The rapid global spread of COVID-19 has impacted every sector in one way or another. Perhaps one of the hardest hit areas to date has been digital advertising. While perceptions of advertising may not have changed drastically from a consumer perspective – it’s reported that 92% of consumers believe businesses should still be advertising during this time – a mix of both financial and economic uncertainties has significantly altered brand behaviours, with 62% of businesses amending advertising strategies as a result.
Research shows that the biggest change businesses are making to their marketing strategies at this time is by reducing advertising budgets. In fact, the data suggests that budgets are now beginning to show signs of dipping to levels not seen since the 2008 financial crisis. This has been sparked, of course, by reduced demand from end consumers as many face unprecedented financial challenges and professional uncertainty themselves.
In total, just under three quarters of all UK organisations have noted a decline in demand for products and services since the start of the outbreak. Globally, it’s estimated that businesses will spend $45 billion less on digital advertising this year as a direct result of the coronavirus pandemic.
So what does this mean for today’s digital advertising platforms? It is perhaps safe to say that all channels will experience a decline in ad revenue, but will they all be affected to the same extent? Maybe not. In fact, right now it’s looking as though there are one or two top platforms that are excellently equipped to weather the coronavirus storm.
While all aspects of advertising have felt the impact of COVID-19, some areas are faring better than others. Outdoor advertising has been hard hit as a result of widespread stay-at-home orders, as has digital advertising. Some other forms, however, such as traditional media, have so far been spared the brunt of the pandemic.
The continuity of traditional advertising witnessed so far is understood to be due to the more complex nature of amending such contracts. Media analyst Rich Greenfield, from Lightshed Partners, notes that ‘digital platforms are feeling the pain soonest, given the relative ease of pulling ad spend versus mediums such as television’.
This significant negative impact on digital platforms that analysts are noting can be backed up using recent research into changes in ad spend. Over in the United States, 47% of businesses have reduced their display ads budget, while 45% have reduced how much they allocate to social media advertising. Around 43% have minimised video ad spend. Interestingly, however, less than one quarter of businesses have reduced how much they invest in search advertising through channels such as Amazon and Google.
Of the major players in the world of digital advertising, social platforms appear to be amongst those struggling the most under the current circumstances.
In a recent press statement, Twitter CEO Jack Dorsey said that while they’re ‘seeing a meaningful increase in people using Twitter… the company expects Q1 revenue to be down slightly on a year-over-year basis’. Indeed, Twitter has seen a 23% YoY increase in users, 8% of which has come since Q4 2019. Yet the firm has advised investors to disregard previously published forecasts which estimated $820 to $885 million in revenue would be generated.
And it’s a similar story for Facebook. While the number of messages sent through the platform rose by 50% throughout March 2020, the organisation also notes that it has ‘seen a weakening in our ads business in countries taking aggressive actions to reduce the spread of COVID-19’. This ‘weakening’ is understood to equate to a $15.7 billion reduction in forecasted revenue.
But, why are these platforms struggling the most?
It’s understood to be due to the type of ads most regularly employed through these channels. Facebook accounted for half of all global display ad revenue last year, which is a subsector of the industry seeing the biggest decline in spends. Additionally, the problem isn’t rooted in just where social’s display ad revenue comes from, but who it comes from too.
It’s reported that around one third of Facebook ad revenue is generated by industries that have seen some of the biggest disruption to operations during COVID-19: travel firms and the movie industry. The network is believed to be anticipating a $50 million loss as a result of the decision to postpone the latest Bond release, No Time to Die.
Amazon, and to a slightly lesser extent Google, appear to be performing better from a digital advertising perspective than their social counterparts. The question is… why?
Interestingly, while display ad spend has been reduced significantly, far fewer businesses are cutting their search advertising budgets. In fact, while 24% are reducing their search ad allocation, the same number is maintaining investment in this area. Quite simply, search advertising isn’t showing the same level of decline as visual.
American financial services company Cowen & Co. has stated that Amazon’s digital advertising platform is ‘generally less exposed’ than others during this challenging time because of its strong product search foundation. With consumers spending more time at home and being deterred from venturing out to the shops, Amazon’s online shopping channel is becoming the ‘go to’ resource for those needing vital products.
While Amazon’s digital advertising platform does offer display ad and video ad options, it is dominated by search advertising; that is to say the display of sponsored brands and products that are relevant to the specific terms being entered into the integrated search engine by users. With Amazon remaining one of the few retailers still offering normal services, or at the very least near-to-normal services, it’s maintaining a strong position. In fact, it’s believed that ad spend on Amazon has declined by as little as 6% in total.
Google’s situation may not be quite as strong, with the travel industry making up some of the search engine giant’s key players. However, it is understood that the impact on Google’s digital advertising platform has been significantly muted due to its core search ad foundation which is playing a big role in helping the channel ride the wave.
Perhaps one of the biggest reasons why Amazon is faring better at this time is because of its online prominence. “With the closure of physical stores, consumers are relying more and more on retailers who are continuing to sell online” says Alex Timlin, Senior VP at customer engagement platform Emarsys.
Indeed, many stores have either been forcibly or voluntarily closed, with fashion retailer Primark’s monthly sales figures dropping from £650 million to £0 as all global stores shut their doors. A huge portion of shopping has now moved online, and Amazon is not only likely to see a notable increase in sales but also a minimised and muted impact on ad revenue. This comes as businesses adapt their strategies to ensure they’re investing in platforms that are retaining strong traffic figures while physical footfall is nonexistent.
Another important factor to consider when analysing Amazon and Google’s stronger-than-anticipated ad performance during this time is the evolving needs of consumers. For example, analysts have stated that sales of footballs during Coronavirus lockdown are up more than 2000% YoY as families search for garden-friendly activities for children, while the rise in demand for soap dispensers is almost 1000%.
It’s clear that there has been an extreme and very instantaneous shift in buying trends, and no platform is better placed to monitor and adapt to these changes than one with foundations in search advertising. Amazon and Google have a unique insight into what consumers are looking for during crisis, giving them an ability to optimise ad placement and deliver improved results for brands.
Although Google isn’t a direct retailer like Amazon, it’s search core still enables it to monitor real time retail trends, and utilise this data for ad optimisation. Like Amazon, Google is using this to position itself as an effective advertising channel during COVID-19. Google is also demonstrating a strong commitment to its clients, providing a total of $340 million in ad credits to SMEs who are unable to provide goods at this time.
Overall, while Amazon and Google are certainly leading the way, the coronavirus pandemic certainly doesn’t mark the end of the road for other digital marketing platforms. As restrictions begin to be lifted, many businesses will be focusing on rebuilding their customer base as rapidly and as effectively as they can, and that means employing digital ad campaigns that can reach the right people quickly.
And even though we’re not quite there yet, things are looking up. Facebook has announced that it is beginning to see ‘signs of stability’ as it exceeds projected revenue growth for the quarter. While Q1 2020 has been noted as the platform’s slowest period of growth, revenue was up by 18%; a 2% increase on analysts’ predicted figures.
As the world begins to return to a new normal, diversity in the use of digital ad platforms will expand. Right now, however, businesses are naturally looking to filter their budget into the most effective platforms during crisis, and research suggests that those platforms are the ones based in search advertising, such as Amazon and Google.