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We’re moving further past the one-year mark of the COVID-19 pandemic turning the world, and advertiser spending, on end.
While the COVID battle isn’t over yet, vaccinations are increasing and confidence is growing in the US, dictating advertiser spend across the AdThrive community.
So what can AdThrive publishers expect to see, moving into a post-COVID world?
To answer this question, we’ll take a close look at the past and the present of digital ad spend to make some predictions for the future.
Looking at the past: 2020’s ad spending ingredients
2020 had a few unique ingredients that were different from years past:
- A massive influx in ad inventory (publishers’ content where advertisers can buy ads)
- Big shifts in demand (ad buying behavior)
Last year brought unprecedented traffic, especially to lifestyle content. Starting in mid-March, as people began cooking, remodeling, educating, and working from home, we saw surges of record-setting traffic.
What will happen to traffic now that people are increasingly vaccinated and venturing out? That remains to be seen.
News traffic was also higher than ever before — the result of coronavirus-related content, a media-centered administration, and the 2020 US election. With all three engines of this news cycle almost behind us, advertisers who were spending on news in 2020 might need a new outlet.
A mixed bag for ad spending
The massive traffic spike meant that, although CPMs plummeted at the start of the pandemic in the US, revenue stayed relatively stable for many AdThrive publishers.
Some industries majorly pulled back on ad spending (like travel and live entertainment), while others (like tech) leaned in to spend their extra pandemic-fueled cash.
How will advertising mix and spend change in 2021 and what does this mean for publishers?
Looking at the present: 2021 is outperforming the past several years
While the last year has been a wild ride, advertising in 2021 so far seems surprisingly normal and we’re seeing advertisers continue to place significant value on digital advertising. Traffic also seems to be following standard annual patterns, at higher absolute values than we saw pre-COVID.
Advertiser spend is up
Q1 2021 outpaced both 2018 and 2019 (the most “normal” comparison years) in advertiser spend and the AdThrive community continues to outperform in Q2 as well.
This is the opposite of the trend we saw in 2020. Despite starting out at much higher ad spending levels than 2019, those gains were erased with the start of the coronavirus pandemic in March 2020.
- So far, every year has seen growth in average per-site revenue.
- In 2020, that revenue growth was erased at the start of the coronavirus pandemic.
- So far, 2021 gains are outpacing the standard year-over-year growth.
Advertisers are spending more per impression
It’s not just that advertisers are spending MORE.
They’re also spending more per ad impression — meaning that every eyeball on an ad now costs more than it did previously.
- Early January CPMs haven’t shifted much in the last few years.
- 2020 upended the standard pattern.
- Now, 2021 CPMs are growing at a faster pace than 2018 and 2019.
Every ad impression is that much more valuable to advertisers today than it has been in the past around this time. Advertisers are finding more value than ever with digital advertising.
Who’s spending so far in 2020?
Industries like travel and live entertainment have been largely absent over the last year, and with things reopening, they need to get out there to ensure they’re top of mind for consumers.
Other industries have splurged as pandemic-related spend added to their bottom line. They have cash to spend on advertising, but they’ll need to work harder to stay top of mind as their categories lose some relevance post-pandemic.
Here’s what we’re seeing so far:
- Travel is seeing the most lift compared to March 2020, which makes a lot of sense.
- Quick service restaurants (QSR), fitness, and non-essential goods also growing versus last year.
- Food, tech, and retail remain strong/steady year-over-year.
- Categories like pharma/health and media/entertainment that saw big booms in March 2020 are spending less this year.
- Live entertainment is still not back to normal spending levels.
However, even if a category isn’t growing overall, CPMs may be growing for that category.
For example, looking at February 2021 (post-COVID) compared to February 2020 (pre-COVID), we found that live entertainment advertisers who ARE spending, are working that much harder… and paying more per impression. Travel CPMs have grown as well, for a similar reason.
Looking ahead: inventory scarcity will drive increased advertiser competition in 2021
We feel strongly that we’re in a critical phase in the growth in the importance of advertising to brands.
As consumers emerge from their homes, they’re excited to dive back into “normalcy” and make up for lost time. Many are predicting the advent of the “YOLO Economy”.
Brands want to be part of that action and that means being top of mind for consumers, getting their message out more frequently and more effectively than their competitors.
It’s a critical time for advertisers to be spending their dollars.
Traffic decreases = scarcity for advertisers, driving up ad spending
Many are predicting that as people venture out, consuming less lifestyle and news content, advertisers’ opportunities for getting in front of consumers online will become less frequent. Meaning that every encounter will be that much more important, and that much more valuable.
This fits in with what we’re already been seeing in terms of the growth in the value of each ad impression.
But we bet this trend has not been fully realized yet, since the scarcity of ad impressions is not as significant as we might expect.
So far, we’re still seeing higher traffic numbers than in previous years (2020 aside), even when adjusting for the size of our network.
- Every year, traffic follows the same annual pattern
- 2020 was a significant anomaly, starting in March
- Now, we’re back to pre-COVID traffic patterns and thus far outperforming on an absolute level
During the 2020 election in the US, we saw just how much traffic changes in one single category like news can have a reverberating impact on CPMs across the industry.
When we analyzed year-over-year CPM growth by US state, we found that CPM growth was dramatically higher in states that were “battlegrounds” — either they had very competitive Senate races or were critical for the Electoral College — even for sites that weren’t running political ads.
The fact that political ad buyers were spending so much money in that state was reducing the total supply of ads, which drove up the prices of all ads!
In 2021, we expect a decline in news traffic in particular (which generally makes up a large portion of internet traffic overall), reducing available advertiser inventory across the web.
Reduced inventory increases competition, and advertisers will need to raise spending per ad to continue showing their ads to your audiences.
Key takeaways for publishers
We might not have seen the full post-COVID digital advertising economy shape up yet, but here’s hoping that this sneak peek into the first part of the year shows that we’re on a positive trajectory.
- 2021 traffic will look low relative to the extreme COVID-related swings of 2020. Keep in mind that what we’re seeing right now started off higher than the typical year and is progressing in line with typical annual trends.
- Any decline in traffic has been offset by higher CPMs so far this year. Advertisers are placing a lot more value on every eyeball!
- It’s a great time to invest in traffic-growth strategies. Email marketing especially presents a huge opportunity to help buffer against any future traffic declines with a loyal, engaged audience and make your readership even more valuable in a future without third-party cookies.
- As you plan content, think about some of the industries that are spending more or are poised to grow, like travel, QSR, and live entertainment. Not only are we expecting these advertisers to grow, but this is also the content that your readers will be eager to get back to.
Overall, we’re cautiously optimistic about advertiser spending growth for the rest of the year.
Keep creating and driving traffic to your amazing content! It’s more valued by advertisers and readers than ever.