COVID-19s impact on the advertising industry

Ed Steer, co-founder and CEO, Europe and North America at Sphere Digital Recruitment, looks at the impact of the pandemic on the advertising business.

The Coronavirus outbreak has put people’s lives and businesses under a unique and new type of pressure.

Over the past 12 weeks or so, naturally, advertising spend and the platforms and places that brands can speak to consumers has shifted. Much like in 2008, we have seen an acceleration towards the newest forms of media and technology, and money is being invested where brands can speak to consumers in the very best places and where results are highly accountable.
Sphere works with brands, technology vendors, agencies and publishers, and through speaking with all of our customers throughout March, April and May, we are building up a clear picture of the impact that COVID-19 is having across the advertising ecosystem.

Naturally, many areas like out of home, cinema and the print media have found this period extremely challenging, and display advertising, across the board, has felt the impact of decreased budgets, as brands conserve their cash whilst under the pressure of declining revenue, and work through how and where to speak with their consumers.

Yet, encouragingly, some confidence is beginning to return, as advertisers adapt and plot their path through the COVID-19 environment. We have seen strong growth and increased revenue in some sectors, with mobile advertising and CTV (Connected TV) outperforming other platforms.
In-game advertising has seen a bounce in revenue, as consumers spend more time engaging with mobile games, and any platform that monetises by driving app downloads as opposed to ad revenue, has help up particularly well.

Brand safety and mobile analytics players have also seen demand for their technology remain high, as brands seek to protect themselves and to understand the effectiveness of their spend, at a time where sensitivity, whilst advertising, is important. This has created increased pressure for traditional publishers. Their traffic is going through the roof, yet monetising this is challenging against the backdrop of decreased budgets and (some) overly-aggressive brand safety measures.

Much like mobile gaming, the influencer marketing and social platforms have enjoyed increased engagement and revenue via their platforms. As consumers have spent more time engaging socially, advertisers have followed them.

The performance marketing space has outperformed display in some quarters, with many affiliate-led platforms and businesses that operate a CPA model performing well in sectors where consumers are spending their money, from beauty to gardening and alcohol to kids. Some DTC brands and digitally native eCommerce businesses have also seen a spike in spend.
Naturally, the job market has been tough, yet companies are still hiring. Some businesses are hiring as they are performing; others have great cash reserves and want to keep expanding their product and their pipeline throughout Q2 and Q3 and through to the end of the year. Some businesses who are pre-revenue, or who are heavily focused on building their product and who have great funding, are keeping their plans intact.

The CTV / OTT space is performing well. People are spending more time streaming their favourite shows and brands are shifting money from linear TV advertising to the CTV world, accelerating a trend that has been in full flow for a few years now.

It is hard to predict exactly what will happen next. We are running monthly research pieces to understand the impact of COVID-19 on businesses and people, and over 50 per cent of brands, agencies, technology vendors and publishers expect client activity and spend to return to 50-100 per cent of pre-COVID spend by Q4.

Sphere has more detailed analysis of the impact on COVID-19 on technology vendors, agencies and brands. You can download the report from our website.