After plummeting in late March and April at the outset of the coronavirus crisis, media companies’ advertising businesses have been on the rebound in the second half of 2020, and that recovery has ramped up in October.
One media executive said their company’s October revenue was up by double-digit percentage points over last October. A second media executive said their company was set to rake in nearly as much revenue in October as it did in the entire second quarter. And an executive at a third media company said its October revenue had exceeded the second quarter mark.
Comparisons made against the second quarter are not exactly fair. For many media companies, the immediate period after the coronavirus crisis pushed people to quarantine and advertisers to cut spending was when the ad market bottomed out. Media companies had hoped that the easing of shelter-at-home orders would spur advertisers to start spending again in the third quarter and then pick up in the fourth quarter, heading into the U.S. presidential election and the holiday shopping season.
“Everyone was planning for Q4 this year to be a big one. Political has had a lot to do with that,” said a fourth media executive. GroupM projected that political advertisers would spend $15 billion on advertising this year, including $1 billion on digital ads.
However, political has not been the business booster for all media companies. The second media executive said that their company has “not seen a windfall of political dollars.” Instead, that publisher’s rebound has been fueled by consumer packaged-goods, streaming, pharmaceutical, healthcare and tech advertisers. The first media executive similarly said that, while their company did benefit from political advertisers, streamers have continued to spend and more money from consumer electronics manufacturers is flowing into the market, with new phones and gaming consoles being released ahead of the holidays.
Activity among non-political advertisers will become even more important after the election-related ad dollars evaporate. Political advertisers have eaten up so much of the market — including siphoning YouTube’s supply —that some advertisers in other categories were holding back portions of their fourth-quarter budgets until after the election when the added competition abates, according to media and agency executives. “When you’re getting priced out on everything, you’re not going to spend. I expect the typical holiday demand to come flowing in after the election,” said the third media executive.
However — because it can not be said enough in 2020 — nothing is guaranteed. Since the spring, advertisers have been wary of making long-term commitments, as evidenced by the greater flexibility they sought in this year’s TV upfront market. As a result, “the RFP cycle has shortened tremendously,” said the third media executive. Prior to the pandemic, the cycle between when an advertiser would present a media company with a pitch request and when it would expect to receive the pitch “was anywhere between two to four weeks, depending on how generous buyers were being with the seller. Now it’s anywhere between one and seven days,” said an agency executive.
That shortened sales cycle means that media companies are not only still in the midst of closing deals for November and December but still gauging overall demand for those months.
“What seems to remain to be written, though, is how the second half of the fourth quarter shapes up. We have a good amount of brands that are waiting to see what happens … with the election [in order to determine] how they’re going to allocate money in December,” said the first media executive.
While wary of an ever-volatile ad market, media executives are optimistic about the last two months of the year — and not only because of the pent-up non-political demand and influx of holiday advertisers. Typically advertisers try to exhaust every ad dollar by year end because otherwise that money goes away and it can be harder to get the same sized budget the following year. This year, that may be even more the case if advertisers may have more than the usual amount of money carrying over from cutbacks in the spring and summer.
Those extra dollars could be especially important for media companies to grab now given the likelihood of long-lasting economic trauma. Between the uncertainty around advertisers’ 2021 budgets and a resurgent pandemic already spurring another round of lockdown orders abroad, media companies may need a white-hot fourth quarter to keep them warm through winter. Media companies with large digital publishing footprints and established connected TV properties feel well positioned in the event the current advertising upswing takes a downturn because, whatever the size of advertisers’ budgets in 2021, digital’s share of those dollars is expected to increase. But with how 2020 has gone, that’s not a given.
“Our Q4 will be our biggest quarter ever. We had planned for that pre-Covid, but it was very much in doubt that would happen. Now the big question is: is this going to carry over into the new year?” said the second media executive.
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