March and April rolled in that the extent of the damage was becoming clear: contracts were put on hold, projects had halted, and agreements shattered across the industry.
Many independent contractors and some larger agencies were fighting to stay in business, especially when they had zero liquidity on hand. And while the world was lost in the daze of social and political upheaval, a good number of these businesses reached the verge of collapse.
In some cases, with the likelihood of their long-term prospects virtually negligible, the principals decided to fold. It may seem prescient in the future that they have left the industry so quickly and with little fanfare.
#TheShakeOut
This downward spiral is likely to go on for some time.
What comes next is only the first phase of fallout from the pandemic — it will impact previously forecasted KPIs, RFPs, and expected employment for approximately 1 - 3 months.
This is tied to the 60 - 90 day cycles in place for many of the retainers and payment schedules throughout the advertising industry.
Looking at the larger world of domestic business, Teikoku Data Bank reports that, since late April, 93 companies have collapsed because of the pandemic. That is almost a three-fold increase compared to the previous month. According to the Japanese daily, The Mainichi, only 60% of small and mid-sized business owners believe they will survive the crisis – 16% can only last until the end of May, 15.5% by the end of June. The tides are rising, and the Japanese government is scrambling to hand out enough lifeboats.
Agencies can now expect several months of financial stress as they navigate the realities of vanishing revenue and voided commissions.
Along with this backdrop in the business world is all of the repeated psychological impacts to greater society re: ILLNESS, SUICIDES & DEATH ☠️
That, in an and of itself, will cause a shockwave that ramps up into the next phase, where we are likely to see massive decimation across industries worldwide.
#TheCollapse
Businesses which survive the previous phases are really those that already have enough viable capital saved up to keep themselves afloat against the incoming tides of the next 4 - 6 months.
Agencies making it to the end of 2020 have a good chance adjusting to the direction of the post-pandemic economy as markets realign towards a long-awaited Q1 2021.
#TheLastManStanding
The strategies which seem to work well enough to carry many of us through the continuing chaos of the year are actually likely to be stop-gaps that are repeatedly re-thought and applied — hopefully with increasing success.
That may be something which is not yet clear for many at all layers in the industry, but a realistic, longer-term perspective is what will be truly important as previous assumptions continue to be burned to the ground.
Photos Courtesy of Unsplash: Steve Harvey / Marianne Bos / Brian Asare / Septian Firstlyanto Putra