We are seeing ad rates fall across the globe. The latest figures from the end of March we have to hand from our ad partners show a 45% drop in eCPM from Italy, the most affected region. The UK is showing a 40% drop. The US is climbing with a 15% decrease YoY, and Australia has had a 31% drop in eCPM year on year. So, why are eCPMs down so much? Auction pressure is how programmatic advertising works. The more lucrative users there are for advertisers to reach, the more a given advertiser is willing to pay to get that user.
COVID-19 has done two things. Firstly, it is decimating some industries; all Travel advertisers have paused their campaigns, and Automotive & Real Estate may still do some branding campaigns, but again most are pausing campaigns. In total, these makeup about 35% of total online advertising spend. When this revenue is taken out of the mix, CPMs naturally drop.
Secondly, it’s increasing the lack of consumer confidence. There is uncertainty – many people have lost their jobs, whilst others could lose it at any moment. People are tightening their belts and refraining from making large purchases online. This means that data points that advertisers receive on the buy-side indicate that users are not as lucrative anymore, so the prices they are willing to pay for a given user drops.
So, what does the new world look like? 95% of consumers are spending more time on in-house media consumption activities, as they are adapting to the “new stay at home economy”. Personally, I have transitioned to working from home and love it. I get to spend more time with my wife and kids, and I can get food when I want, I do more deep thinking with less distraction.
Arthur C Clarke famously described in 1976, that there would be no need for executives to run businesses from an office in the 21st Century, and they could live remotely and conduct normal business. I believe this is now finally here.
And with this, we can already see many publishers adapting. Publishers like The New York Times, Wall Street Journal and Bloomberg News have lifted their paywalls to give readers access to coronavirus related content. Then some have built new products to adapt with the shift in consumer trends, like PopSugar creating a new health app or b2b publishers creating virtual events to weather the storm.
When they realise the cost savings and relevant efficiency from operating in such a way, there will be no way back. Added to that consumers are slowly getting used to the new normal – after the top of the curve is hit, they may start to get some more confidence and look to purchase online. These consumers may have never purchased anything online before but need to now out of necessity. With these changed business conditions, online trade will explode.
There is always going to be the case of whether it is worthwhile to continue maintaining existing content creation levels. However, since the last global crisis, the 2008 recession, technology has gotten better and more people are online than ever before, as we saw the likes of Facebook, Software as a Service and SalesForce rise like a phoenix. Combine that with the fact that today’s crisis is forcing everyone to be home and it’s somewhat of a perfect storm for publishers and content creators.
How is this going to impact programmatic moving forward? It is anticipated that advertising global online spend will reach nearly $100B by 2023. Programmatic will account for 75% of this. If we are going into a prolonged depression and retail sales drop to a $4 trillion industry by 2023, and $2 trillion is transacted online then using the same ratio, 8% of online ad spend versus 2019 sales the online industry will be a $160B industry meaning programmatic jumps from $75B to $120B. So, a bit of short term pain will eventually lead to a prosperous programmatic industry.