We are all in this together.
In these unprecedented times, it is hard to go more than an hour without reading an article, having a discussion or watching a story about COVID-19. As we are all aware, this pandemic is causing declines in stock markets and putting the global economy at unparalleled risk. In a time of uncertainty, it is natural for those of us in the advertising industry to wonder about the impact on digital media spend, especially publishers who rely on advertising as their main source of income. We want to dig into what we are seeing, and how we expect things to shake out.
Where are we now?
Advertisers depend on user behavior to determine their spending habits. As is well documented (see, e.g.,Business Insider and Digiday), during this time, advertising spend will vary wildly depending on the specific industry. Certain verticals – Sports and Travel for example – are seeing a major decline in consumer spend, as leagues around the world have paused operations and travelers are cancelling planned trips and hesitant to plan future travel. Looking at some specific advertising verticals, the difference in volume and price trends are fairly staggering.
Here’s a look at some trends for Travel advertisers over the last 30 days:
Source: Google AdX Spend By Advertiser Category on Freestar Publishers
Unsurprisingly, Travel impressions and CPMs are down pretty drastically – over 40% – in the last 30 days. We are not sure if this is the “bottom”, but it’s clear that this segment of advertisers have already pulled back spend significantly. Other verticals have not been hit as hard, such as the Jobs vertical. That likely aligns with what’s happening in the world as employment in certain industries is unfortunately being hit very hard and people are quickly looking for new work.
Here’s a view of the Jobs advertising vertical over the last 30 days. While still a drop in CPM, this isn’t nearly as significant at 13% while impressions are climbing rapidly.
Source: Google AdX Spend By Advertiser Category on Freestar Publishers
Where are we going?
With COVID-19 being a once-in-a-century global health crisis, it’s impossible to know the impact this pandemic will have on our industry. The long-term effects are obviously uncertain, but we can look to what happened in our industry during the last economic downturn and the early results of this year. In 2008, the recession led to a 13% decrease in ad spend overall, but only accounted for a 2% decrease in digital ad spending. In China, the early epicenter of the COVID-19 outbreak, commerce has been down 20% in the first two months of 2020, but eCommerce was actually up 3% according to GroupM. Finally, overall U.S. digital media traffic has been increasing rapidly over the last several weeks as people are spending more time at home.
Overall, impressions are up and we anticipate they will likely remain fairly strong as more internet users remain home for longer periods of time.
Broadly speaking, we have seen a mild decrease in CPMs at Freestar in the last two weeks while overall traffic has increased. However, we have a very diverse mix of websites we work with and there are some verticals that have been hit hard in both volume and CPMs while some other verticals are reaping the benefits of materially increased traffic. Overall, impressions are up and we anticipate they will likely remain fairly strong as more internet users remain home for longer periods of time.
With regard to price, CPMs for Freestar publishers as a whole started a slight downward trend this past weekend, as you can see below:
Source: Ad Network Aggregated Reporting on Freestar Publishers
We know the expectation is that March should be a stronger month than February, but through Sunday, March 15th, CPMs were down slightly month-over-month. This week, we have started seeing more of an impact with CPMs down 13% month over month. We should put this in context though, as this is the first full week where much of the U.S. workforce has shifted to working from home, and most of the nation’s schools have closed. This initial shock to the system is expected, given the chaotic state of the world.
It’s tough to say if this is the new normal or if we’ll see the market further adjust. As people settle in and we expect the stock market’s volatility to start calming down after the worst selloff since 1987, advertiser budgets will certainly shift going into Q2. But we believe they will be shifting in our favor. In the last decade, both consumer attention and advertiser spend have shifted dramatically toward digital media, with 2019 expected to be the first year where ad spend on digital media exceeds traditional media. As a result, we are cautiously optimistic that digital spend, particularly via programmatic channels, will weather the storm far better than traditional media. The large budgets that have already been allocated to sports, other live events and out of home advertising will, at least in part, be moving to other advertising mediums. Programmatic is the obvious choice to benefit from that shift given its drastic advantage in targeting, measurement and ability to optimize toward specific outcomes in real-time.
What we know is what we can control
As always, we are staying in very close contact with our advertising partners; we want to know what they know, and we want to know it now to stay ahead of the curve. The less uncertainty, the more we can use data and our vast experience to steer this ship through choppy waters. For our publisher partners, we are here to talk business, see how you are holding up, and provide you tips on how to keep your kids busy while you work at home (here’s a fun idea, for instance).
Now is not a time to panic and we at Freestar certainly are not. While the world around us continues to change every day, for the most part, it is business as usual for us. Our staff has been largely remote well before the pandemic hit and, as many of you know, video conferencing has been a way of life for us for years. Our typically office-based employees have adjusted seamlessly to working from home and it has been quite fun to see the artwork and ceiling fans in their homes! We also have not stopped adding incredible talent to our team with two new yield managers and our first General Counsel starting in the next two weeks to provide you even more support and guidance.
We always strive to be proactive versus reactive and deliver the best customer experience our partners have ever had, so our account teams have been doubling down efforts to reach out and connect with our publishers. Knowing that more users are at home and likely spiking traffic, we are also keeping a close eye on site speed in order to ensure user experience is top-notch.
There is no telling what is going to be the reality in the upcoming months, but what we can say is that we are all in this together. If there is anything at all we can do to help support you, professionally or personally, please don’t hesitate to reach out.
Kurt Donnell, Freestar CEO
