Advertising post-COVID 19: Disruption to change dynamics, increased focus on ROMI

On January 21, the World Health Organization issued the first situation report about the coronavirus outbreak in which it reported 282 confirmed cases and 3 deaths due to the disease. Just 2 months later on March 21, confirmed cases jumped manifold to 266,073 and over 11,000 people had died from the pandemic. As of April 13, just about 3 weeks later, confirmed cases have surged to 1.7 million and death toll crossed the 1,11,000 mark. Confronted with an unprecedented outbreak, governments across the world imposed lockdowns forcing billions of people inside their homes.

The unprecedented scale of this outbreak and the restrictions meant to contain the pandemic have impacted businesses in all sectors, extending the spillover to the advertising sector which is highly dependent on prosperity in other sectors.

The COVID 19 pandemic is not just a disease that has killed thousands of people and these lockdowns are not just restrictions on movement but the uncertainty and fear that accompany these will have a long-term impact on behaviors and beliefs of people, which are crucial aspects that advertisers need to keep up the pace with.

Advertisements are essentially messages that a company delivers through a mass-medium with the objective of persuading consumers into making a purchasing decision or to build brand loyalty. To ensure that it is done effectively, advertisers need to keep track of changing consumer behavior to send out a message that informs, persuades and reminds customers about the brand or its products and its benefits compared to those of competitors.

Another and more immediate threat to the industry is cancellations of sporting events and halted production of TV shows and movies, which could have a profound impact on TV advertising.

Broadcasters who follow a programming calendar and organize gatherings of advertizers and media professionals to sell their ad inventory are in trouble as the outbreak has forced governments to cancel large gatherings. Sports broadcasters have an even bigger problem on their hands as the industry struggles to decide who will cover the revenue losses of sold and unsold ad inventory of canceled events.

Short-term impact

Recessions aren't good for the advertisement market and one triggered by a pandemic could make things worse for the sector. Advertisement budget cuts are among the initial cost-cutting measures that companies adopt and the trend might have already started.

The impact on advertisements varies across sectors and some sectors have even made their advertisements more aggressive but the market as a whole is down because some brands just don't see the point in advertising when their supply chain is disrupted and they can't fulfill demand if there is any. While others fear giving out a wrong message and are steering away from the coronavirus.

• Digital advertising

Internet usage has increased as lockdowns force people to stay inside but social media platforms and news publishers have reported weakened ad sales despite increased traffic as companies slash marketing budgets and show reluctance in buying ads against coronavirus coverage for fear of tarnishing their brand. The digital market is first to take the hit because ad spending is easily adjusted compared to traditional media.

Facebook and Twitter have said that the COVID 19 pandemic has impacted their advertising revenue despite the boost in active users due to the lockdown.

"The COVID-19 impact began in Asia, and as it unfolded into a global pandemic, it has impacted Twitter's advertising revenue globally more significantly in the last few weeks," Twitter's Chief Financial Officer Ned Segal said in a statement.

"We don't monetize many of the services where we're seeing increased engagement, and we've seen a weakening in our ads business in countries taking aggressive actions to reduce the spread of COVID-19," Facebook said in a statement.

News publishers have also reported similar impact despite attracting increasing traffic as people in lockdown seek information about the pandemic.

Publishers, advertising agencies and ad-tech firms are trying to convince advertisers to reconsider their budget cuts arguing that supporting digital platforms is crucial at this time because they are the fastest way to spread awareness. Publishers also argue that shunning advertising at this time would mean losing access to engaged readers and also impact long-term purpose-driven advertising strategies.

Forecasts for global advertising growth this year have been revised down by USD 20 billion since March 12, according to market research firm eMarketer. It estimates ad spending growth of just 8.4% in China, where the outbreak began, the slowest since 2011.

• Traditional advertising

In traditional advertising, television network executives generally hold a meeting at the start of important advertising sales periods. The 'upfront marketplace' meetings are attended by major advertisers and the media to finalize deals for commercial advertising slots well before the broadcast.

But not all slots are sold during these meetings, network executives reserve some of the air time to sell in the 'scatter marketplace' at a later time closer to the broadcast. This air time is essentially a gamble that might sell for thrice the price compared to upfront sales depending on ratings on the show and the economy, or executives might have to offer deep discounts to sell off the air time.

The outbreak has disturbed the broadcast calendar of the industry, throwing all stakeholders into disarray as upfront marketplaces could not be held due to the suspension of large gatherings. Some broadcasters are planning to hold virtual meetings but analysts are skeptical about its success. Depending on the length of the pandemic and the uncertainty of an upfront, perhaps all of broadcast television will be sold in the scatter marketplace in 2020-21.

