Fears about the economic impact of the coronavirus pandemic meant that many in the media and advertising industry weren’t particularly looking forward to yesterday, April 1st, which was the start of a new quarter. The April Fool’s Day pranks took a backseat this year and instead the focus was on whether advertising spend would drop off a cliff as soon as Q1 ended on March 31st. The impact would of course lead to a substantial dip in revenues for agencies, publishers, broadcasters, and ad tech companies.
But the early signs were somewhat promising. All of the people VAN spoke to (on the condition of anonymity, and each of the conversations took place separately to avoid people feeling the need to ‘save face’) said that while they saw drops yesterday, the declines weren’t as severe as they might have feared.
Bad, But Not That Bad
A senior executive at a leading supply-side platform (SSP) told VAN they’d anticipated a drop in spend of up to 70 or 80 percent on April 1st. “The way people often plan their campaigns is they have the end date set as the end of the month, so the worry was that they would finish those campaigns, and then have no new campaigns loaded into their DSP for this quarter,” they said.
But so far this hasn’t happened. “Things haven’t completely gone off a cliff,” the source said. “We’ve probably seen around a 25 percent drop on the day before, which is what I’d expect to see anyway at the start of a new quarter.”
Another executive at a different SSP also said that so far the spend being funneled through their platform is around 25 percent lower than the previous week.
“Typically when we enter a new quarter, we see a 20 percent dip looking at comparable data points,” they said. “So revenue is five percent lower than we’d expect at this early point in the month.”
And an executive from a TV sales house said that from what they’ve seen so far, April will be down by 30-40 percent year-on-year, which is slightly worse than March, but not completely catastrophic either.
Those VAN spoke with said they’d already seen the sectors hardest hit by coronavirus paused their spending towards the end of last quarter.
“The first ones to disappear were all the obvious ones – travel went pretty much overnight, and auto dropped off quickly,” said one of the SSP executives.
The TV sales house executive encountered the same. “We have quite a lot of travel clients in our portfolio, and they’re all off as it stands for the moment,” they said. “They’re all crossing their fingers and saying they hope to be back in July, but there’s no hard and fast answer on when we’ll be able to get back to normality.”
But it seems other sectors aren’t panicking as some may have feared. And this could bode well for the coming weeks and months. The combination of high supply (caused by consumers spending more time watching TV and browsing news sites) and dampened demand has lowered media prices. And advertisers not directly impacted by the pandemic might spot an opportunity, once the initial shock of the disruption is over, and even increase their own ad spend.
“There are more requests out there due to people spending more time on their devices, and with some brands reported to have reduced or even stopped spending, there is a cost-effective opportunity for those brands that have relevance or wish to have an ongoing dialogue with their customers at this difficult time,” said one of the SSP sources. The TV executive agreed, saying that “pricing for TV advertising is as good as it’s ever likely to get, so for anyone who is in a position where they can afford to keep advertising, there’s lots of value to be had.”
One Good Day Does Not a Good Quarter Make
Whilst there are reasons to be optimistic, those VAN spoke with remain cautious. “What we don’t know is whether what we’ve seen so far is just a slight lag, and we’ll see a big drop tomorrow,” said one of the SSP executives, while the other said they have serious doubts about whether they’ll see demand ramp up over the first week or two of the quarter, as they would usually expect.
A C-suite executive from a mobile specialist ad tech company told VAN that spend on their platform was ten percent down on the April 1st compared to the day before, and that some companies might find themselves seriously struggling this quarter.
They listed two primary concerns for Q2. Firstly, already hard-pushed DSPs and SSPs could be forced to close down, leaving publishers with bad debt. And secondly, if the virus does as much damage to the US economy as some have predicted, publishers could find themselves in “uncharted waters” for poor yields and fill.
“Businesses with revenue guarantees, too many staff, and a 100 percent reliance on programmatic will be in big trouble,” they said. “Especially if they are servicing debt.”
