Is April the New January? – Marketplace Pulse Insights
Thanks to everyone who read, and provided feedback on, last week’s first edition of “IX Marketplace Pulse.” If you have any items you’d like us to consider for our next edition, please email MarketplacePulse@indexexchange.com.
Stay safe, happy and healthy.
EVP, Global Marketplace Development
What We Learned This Week:
The prevailing trends continued last week and largely flattened out.
- When comparing March 29 to two weeks prior (March 15), we saw significant drops in the average bid price, with certain categories like Entertainment getting hit harder than others (e.g. sports events were cancelled).
- Mid-March marked a period of stark reactions: the majority of marketers that wanted to take action against their buying strategies did so between the second and third week of March.
- However, we typically do not see large variability in average bid price for a given day of the week. So when we compare March 29 to the average bid price over the last two weeks, we saw relative stability.
- Interestingly, in some cases, we saw resilience as CPG started to see growth (suggesting CPG marketers are already retooling, as expected).
- This illustrates how most buyer reactions have happened in waves: big changes happened in the middle of March as marketers jumped to react. Once that happened, the second half of March showed a story of quiet(er) stability with flat prices. Perhaps the calm before the Q2 storm?
Hand-wringing in Anticipation of a New Quarter
Every buyer that I’ve spoken to over the past week is anticipating a slow start to April. The problem is quantifying exactly how slow overall. Anecdotal, not data-based, estimates from my conversations range from a 10-50% reduction in topline ad spend. That is a massive range. Take solace in the fact that when you are talking about a range that wide, it really means that no one has any idea of the real impact. And how could you? There is no precedent for this. It’s not simply a recession, or a global event, or anemic seasonality. It’s all of those things and none of those things, really. There will be nothing in the past to lean on as a proxy for what will happen. The only thing I know for sure – something will happen. And we’ll know exactly what it looks like in a few days.
The first step is to control what you can. For most of us, that comes down to knowledge. Sales, account management, traders, and ad ops professionals: you need to dig deep into the numbers. Understand where your business is resilient vs. vulnerable – and know it to the letter. If you aren’t deep into the weeds, you won’t notice when things change (good or bad), and you won’t be able to react quickly.
While that sounds bleak, I am not personally feeling bleak. April is just going to feel more like January from an ad spend perspective (certainly not from a life perspective). Every year, January drops precipitously from the highs of December. We don’t panic then, nor should we now. Each January, and Q1 for that matter, takes time to come back online. Campaigns need to be booked. Budgets finalised. Creative tagged. It takes time, but the machine gets going again. This is not dissimilar to what I see happening with brands rebooting in Q2. In 2020, we are going to have two Januaries. This is great because that means I get two birthdays!
This is a resilient industry, and we have the luxury of knowing we need to prepare ourselves. This is more notice than most get, and that’s a gift. Let’s not waste it.
I expect Auto to be the most impacted in Q2 (other than the obvious categories that have already dipped). They are scrambling to not only reboot messaging but to understand what consumer demand is like in this turmoil. Consumers like to test drive cars – that’s hard to do from home. High consideration items that rely on a highly transient population just have more headwinds than most. With “Stay At Home” guidelines in place through the end of April, I won’t be surprised if this sector stays on the sideline for the month.
This is going to be an interesting category to watch. Some companies have achieved overnight brand recognition since the pandemic hit (Zoom in particular), and they would be wise to help shape their new relationship with consumers, not just business decision-makers. I anticipate many other category leaders will start experimenting with programmatic due to its relative ease to activate and its attractive pricing. It’s not clear to me if this investment is going to be opportunistic or represent a new normal, as some behaviours that shifted during the pandemic will remain after we go back outside. I wouldn’t be surprised to see one or all of Microsoft Teams/Skype, Slack, Google Duo/Hangouts making stronger plays during this time.
The Long Tail
Most of the walled gardens and major platforms have revised down their guidance to Wall Street. Despite record traffic, they expect a significant hit to ad spend. However, I can’t help but think this is because they have been so effective at garnering disproportionate amounts of ad spend from small and medium-sized businesses that have been decimated by the pandemic. Our industry, in particular, has often struggled to capture budgets from this sector. Minimums are prohibitive, and the platforms are fairly complex. As a result, it’s possible their exposure is outsized relative to most companies in our sector.
Trends that Remain
Like I mentioned last week, buyers and marketers need more time to transition into new messaging and strategy. They are literally trying to refuel the plane mid-flight. The good news is that this is still largely the plan based on my conversations over the past week, but I can’t emphasise enough that this is not a trivial change. It will take time. We may not see the impact until May or June.
Your biggest asset right now is empathy. Every link in the chain should be focused on empathy. Brands need to be empathetic in their messaging to consumers. Media companies need to be empathetic to brands who are trying to accomplish difficult goals with no roadmap. Ad tech companies need to be empathetic to its users. It’s a virtuous cycle of empathy. A flywheel of kindness and consideration.
Strategies for Resilience
Here are a few strategies we suggest to help you get through the April slump:
- Brace yourself for April 1. It won’t be pretty; but it’ll pass. Focus on things within your control and lean into conversations with your preferred partners.
- It is Spring after all. Use this opportunity to do a little Spring cleaning. Brand blocks, ad category restrictions, and floors all serve to hold back demand. In a market that currently lacks liquidity, unlocking ad spend is a worthwhile exercise. As things return to normal, you can always roll back any changes.
Optimise. Programmatic on a good day has more supply than demand. With consumers engaged at record levels, supply has skyrocketed. Demand, on the other hand, has gone backwards. This has created an even greater wedge between supply and demand. Use this moment to make the changes you may have been holding out on. That ad slot at the bottom of every article that pulls in low viewability scores and underwhelming CPMs – cut it. Make changes like this now. Your buyers will appreciate it, and you’ll be happy you executed quickly.
- Cost savings: There are a number of ways to show value to your clients. Those that are sticking this out – or those in the “retool and restrategize” category I mentioned in our last newsletter – could see benefits in a softer market. Lean into programs that provide cost savings, and show marketers that you’re looking out for their best interest.
- Optimising CPMs for value. Much like January, there is going to be softness in April that smart buyers can use to their advantage.
- Lean into investment opportunities and discuss with publishers the best way to bring savings back to buyers who are still in the game. It’s a good time to begin re-engaging with key publishers and partners.
- Strategy focus
- Take the time to get your messaging right. This is the easiest thing to say; it’s definitely the hardest to do.
- All brands should be rethinking their audience strategy. The behaviours of your customers have changed and your strategy should too. Don’t be afraid to experiment.
- eCommerce. Focus on Point-of-Sale and ensure you streamline processes for consumers to purchase. Invest in shipping offers and programs. My own, non-data driven take, is that people are less price-sensitive than arrival sensitive. They want speedy delivery more than price.
It’s easy to be overwhelmed by the challenges we have ahead of us as an industry, but we have to remember they’re pretty small in the grand scheme. It’s helpful to have some perspective and realise that worrying about ad spend in some ways is a luxury unto itself. In some cases, the pandemic is merely accelerating changes that were well underway in our industry. In other cases, it will be a time of great experimentation which often leads to innovation and better value. Either way, we need to embrace the changes upon us and lead it rather than be a footnote in its story.