x IAB Proprietary Research Covid Impact on Ad Spend 2020: The Transformation of the Television Marketplace Published 6/16/20 1IAB Proprietary Research 2 Executive Summary: Upfronts/NewFronts Findings In this third study of advertising Buyers, IAB focuses on Upfronts/NewFronts spend and trends, plus 2H impact on total advertising spend Overall, ad buyers expect 2020 ad spend to decline, estimated at -20% down from 2019 due to the economic impact of Covid Amid the overall decline, digital ad spend is growing: Buyers expect it to be up 13% in 2H vs 2019 Linear TV ad spend expected to be flat for Q3, down in Q4, while CTV/OTT investment will increase significantly year over year Nearly half of Buyers are confident their budgets are stable for the rest of 2020, but confidence in 2021 is much lower 72% of Buyers say NewFronts are more important than ever before, but most want Upfronts For the coming 2020/2021 year period Despite widespread calls for change, calendar-year Television buying does not appear to be growingIAB Proprietary Research 24% 9% 25% 31% 34% 35% 50% All of the above Extended payment terms Added value Shorter cancellation options Business outcome guarantees Custom audience guarantees Price efficiency Most Important Elements for Video Commitment Negotiations 6 n=148 Q: Which of the following (if any) do you consider to be the most important elements when negotiating video commitments? Price efficiency remains the primary negotiating issueIAB Proprietary Research +46% +32% +32% Agencies Brands Other Respondents OTT/CTV Spend Growth 2020/2021 7 On Average, Agencies expect Connected TV/OTT investment to increase by 46% y/y n=91 Q: To what degree do you expect your OTT/CTV spending to change (grow/decline) this coming 2020/2021 video season vs. previous year? DEFINITIONS CTV/OTT = Connected TV and/or Over-the-top Connected TV: used to stream video over the internet Over the-top: video content delivered via traditional closed television system and not requiring cable or satelliteBuyers Perspectives on Video MarketplaceIAB Proprietary Research 11% 17% 52% 20% % of Respondents “2020/2021 NewFronts are more important to my business vs. year ago” 9 Ad Buyers overwhelmingly see NewFronts importance growing n=128 Q: To what extent do you agree with the following statement: “2020/2021 NEWFRONTS are more important to my business now than they were a year ago.“ Completely agree Partially agree Partially disagree Completely disagree 72% Agree: NewFronts are more important y/yIAB Proprietary Research 10 n=128 Do you feel that the Upfronts/Newfronts events should merge into one event moving forward? 49% 18% 33% Yes No I don't know Buyers favor merging TV/Digital “Fronts” Measurement Digital channels expected to gain shareIAB Proprietary Research 14% 18% 25% 15% 7% -18% 23% 21% 20% 16% 27% 4% 1% -15% 32% 21% Digital Display Digital Video CTV/OTT Digital Audio Podcasts Digital OOH Social Media Paid Search Q3 Q4 18 Digital Channel Est. % Change in Ad Spend Q3 and Q4 Y/Y n=101 Q: Please share % increase/decrease or (0) for no change for Q3 2020 (Jul-Sep) vs. Q3 2019; Q4 2020 Jul-Sep) vs. Q4 2019. CTV expected to be the biggest winner for Q3/Q4 Baseline 2019 Digital OOHIAB Proprietary Research 0% -18% -46% -39% -42% -6% -9% -43% -46% -26% Q3 Q4 Linear TV (Broadcast Q4 2020 Jul-Sep) vs. Q4 2019. Linear TV & Terrestrial Radio expected to show the least decline among traditional channels Base: Respondents Expecting 2020 Ad Spend to Increase or Decrease Y/Y (79%) Baseline 2019Whats Next?IAB Proprietary Research What We Are Keeping Our Eyes On 21 1. As advertisers increase flexibility in creative and publishers increase flexibility in delivery will ad spend recover? If so, who will benefit most? 2. How might the crisis sparked by the killing of George Floyd impact ad spendparticularly regarding news? 3. How will political ad spend around the November election evolve? 4. What tactics are planners/buyers changing as States relax “shelter at home” policies? 5. How will changes in Covid infection rates impact ad spend? 6. Will there be significant differences in Covid ad spend changes by vertical? 7. How will 2020 ad spend compare with current projections? With 2019? 8. What can we expect from the Buy-side in 2021?IAB Proprietary Research 22 About Us The Interactive Advertising Bureau (IAB) empowers the media and marketing industries to thrive in the digital economy. Its membership is comprised of more than 650 leading media companies, brands, and the technology firms responsible for selling, delivering, and optimizing digital ad marketing campaigns. The trade group fields critical research on interactive advertising, while also educating brands, agencies, and the wider business community on the importance of digital marketing. In affiliation with the IAB Tech Lab, IAB develops technical standards and solutions. IAB is committed to professional development and elevating the knowledge, skills, expertise, and diversity of the workforce across the industry. Through the work of its public policy office in Washington, D.C., the trade association advocates for its members and promotes the value of the interactive advertising industry to legislators and policymakers. Founded in 1996, IAB is headquartered in New York City. For more content, please visit iabIAB Proprietary Research 23 Thank YouIAB Proprietary Research 24 Respondents to this survey were comprised of both brands and agencies representing a wide spectrum of U.S. advertising categories: 27% 24% 22% 21% 20% 19% 16% 16% 15% 14% 14% Automotive and related Financial services Media CPG Food/Beverage Travel & Tourism Apparel/Fashion Retail brick and mortar Retail online Education/Government CPG Household Products/Other Health/Healthcare Appendix: Respondents by Category *Other Categories include: Consumer Electronics Home & Appliance Technology Beer, Liquor and Wine Restaurants Pharmaceuticals & Remedies (OTC and DTC) CPG Cosmetics and Toiletries Telecommunications Pets/Pet Supply Baby, Child or Parenthood-related Fitness and Wellness Politics, Organizations or Public services Energy Gaming Jewelry & Watches Real Estate Toys and Hobbies Misc.IAB Proprietary Research 25 Appendix: Two thirds of respondents have, at minimum, knowledge of Upfronts/Newfronts ad spend for particular brands Pulse 3 Base: n=148 Pulse 3 Q: Which of the following best describes your knowledge of your organizations ad buys during Upfronts/Newfronts? 36% 26% 38% Buyer Purview into Upfronts/Newfronts Ad Buys Full line of sight for organization Full line of sight for particular brands No line of sight Base: All Respondents (100%) 62% of respondents have line of sight into Upfronts/Newfronts ad buys