US spending on search advertising will decline by between 8.7% and 14.8% in H1 2020, which is about $6 billion to $8 billion less than we expected, according to our latest estimates.
Our previous forecast of US digital ad spending, completed on March 6, 2020, called for a 14.4% increase in search ad spending for all of 2020.
As a performance marketing channel that is relied on to drive return on investment, search is often viewed as relatively safe in a recession, when marketers are forced to justify budgets. But there are at least two major downward pressures on search ad spending during the current crisis:
Ecommerce activity typically drives a significant share of search ad spending. But for now, tight supply chains and logistical restrictions—like those announced by Amazon to limit warehouse operations—mean it’s hard for consumers to buy a lot of items online. Amazon has reportedly pulled back significantly from spending on Google search ads, likely because it doesn’t want to drive additional demand when it’s already running close to capacity.
Our current guidance assumes that advertisers in different industries will make different decisions about budget allocations, and not all sectors of the search ad market will experience the same degree of decline during H1.