Over the last few weeks, and likely for weeks or months to come, the first thing on many of our minds is the same: Coronavirus. Not only how we take the right precautions to protect our families, friends, and communities, but what impact this could have on the economy.
Given the volatility and declines in global stock markets over the last few weeks, financial analysts clearly believe that the world economy is in for a rough patch. There could certainly be a recession caused by this. What does that mean for digital publishers who rely on advertising as a revenue stream?
How do advertisers spend their money?
Before digging in, it’s worth thinking about why and how advertisers spend their money. Advertisers are looking to make consumers aware of their products, convince them that their product is better than the competition, and get them to spend their money on it – pretty straightforward!
In a recession or a challenging economy, a few things happen to advertisers’ priorities. Companies in industries that believe they don’t have a strong product will advertise less. Right now, travel companies are in a tough position with travel bans and a general consumer fear about travel. They’re already cutting back on their spending.
Once an advertiser decides whether they are spending money, and how much, they start thinking about where they spend it. Some of the main ways they can spend their budgets are on television, radio, print, out-of-home (like billboards) and digital advertising. They allocate budgets across those channels based on many different factors.
Digital advertising, what we all care about the most, has a number of benefits to advertisers right now.
- It’s very efficient. That is, it’s relatively inexpensive compared to buying TV ads or billboards.
- It’s highly targeted. More than any other form of advertising, an advertiser can reach exactly the people they want to reach.
- It’s very measurable. Advertisers can see the impact of what they spend and how it helps drive their business.
- It’s easy to turn on and off. Once you’ve bought an ad in a magazine or a billboard, you own it. With digital ads, if something isn’t working right, you can turn it off right now. Sometimes that can be a negative, but usually, it means buyers feel more comfortable about investing in something they can change their mind about later.
All of these benefits make digital advertising a great place for advertisers to spend their money. As they decide what they can spend and where to do it in the coming weeks and months, digital advertising will remain at the forefront, but will likely still see some volatility.
Let’s consider all angles
Because of the uncertainty around the overall impact of the virus on the economy, we are cautious to forecast what the future might look like. Instead, we want to focus on some broad expectations and preparations publishers can make to be ready for any future downturn.
The short term
Ad spending heavily depends on consumer behavior. As mentioned earlier, we’re seeing the travel industry’s ad spending impacted the most so far as travelers postpone or cancel trips and pull back from new bookings. However, ad spending could increase in areas with new opportunities as consumers spend more time at home and online.
It’s early to tell, but we do see the potential for strong short term impacts as major spending-events are canceled, people start to lock-down, and more cases are reported. It is very possible that many advertisers press pause in the short term to sort things out and see what happens next.
The longer term
The Coronavirus may impact the global manufacturing of products, limiting the stock available for advertisers to sell. This could affect 2020’s holiday ad spending as marketers won’t spend money to advertise products they weren’t able to manufacture or get into stores.
If we enter a recession, it’s likely that RPMs trend down for a period. The March 9, 2020 market impact due to Coronavirus was the largest stock market decline since 2008. In 2008, the recession led to a 13% decrease in ad spending overall, although it only saw a 2% decrease in online ad spending.
The Myers Report predicts a $3 billion reduction in ad spending this year, with another $6.2–9.3 billion reduction in 2021, depending on the continued impact of the Coronavirus. Those sound like big numbers, but keep in mind that global digital advertising spend is forecast to be over $220 billion this year — and the Myers reports forecasts that digital advertising will grow, just $3 billion less this year than they thought. This type of impact on spending over the course of this year is bad but bearable.
During situations like this, publishers have two options: sit back and wait to see what happens OR prepare for every scenario possible. We think the second option is the smartest path!
This is your livelihood and ours. We’re committed to protecting you and making the most of any economy for you. It’s why we’re here and why we’ve been investing over the years.
We don’t know exactly how this is going to unfold, but we’re prepared for each contingency and focusing on efficiency and squeezing every last cent of revenue for publishers. Most of the AdThrive team works remotely, and our NYC team is now also working from home, so we’re limiting potential exposure to make sure all of our day-to-day operations can continue uninterrupted to best serve you.
We’re continuing to monitor on a day-to-day basis but we believe that our investments in technology, team, unique partnerships, and our publishers over the years put our community in a position of strength to face this uncertainty together!
What you can do
We encourage you to assess the current state of your business, prepare for potential dips in revenue, and have contingency plans in place.
“Trusted publishers have a responsibility to create quality journalism that we can rely on, especially in times of confusion and uncertainty.”Kunal Gupta, CEO, Polar
Continue to focus on high-quality content. Grow your mailing list. Build your loyal, owned audience. Creativity is more important than ever — people are spending more time indoors, at home, online; craving comfort and indulgence; prioritizing health and family. We’ll continue to share content opportunities to help you tap into the latest consumer and industry trends!
Continue to support your fellow publishers. If there’s some good coming out of so much bad news, fear, and uncertainty lately, it’s communities drawing together in support like the “Stand with Austin” movement in the wake of SXSW’s cancelation. We’re always strongest together!
Above all else take care of yourself and your family!