Key Takeaways
- Based on historical comps, the government shutdown has little to no impact on ad spend (6% avg growth during shutdowns)
- That was historically better than how the market was trending at the time (4% avg growth for the quarters prior)
- we see minimal risk to ad spend in the next month or two
- However, we expect the ad market to weaken in H1’26 as consequences of the shutdown being to make their way through the market (i.e. Travel, Pharma)
As of November 5th, the US entered the longest shutdown ever in history. While the outcome still remains unknown, we wanted to tackle a unique take on historical shutdowns and their impact on ad spend. Given the most recent shutdown is very much uncharted territory, it’s hard to know exactly what will happen but we think there are two distinct implications: what happens in the immediate term of a shutdown vs. what happens more long-term as the true impact starts to work its way through businesses and the economy.
The short term is a bit easier to understand. Again, without historical precedence but our base case is little to no change. From the historical examples in the chart below, we can see that within the same quarter of a shutdown, ad spend keeps plugging along. And even when we compare to the growth rate going for the quarter prior to shutdowns, ad spend tracks to the market average.
Ad Spend Risks
However, category impacts are already being seen. Revenue losses will quickly translate to ad spend declines and we’ve identified a few categories where we expect to see ad spend weaken. We expect the ad market to show softening tied to the government shutdown starting in H1’26.
Travel
After the recent pull back from the FAA on flights, airlines will be particularly impacted in the near term as travel declines in volume. However, airline travel ad spend remains elevated through year end for Forward Bookings in the hopes that the shutdown will pass and travelers will resume flying for the key holiday period. Additionally, while airlines as a sub-category may be impacted, others may benefit. For example, if more people opt to rent cars and drive to destinations for the holidays or vacation, we may see an increase in ad spend for rental cars and hotels that would offset softness in airline spend. Cruises as a sub-category (already pacing ahead of last year for forward booking data), may also benefit from changing behavior tied to the shutdown.
Pharma
Currently, there have been 32 novel drugs approved by the FDA YTD. Historically, the FDA approves approximately 50-60 novel drugs annually. We highlight novel drug approvals because they tend to be the ones with greatest marketing support and more likely to drive increases in consumer facing ads post-approval. With the government shutdown, this will likely push 10-20 novel drug approvals in 2026, delaying further drug launches and will likely cause a significant decline in ad spend as early as H1’26.
Conclusion
While it is impossible to understand what long-term impact the government shutdown will have on the broader economy, we feel confident that the ad market will begin to show that impact long before the economic data will.
