‘Still dreadful, but trending in the right direction’: Digital ad spend began recovering in May

In March as the coronavirus crisis began escalating rapidly, publishers and ad tech companies battened down the hatches. Advertisers had begun to pause spend and media industry executives braced themselves for an even worse second quarter.

By most accounts, April was a terrible month too, according to the 13 publishing, ad tech executives and industry experts Digiday contacted for this article. But in May, things began looking up — albeit moderately. 

In April, total digital display ad spending (which excludes video and social media) in Europe was down 38% versus the prior year, according to IAB Europe chief economist Daniel Knapp. In May, spend was down between 25-28% on the prior year — but an improvement on April. Knapp estimates that June spending will be down around 16% versus last year and that digital advertising in Europe will decline by 5.5% for the full year, versus 2019. (IAB U.S was still compiling its May buy-side trends report at the time of writing.)

“These early indicators suggest the crisis may not be as long as anticipated,” said Knapp. 

There are big caveats. With many businesses still teetering on the edge of collapse and high unemployment rates in many countries around the world, the economic outlook remains uncertain. The threat of a second wave of the pandemic before a vaccine becomes widely available also continues to loom large. Specific to the media industry: While programmatic spend is returning, direct deals have lagged behind, said publishing executives. Print advertising and events sponsorships are also business lines that are still clearly challenged.

“The question is if, and when, the market will get back to the pre-March … levels,” said a commercial executive at a large U.K. publisher. “Advertising always tracks GDP so the key to sustaining the gradual recovery will be whether consumer confidence stays the distance.”

The key issue with the first half of the year, according to Knapp, was a “supply crisis” — where many companies were forced to stop advertising because they had difficulty producing products and services and getting them into the hands of consumers. 

“What was disregarded is the risk of the second half of the year in 2020 of moving into a demand crisis where suddenly the consumer wallet is squeezed,” said Knapp. But, he added, “It’s legitimate to look with optimism into the future [because] the consumer demand crisis, if it occurs, is not going to trigger as severe ad spend declines as the” initial throes of the pandemic.

In March and April, companies were largely focused on trimming costs and preserving cash — as evidenced by the waves of layoffs, furloughs and pay cuts across a variety of sectors. In May, many companies began to rebuild, said Tom Jenen, chief revenue officer of Brandmetrics, a measurement platform.

“Everyone seemed to have shut down because they weren’t sure where the right place was to put their advertising investment. In May they understood what they needed to do and what they needed to say,” said Jenen. “It feels like this was a correction.”

Last month when reporting first-quarter earnings, the majority of public companies pulled their financial guidance, citing the uncertainty surrounding the crisis.  Last week, ad tech company Criteo released an interim update to investors saying May had turned out better than expected. Criteo specializes in retargeting, with travel advertisers and retailers making up a hefty proportion of its client base. 

“A continued decline of the company’s revenues for the month of May compared to April had not materialized as anticipated,” the company said in the update. A Criteo spokeswoman declined to comment beyond the statement as the company is heading into its quiet period.

In other positive news for May outside the media and ad sector: Adidas said last week that its revenue growth in Greater China turned positive in May, earlier than expected. The sports apparel company said Greater China quarter sales are expected to be around the same as last year.

On social media, the advertising rebound appears to have happened a lot faster, according to VidMob, a creative technology platform that partners with the likes of Google, Facebook, Twitter, Snapchat and LinkedIn. Across the categories it tracks, in aggregate, March spending started slightly ahead of last year. Spending then fell back by approximately 25% as lockdowns began, but had rebounded by month-end. April was up nearly 70% on the previous year, said VidMob CEO Alex Collmer, a lift driven by large increases in categories such as gaming that offset declines in sectors like travel. May was on a par with April, VidMob said, as spend from gaming and other categories decreased. CPMs, which had been anywhere between 17% to 45% lower than last year, began tracking up towards normal levels at the end of May and early June, according to VidMob.

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“Flexibility is so important today at a time when none of our clients know what the world is going to look like next week, next month, next year,” said VidMob’s Collmer.

But let’s not call this a comeback just yet. As another U.K. publishing executive, elegantly summarized when asked about projections for June, “Still dreadful, but trending in the right direction.”

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