Coronavirus reshapes ad spending. Google gains.
When the pandemic hit in March, many of my friends and clients from my previous life in advertising started getting really worried about the possibility of a layoff. The pandemic had caused consumer spending to nosedive. Marketers and media buyers were scrambling around, overhauling marketing plans and finding novel ways to manage the disruption.
The decline in shopping had an immediate backlash in ad spending, resulting in advertisers cutting as much as 60% of ad spending. My ex-colleagues and I would later learn about how 76% of companies plan to slash their advertising budgets. In the months that followed, layoffs and furloughs started hitting ad agencies. One by one our friends and clients were losing their jobs.
But just as we thought that things were going to get worse, digital marketers started to notice a shift in trends. Homebound consumers started doing more shopping online. According to TechCrunch, the pandemic had accelerated a shift to e-commerce by five years. As a result of this, small and large companies started to place more emphasis on digital ads. Companies that were slow to turn to digital ads were forced to come online.
Online ads are more cost effective than many other media platforms. More importantly, marketers are able to accurately target audiences and measure their ad performances. These benefits became imperative as advertising budgets started to shrink and consumers started spending significant amount of time at home and in front of their laptops.
In an unexpected turn of events, digital advertising emerged as an unlikely winner in the pandemic. It also highlighted that ad spending lies in the hands of several tech giants at the expense of other conventional media platforms such as print and television. A couple of years ago, digital advertising made up a third of ad spending in the US. According to GroupM, a global ad agency, it was about the same size as newspapers, radio, magazines and local TV combined. But in 2020, the total of these four categories had shrunk to one-fifth of US ad spending.
With high-tech algorithms for targeting audiences, companies such as Google, Amazon and Facebook have excelled in showing performance for ads during the pandemic. And with good performance comes more ad dollars as marketers shift spending to channels with the highest ROI. A report by ad agency WPP mentioned that, “Digital advertising has been a remarkable bright spot in an otherwise dark year for the advertising industry.”
Google’s quarterly report showed a QoQ increase of 10% to $38 billion. Google has benefitted from product searches that typically take place in malls pre-pandemic. In addition, YouTube viewership jumped by 75% due to an increase in news content. Millions are turning to YouTube as a source of information, searching for news clips and vides about the pandemic. “I never thought we’d have so many videos of hand-washing, for example,” said YouTube CEO Susan Wojcicki. New content on YouTube has include DIY videos on how to make your own face masks, exercise routines at home, how to cut your own hair and trend on “life in quarantine”. This has prompted even more ad spending on YouTube. Barclays analyst predict that there would be continued acceleration in the digital ad space.
JTan — fascinating article! It’s really interesting to see how digital advertisers emerged as an unlikely winner during the pandemic! I’m really interested in some of the trends you note at the end of your article — how increasingly people are turning to YouTube (and as I was discussing with a friend last night — maybe even TikTok) as an actual source of information. How do you think these trends are going to change the landscape of digital advertising?