Digital Ad Business Withers Under COVID-19 Crisis

The ripple effects from the COVID-19 crisis continue to spread throughout the business world, with the advertising industry now feeling its destructive effects. Those were quantified yesterday in a  new Internet Advertising Bureau survey that shows a steep decline expected in ad spending across digital media

The IAB surveyed more than 200 U.S. media properties programmatic providers and media platforms. By nature of its membership, TV was not heavily represented. In fact, TV advertising may come out with less damage than newspapers and print media. But for digital ads, 98 percent of publishers are expecting a decrease in revenue in 2020. According to the survey, news publishers were the most vulnerable with 88 percent of the survey respondents saying they’d had ad buyers ask to cancel campaigns; 86 percent said advertisers had asked to pause ads. The IAB said effects are being felt across ad-supported websites, “as well as companies that provide technical infrastructure to support selling ads” such as network services, brand safety and attribution services.

The IAB survey doesn’t come as a complete surprise, although the 98 percent number is steeper than many observers expected. At the end of March, Gartner reported that 65 percent of chief marketing officers (CMOs) surveyed were planning to cut marketing budgets as a result of business disruptions from the coronavirus. The survey showed that 34 percent of businesses expect “reduced levels of business operations” due to COVID-19, 10 percent expect operations to be severely restricted, and 2 percent will cease business operations.

While digital campaigns jumped out in terms of actual quantification, the toll on the newspaper business — already in crisis over the past two years — could be more devastating. L.A. Times President and Chief Operating Officer Chris Argentieri said on Wednesday (April 15) that the newspaper had lost more than 33 percent of its revenue since the crisis hit in earnest last month. “The Times has lost more than one-third of its advertising revenue and expects to lose more than half of its advertising revenue in the coming months,” Argentieri wrote.

TV, although the production costs and advertising time costs are much higher, may actually come out ahead in the crisis. According to industry media trade Digiday, TV time is selling at bargain basement rates during April due to an early spate of postponed campaigns. But, “At the same time, some advertisers that had pulled out have begun to push money back into the TV ad market,” the report said. “We have clients that, in the initial couple weeks in March, wanted to get off the air and are now slowly coming back on and readjusting,” said one agency executive.

While the COVID-19 pandemic has affected the TV ad market in April, “it is unclear how long the change will last,” the report noted. “In contrast to the April inventory surplus, May and especially June are slated to see an overload of advertiser demand, the agency executives said,” according to the report, which quoted another agency executive as saying, “June is completely tight right now because everyone shifted to the end of the second quarter.”

It would make sense that lower costs could work in favor of non-traditional internet advertising, including Google Ad Words and social media campaigns. The wild card here is the amount of small businesses that feed the revenue of ad words and social platforms. Neither Facebook nor Google break down their revenue by business size. If small business start dropping appreciably the client base will drop. If that happens, the bidding price of ad words and social media ads could drop as well. Would bigger companies jump on those more affordable opportunities? Time will tell.

“Both Facebook and Twitter (TWTR) have already warned that they will take a hit from the downturn. Alphabet’s Google (GOOGL) no doubt is seeing the same effects, but so far hasn’t discussed the matter. Facebook’s disclosure was on the vague side. The social network said in a blog post that it has ‘seen a weakening in our ads business in countries taking aggressive actions to reduce the spread of Covid-19.’ Traffic isn’t an issue — Facebook has seen record use almost every day, but it isn’t monetizing much of the growth on platforms like Messenger and WhatsApp,” said Barrons.

Overall, viewership of most every media is up during the coronavirus crisis, although consumers have widely differing opinions of the trustworthiness of sources, as seen in the PYMNTS COVID-19 tracker. Therein, however, lies another problem. Brands typically shy away from bad news. But in this case consumers don’t mind seeing brands in the context of the coronavirus.

“It may be understandable for advertisers to shy from “negative” or “anxious” content like coverage of a pandemic,” says eMarketer. “But March 2020 research from Integral Ad Science suggests those concerns may be misplaced: Just 16% of US internet users surveyed said they would have a less favorable opinion of a brand whose ad was adjacent to coronavirus-related content. Almost eight in 10 respondents said such placement wouldn’t change their view of a brand.”