The Impact of COVID-19 on Programmatic Ad Revenue
Before March 2020, the programmatic advertising industry was experiencing double-digit growth, and it was expected to have another excellent, highly profitable year. Then the pandemic hit, and the industry was suddenly faced with a brand-new set of challenges. Ad spend dropped, and the Coronavirus forced publishers and buyers to rethink their advertising strategies.
COVID-19 made a significant impact on the advertising industry and programmatic ad revenue. Many publishers and advertisers are still figuring out how they fit into this altered landscape and what the future holds.
The Initial Impact of the Coronavirus on Ad Spend and Publisher Revenue
As news of the global pandemic spread, people panicked. They wanted to stay up to date with the latest news and developments. Traffic to online news sites skyrocketed, peaking at 523 million in March. Despite that, many direct publishers suffered as advertisers cut or canceled their campaigns. For example, the Los Angeles Times claimed that its ad revenue was “nearly eliminated1.”
Other industries, like e-commerce, office tools, and entertainment, benefited from lockdowns as consumers found alternative ways to buy groceries, work from home, and have fun.
Slack, Electronic Arts, and Grubhub were brands that increased their ad spend significantly, specifically to take advantage of these changes. Similarly, education and training, technology, and toiletries and cosmetics categories all saw an increase of 35% or more in ad spend.
Unfortunately, not all industries were so lucky. Some were hit particularly hard by the Coronavirus pandemic and had to reduce their ad spend significantly. The three sectors that saw the biggest month-over-month drop were:
- Travel at -79%
- Automotive at -40%
- Events at -34%
Additionally, the number of advertisers in these industries dropped by 8%, as some brands canceled their ad campaigns entirely2.
In short, the Coronavirus altered the advertising landscape. Most notably, brands that used to be top buyers fell behind as new brands stepped up to the podium. However, it’s also important to note that programmatic publishers weren’t hit as hard as larger, direct publishers, primarily due to the technology’s flexibility and automation3.
Programmatic Ad Recovery: Q3 2020 to Present
According to the IAB, the year-over-year growth of programmatic ad spend had dropped by 5.2% by Q2, 2020. However, the industry did start rebounding after Q3. Many brands realized that they needed to advertise alongside Coronavirus content or risk missing critical opportunities.
Spend rose by 11.7% in the third quarter, and 28.7% in the fourth. Despite low projections, programmatic ad spend hit double-digit growth by year-end, increasing by a total of 24.9%.
Does that mean that the hard part is over? Maybe. Maybe not. There are many new top buyers, while once-successful publishers experienced a significant drop in revenue in 2020. It’s certainly possible that we’ve not experienced the full long-term impact of the pandemic yet.
The Future of Programmatic Advertising
The future holds many new and exciting opportunities for both advertisers and publishers. OTT, CTV, and other video ads saw significant growth during 2020. However, many marketing and programmatic experts know that new challenges also lie ahead.
Susan Hogan, the Senior Vice President of research and analytics at IAB, believes that the biggest may be losing third-party tracking capabilities.
If publishers want to survive, they’ll need to turn to first-party data. Luckily, new ad technologies are already available to help both publishers and advertisers prepare for the inevitable disruption of the programmatic ecosystem.
According to Stephanie Layser, VP of Advertising and Technology Operations at News Corp, the increased focus on brand safety, quality content, and transparency will also influence buyers. As third-party cookies are phased out, and data privacy takes priority, the industry may move towards curated and private marketplaces for ad buying4.
Publishers may also need to start searching for ways to diversify their revenue to protect their income from another unexpected (or expected) change in the advertising landscape. While the future of programmatic ads looks promising, it’s better to be prepared for the unforeseen.
The Benefit of Managed Services and Monetization Partners
Publishers typically rely on SSPs when monetizing their sites, missing out on the benefits of direct relationships with advertisers. Buyers want to work with credible sites that are brand-safe, reliable, and transparent. Similarly, publishers want to protect their revenue generation.
Managed ad platforms and monetization partners can help both parties gain additional security by forging direct relationships and opening new lines of communication.
It’s impossible to know if we’ve seen the full impact of the Coronavirus on the programmatic ad landscape, spend, or revenue. We can’t deny that it’s already changed the industry, affecting buyers and publishers alike. However, the fact that programmatic has experienced double-digit growth despite the pandemic proves that it’s a robust, enduring advertising technology.
The future still holds many challenges and changes, but programmatic’s biggest strength is its adaptability, flexibility, and ever-evolving technologies. W