Cancellations or postponement of sports events is also causing big losses to advertizers and broadcasters alike as the industry scrambles to respond. Unsold ad inventory of broadcasters could complicate the deals with sports leagues which might still expect to get paid even if events are canceled. The coronavirus effect on live sports, one of the crucial categories that continue to attract large audiences and therefore advertisers to traditional television, could "accelerate a meltdown" for TV advertising, said Richard Greenfield, a media analyst at Lightshed Partners.

Long-term impact

Advertisements have been around for decades but have evolved over time to become more efficient and targeted. What started off as campaigns with the sole objective to increase sales are now a part of broader creative campaigns to build connections and loyalty among customers.

In 2020, advertising is easier than ever and is not just limited to big brands with deep pockets. The rise of digital ad platforms has made it easier for even small businesses to advertise to local as well as the global audiences in a targeted manner.

The coronavirus outbreak could bring another disruptive change in the advertisement market, both due to the changing behavior of the audience and due to the changing marketplace as advertisers rethink traditional advertising.

• Digital advertising is the future but there are shortcomings

Mandated quarantines and social distancing across the globe as a result of the pandemic means that people are spending more time inside and getting more comfortable in embracing technology. This will further cement the benefits of digital platforms and accelerate the shift of advertisement budgets from traditional advertising.

The billboards, newspaper ads, TV and radio ads still remain relevant and will still be sought for in the future. But more technological developments can be expected and more data sets on the audience would be considered by advertisers to ensure maximum Return on Marketing Investment (ROMI).

The outbreak has also exposed shortcomings of digital advertising as websites suffer unintended consequences due to the use of advertising "blacklists" by advertisers. Advertising 'blacklists', as they are informally called, are used by brands to stop ads from appearing on web pages or URLs that include certain keywords. The usage of these advertising "blacklists" exploded after the 2016 US election when brands sought to avoid polarizing news coverage. "Trump" was the most popular blacklisted keyword until "coronavirus" overtook it earlier this year, with more than 3,100 advertisers blocking it as of March, according to ad-tech firm Integral Ad Science.

But these blacklists often bring unintended consequences and block ads on some webpages that attract the target audience of advertisers. News publishers, advertising agencies and ad-tech firms are feeling the impact of these blacklists due to extensive coverage of coronavirus and have made many of them speak out for the required changes.

"Factual news coverage on the global pandemic is essential and must be supported," Reuters CEO Michael Friedenberg said. "It is incumbent upon the ad tech and verification industry to ensure that trusted news from reputable sources about COVID-19 is not blocked by safety filters."

Ad-tech companies have called for developments of more efficient tools that help stop ads from appearing on only the webpages that could tarnish a brand's image. Trade groups representing news publishers have also raised concerns about the use of keyword blocking practices. "The leaders that need to be speaking out are the advertising brands and the CMOS and I'm starting to see some of that," said Jason Kint, CEO of trade group Digital Content Next.

• Brand-building is crucial

Experts have said that brand-building will matter more than ever after the coronavirus outbreak and companies that have emphasized purpose-driven marketing will have better chances of success in connecting with consumers.

Companies that are taking steps like using their manufacturing units to make essential goods like sanitizers, masks, and ventilators to help people during the crisis are expected to positively influence consumer sentiment.

"When the storm passes, brands that did something to help people instead of just talking or raising awareness about the crisis will have built a stronger connection with people," Burger King's CMO Fernando Machado said. "More people are craving actions rather than stunts."

• Increased focus on ROMI

Traditional forms of advertising like event marketing will also struggle as people start to realize the potential of developments in telecommunication. "The experiential bubble is going to burst with both chief marketing and chief financial officers saying, 'Show me the ROMI (return on marketing investment)'," Carbon CMO Dara Treseder said. "Companies are beginning to realize that you can have successful events virtually, and in any case, it's so much easier to prove the ROI around virtual events than live events."

Both upfront and scatter marketplaces are expensive affairs being run for several decades. The rise of over-the-top (OTT) platforms has raised questions on the viability of these marketplaces especially since these new platforms offer similar benefits without the tedious process. Besides, measuring ROMI is much easier with digital platforms and so is proving the efficiency of those hefty advertising budgets.

Centre of Excellence on Emerging Development Perspectives (COE-EDP) is an initiative of VisionRI and aims to keep track of the transition trajectory of the global development sector and works towards conceptualization, development, and mainstreaming of innovative developmental approaches, frameworks, and practices.