The earnings calls of social media giants, traditional media veterans and the agencies that piece them together provides insight into how marketers around the world are adapting, and what their next moves will be.
The Reactive Phase
The last two weeks of March saw advertisers scramble. Some panicked and stopped spending, others pivoted to new channels and sadly some could only focus on business survival. Facebook and Google felt this effect immediately. Not only are their combined revenues so dominant that they mirror global trends, but their ad models are highly flexible giving advertisers the power to pause activity from one day to the next.
Nevertheless, they reported healthy Q1 growth, whilst Twitter saw a minor revenue lift and Snap’s revenue surged an impressive 44% on last year. Turbulence in Q2 seems obvious. Small business is facing extreme economic hardship with both Google and Facebook impacted by this sector. This is further compounded by exposure to the travel and entertainment sectors, which have long been large investors in digital.
With the exception of Facebook’s call on stabilization in April, most ad networks are downplaying expectations of what lies ahead in the second quarter. However, the social media and digital heavyweights are well placed as marketers invest in advertising during isolation.
The Lockdown Phase
Brands still want and need to advertise to people in various stages of lockdown. Choosing channels is the easy part, messaging and content creation is the variable.
WPP’s Q1 trading update references the steep declines underway in outdoor, cinema, magazines and newspapers. None of this is surprising as almost all attention is placed onto screens in our homes. Newscorp is already reporting April declines of up to 45% in parts of their business.
Research agency Kantar reports television consumption is 63% above normal rates. We’ve all been glued to sets at various times throughout the pandemic. Yet television suffers from longer booking cycles, increased ad production costs, and a lack of strong measurability, alongside a relentless need for quality programming and events. ViacomCBS felt a 30% drop in Q1 broadcast ad revenue, largely driven by an absence of live sport.
Large multi-nationals and brand building via broadcast television will continue, but the medium will struggle to attract new advertisers, or command any ad premiums in the mid-term. Marketers are instead doubling down on digital.
Digital not only boasts increasing attention from audiences across web browsing, social media and messaging platforms, it is far more adaptable to the advertising requirement of brands. Whilst we all face the same global pandemic, the variable response between states, countries and continents requires advertisers to be precise with targeting, nimble with messaging, and have constant control of the levers. Our worlds are changing quickly and digital media allows advertisers to adapt, for as long as the state of flux remains.
The Slingshot Phase
Businesses are desperate to open, and consumers are craving consumption. Yet it is clear that lifting of lockdowns will come with a layer of restriction and social distancing. Nevertheless, brands will need to spend to get customers back, and differentiate themselves from every other business trying to do the exact same thing.However, advertising won’t elasticize back to its pre-virus state.
Amongst other big changes, consumers have taken a leap forward in online shopping. Amazon inventory at times ran dry, and Shopify is now Canada’s most valuable public company. The traditional bricks and mortar retailers have seen step changes in their e-commerce propositions offsetting declines in physical store sales. Costco’s April e-commerce revenue is up 85.7% year-on-year, and Target is up 100% online. E-commerce will not retreat, and physical retailers will need to continue investing in their online customer journeys via digital advertising.
We can also expect prolonged uncertainty for 2020 with potential second waves of the virus and changing government administrations. Marketers will be cautious to commit heavily to messaging or channels. This limits complex production shoots and all but rules out long-term media buys. Outdoor and print will recover, largely aided by their growing digital footprints and lighter production requirements. Broadcast television will fall further behind. Digital media and social media will showcase the power of agility as marketers endeavour to refine messaging frequently.
Conclusion
This time last year, eMarketer estimated digital held just over 50% of global advertising, growing to 60% by 2023. Ad spend will undoubtedly suffer from small business closures, category annihilations and CFOs stripping marketing budgets. But from this smaller pie, digital and social will get a far larger piece, far sooner than expected.
This blog was inspired from Forbes.
