Jon Fletcher 2021-02-19

Ad revenue seasonality among the chaos of COVID

Digital advertising revenue generally follows a familiar yearly pattern. It's low at the start of the year when advertisers plan out their budget. It creeps up over spring, before a dip in summer and major spikes around Thanksgiving, and Black Friday. There's a brief pause, then another major spike in the lead-up to Christmas. 

This seasonality helped publishers forecast revenue and maximize profits at times of high demand. But like everything else, the COVID pandemic disrupted this familiar pattern.

2020: The great disruptor 

Before the COVID-19 pandemic, eMarketer predicted that search ad spending would rise by 14.4% in 2020. The reality was there a dip in spending of between 15-20% across the majority of advertising sectors in 2020. 

The start of the pandemic coincided with the time when advertising spend usually starts to ramp up for the year. While publishers saw a pronounced increase in traffic, the increase in advertising spend didn't arrive and dipped when it was expected to rise.

Impact of COVID-19 pandemic in March indicated by the dotted line

When looking at the larger picture, compared with 2019 it's clear how advertising revenue decoupled from the visits in 2020. Established and predictable patterns went out of the window.

Publisher visits (orange) and eCPMs (purple) in 2019 compared with 2020

And the disruption is not over. While the world is learning to adapt, and potentially starting the climb to overcome the pandemic, the pattern will not just snap back into place. Advertising revenue will be fundamentally changed and publishers need to make sure they understand the new paradigm. 

In a Pivotal survey of ad agencies, 'only 4% said they had kept the majority of ads running when asked in March. In April, that figure had reached 15%. And those surveyed had mixed feelings about their retail clients' ad spend for the summer and fall seasons, assuming most of our retail clients are restructuring their debt currently and have no idea what their ability to market will be in. ''

New short-term patterns will emerge 

Looking at the pattern in 2020, there was an assumption that advertising revenues would be significantly lower, but roughly follow the same pattern of seasonal rises and fall as usual. 

But, as COVID stretches from a single catastrophe and into a new reality that gets absorbed into daily life there are some changes to the pattern of ad spend we can expect to see for years to come. Marketing and advertising predictions suggest that overall, despite the volatility, the overall trend in advertising spend is still in a positive trend. 

They now expect advertisers will spend $ 99.22 billion on search in 2024, up from their earlier prediction of $ 91.32 billion. But, the years of this rebound will be marked by new patterns in advertising spend.

Higher peaks, deeper dips 

One of the markers of the post-pandemic advertising ecosystem will be the markets dipping and surging in relation to news of the situation. A miracle cure that ends the pandemic tomorrow will have advertising scrambling for any spaces they can find to capitalize on the restart. But, in addition, further setbacks to the restarting of normal life will make advertisers resistant, waiting for a positive moment to use their budget. 

The ad revenue seasonality model will be marked sharp and downturns as marketers react to news in their markets. Rather than a cycle, we may face a reality of sudden peaks and troughs based on reactions to the news of the pandemic. In addition, the likelihood of lockdowns or restrictions in the winter months may push advertising budgets to the summer.

Source: IAB survey on planned advertising spend in the second half of 2020 

Uncertainty from advertisers means unpredictability for publishers. By not setting out budgets in advance, advertisers are hoping to give themselves some flexibility to capitalize on peaks in consumer interest or pull back campaigns if restrictions are suddenly imposed.

Bigger summer seasons 

Summer is traditionally a slight lull in advertising spend on publisher websites. Travel advertising has a significant uplift but there is no major commercial focal point for advertisers to cluster towards meaning budgets are spaced out over summer. Advertising during the pandemic has shown higher-than-expected growth in the summer months.

There is already a winter/summer season to the pandemic and mentions of 'COVID-season'. Advertisers may move their budgets to the summer when the impact of the virus has been less pronounced. In the upcoming years, summer may become a period of a significant uplift in advertising revenue, compared to the usual lull.

Brands with deep pockets can capture more market share 

The pandemic was not even-handed in the devastation it doled out. Some companies have been able to keep operating, even grow as alternative options had to shutter. 

Companies that had enough liquidity to ride out the worst of the pandemic were also the ones able to purchase advertising at lower rates. Speaking in CNBC, one advertiser nailed the thinking behind this approach. '' (They are) keeping their on-line (advertising) presence so when consumers are ready to start spending money again, they have the awareness of their brands. " 

Publishers looking to reach these brands need a model that can offer impression volume and ways to guarantee to make a splash with audiences. This leads us to our next section, the breaking of traditional formats to create less generic and more brand-specific ad products.  

Publishers have pivoted to survive 

The demand for publisher content was constant during the disruption. Publishers saw their revenue fall but had to keep delivering their product to their readers. In many cases, demand for content increased always directly in line with revenues falling. In order to prop up the falling revenue from advertising, publishers had to find alternative options. 

CMOs turned to paywalls and subscriptions as this crisis intersects with the cookie block that also threatens the single monetization model. The pandemic advanced these plans. 

'' As advertisers are getting pickier about which audiences to buy, engagement level, viewability. One of the biggest challenges publishers have today is the lack of a segmented / personalized approach to ad monetization. '' 

Publishers have opted for unique products, such as creating brand days across the entire website for specific brand deals. The New York Times created their own marketplace of first-party audience segments that advertisers can buy directly, across a range of content and formats.

Direct response and clear attribution will gain ground 

With online shopping growing even stronger and physical shopping facing increased uncertainty, advertisers are likely to return to running more direct response campaigns. Google has said "direct response advertising had substantial year-on-year growth through the entire quarter", while brand advertising had started to slow "by mid-March as the coronavirus pandemic forced lockdowns around the world." 

This means more simple 'click to buy' ads and fewer impressions and awareness campaigns as there will be less call for the multi-touch journey from an online ad to multiple websites and brick and mortar locations. Brands will simplify campaigns and will need advertisers to show direct attribution from these campaigns. Clicks - purchases - revenue.

Publishers may want to work with advertisers that can show this level of attribution in order to capture this share of advertising. 

How to combat unpredictable seasonality 

Beef up your ad stack 

For the boom times, publishers need a robust server-side bidding model that can pit multiple bidders against each other. Publishers need an ad stack that can scale up to maximize periods of increased demand, offer unique formats, and provide the most transparent reporting and attribution. Every demand source will have more unique buyers that will drive up competition for your specific inventory and increase the average eCPM price. 

For periods of stable or low demand, publishers need a diversified advertising offering that can help them offer smaller sets of advertisers a more valuable product. Every publisher has a unique primary audience and there will be brands operating as normal that want to reach this group. 

Allow for flexibility

This can be products like contextual advertising, event or newsletter campaigns. Allowing space to insert dynamic, direct placements gives publishers the ability to create value for a smaller subset of advertisers while still maintaining a baseline of programmatic revenue. Should the high demand for high volume audiences fall due to the pandemic, being able to offer a curated product to help fewer advertisers reach a niche, hyper-targeted audience will help publishers ride the volatility of pandemic advertising. 

Increase speed and performance 

While the crisis rumbles on, it remains a buyers' market for advertising. Maximize your impressions and viewability by making sure your mobile speed and performance are good enough to keep readers engaged. 

With more options and cheaper CPMs for high-quality inventory, performance and engagement will creep further into buying decisions. As the world at large and the advertising industry learns to cope with the daily reality of life in a pandemic, publishers are learning that they can't rely on an inflexible monetization model.

If you would like to see how Marfeel's programmatic technology can impact your revenue, and work with multiple formats and direct campaigns, click here to get a revenue estimation.

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