Advertising markets compose an integral part of the global economy, and ad spend is traditionally regarded as a bellwether of economic growth. If the economy is challenged with natural disasters, turbulence in politics, and disease outbreaks like COVID-19, advertising markets respond with changes. Amidst closed borders, restricted seasonal activities, and social gatherings, the world’s advertising mechanism is starting to crumble for some industries while rapidly picking upstream for others.
Some advertisers have already called off their ad spending. At the same time, when there’s no option to go outside, smart devices take all of our time, and the content consumption naturally grows. In such circumstances, big questions remain open; e.g. how advertisers should change their strategies to make use of increasing traffic opportunities and how to adapt ads to make audiences receptive to messages?
How COVID-19 affected industries: important insights and outputs
The data delivered by March 23, 2020, gives a vivid illustration of how COVID-19 has jeopardized typical customer behavior, and thus demand, across different industries. Travel, fashion & luxury sales drop, restaurants are closed worldwide. The ad spend in the travel category has been seeing cuts by two-thirds and the ad spend in sports by more than 40%. Mobile World Congress, F8 Facebook developer conference, Summer Olympics in Tokyo, NBA season and even the Cannes Film Festival – all these events are terminated until the end of the quarantine. Retailers who work offline are massively closing their stores.
In contrast, online grocery sales keep growing every day (customers now use online providers for all grocery purchases and delivery). Grocery apps have witnessed a record number of downloads. Verticals like computing, hobbies, games, and beauty are also on the rise. Predictably, the demand for facemasks, cleaning supplies, and medical items is also surging.
Ad spend goes down but traffic volumes go up
Even though China has almost recovered from the COVID-19 outbreak, it will take a long time for the economy and advertising market in this country to return to their normal state. Why is this so important? The thing is, the global ad market little less than entirely depends on the Chinese ad market and nearly all the reduction in spending currently comes from China — the world’s second-largest ad market after the US. The ad spending growth rate has been downgraded here from 10.5% to 8.4% across the majority of digital formats. The same trend can be observed in other countries around the world.
At the same time, the advertising industry experts are cautiously optimistic. The worst outbreaks in countries most affected by COVID-19 may soon be over and the virus will most certainly go away after a few months, like it did in China. So far, the good news for advertisers is that the rising numbers of TV watching, content streaming, and mobile game playing (featured below) testify to the fact that there are lots of opportunities to be explored in these niches.
What channels and formats will be most popular and relevant?
TV consumption patterns have changed most drastically, mainly because people now work remotely. Just to illustrate the point, employees with fixed working hours spend 21 hours and 56 minutes watching videos, whereas those who work remotely spend 25 hours and 2 minutes per week. Those who work remotely also prefer to use their mobile gadgets and tablets 4.5 hours per day while non-remote workers spend only 3 hours per day using mobile gadgets.
Now that the quarantine has taken over the world, these patterns more or less can be applied to all people who temporarily work online. Now, mobile and desktop make up 88% of the U.S. of video watching. Soon, the watching rate may jump 60% higher. Recently, Verizon reported an approximate 75% increase in online gaming and a12% in video streaming week-over-week.
Steam has detected a record in customers that spans the last 16 years — March 15th has officially gathered 20 million of users on the platform.
All these trends may cause increased demand for CTV, mobile, and in-game ad inventory in the near future. Brands need to take a look at these patterns and take into account the context of the placements in case they want to benefit from the situation and stay competitive. A good idea would be to redistribute ad spend in the video, mobile, CTV, and in-app formats and use programmatic to ensure that ad content is personalised for every watcher (based on user data).
SmartyAds DSP platform has tracked performance across top ad formats during the last couple of months, and here’s what we found:
● Rewarded video. This is a specifically engaging in-app format that provides users with bonuses after ad watching. For this reason, these ads are preferred by 70% of users, and their completion rate is close to 100%. Their eCPM has grown to $15.75 (March) from 10% (February).
● Playable video. With playable video, you can drive great quality traffic inside your app. This 30-second-long game demo features a short version of the mobile game. If the user likes the gameplay, he or she can download the full version. In March, playable videos made 15.1% — 8% higher in comparison with February.
● Native video. Native ads are known for their ability to imitate the rest of website/app content. They are the least irritating and the most shared and reposted by users on social media. Native video, for instance, can appear as a useful (sponsored) tutorial or in content recommendation widget. CTR of native videos accounts for ~11.0% in March (10% higher than in February).
How advertisers, publishers, and brands can respond to the crisis
Publishers and advertisers are already preparing for changes in the advertising plans and investments. Temporarily, advertising products and services that require people to spend time outdoors make no sense. Brands will definitely call off such ads so publishers that rely upon these advertisers will have to find new sources of content monetisation.
However, adjusting plans does not always mean cutting budgets. Commerce advertising is on the rise and it’s a great chance for brands to explore OTT/CTV/mobile/in-app environments to double profits. Some advertisers have altered the structure of their advertising spend. For instance, AB InBev, the international brewery corporation, redirected financial investments from outdoor advertising to online sites, which spurred further growth of sales to $1 billion.
If you are a brand and your business has been impacted by COVID-19, here are some ideas on how to cope:
1) Organise or hire delivery services and redirect all your customers from offline to online stores using ads.
2) Use targeting to find local customers.
3) Use retargeting to find existing customers and invite them to your online store.
4) Launch brand awareness campaigns to notify your customers about your working hours, delivery service work, and changing policies, terms, service conditions, etc.
5) Start a giveaway ad campaign on social media to gain brand loyalty and attract more subscribers (read potential customers).
The unpreceded disruption that COVID-19 has caused us and the global economy has also transformed the advertising industry in unexpected ways. Entrepreneurs let their staff work remotely, video calls replace meetings and international travels, and virtual events, games and TV shows are replacing everyday pastimes to keep people entertained indoors. In 2003, SARS also decreased YoY of FMCG revenue from 16% to 19%. Spending decreased, but as soon as the epidemic and panic were over, it went back to normal.
Like any disaster, COVID-19 will sooner or later go away and the global economy will recover. Right now, in the situation when advertisers reduce their ad spend, those brands that continue (or launch new) advertising campaigns on CTV, mobile, and in apps will win in the long run. Choose the right mediums, formats, use targeting and align your message to the public interests to support both your business and customers in this temporary period of uncertainty.