The Cost of Media in a Crisis

The global pandemic has left no industry untouched, with many businesses adapting to new ways of working in order to stay afloat. For Display advertisers, coronavirus has not only affected their businesses, but also the way they trade on a day to day basis.

The Cost of Media in a Crisis

There has been a buy-side trend of excluding related publisher content and a sell-side trend of blocking advertiser creatives that feature “Coronavirus” or “COVID-19”.

With the biggest question for advertisers at this moment in time likely being the impact on their budget, we’ll take a look at what’s been happening with programmatic display CPMs over the last couple of weeks – specifically in the UK. Here there have been 2 main impacts: one simple, and one more complex.

The Simple Impact:

Average effective CPMs have declined, due to a reduction in competition intensity. There are 2 main causes of this that are closely linked. Firstly, with more people at home due to social distancing, self-isolation and lockdown, we’re seeing increased overall internet usage; leading to more inventory becoming available. For instance, between the 11th and 25th of March, inventory increased by 44%. This reduces competition because, quite simply, it means there’s more to go around – thus reducing the amount of competition; bringing CPMs down too.

On top of this, we’ve also seen falling consumer and B2B demand, as well as people stopping trading in order to curb their losses as a business. Advertising budgets are being cut in order to make up for lost revenue elsewhere, plus there’s less demand for products and services. Again, this means there’s less competition for placements, reducing CPMs.

The Complex Impact:

On top of lower competition, we’re also seeing volatile exchange rates unlevelling the playing field. Given the complexity, let’s first look at the cause, effect and upshot to contextualise the impact:

Cause: USD considered by investors to be an increasingly safer currency relative to GBP
Effect: GBP devalued against USD to its lowest level for 35 years (9% decrease from 11th to 25th March)
Upshot: All RTB auctions are conducted in USD. Therefore, a £1 GBP bid yesterday was worth 9% less in the auction than 2 weeks previous.

The impact here varies. Where all bids for an impression are submitted in GBP, this change affects everyone equally and CPMs only decline in the context of currency exchange rates. However, there will be some buyers bidding on UK impressions in USD. This is not insignificant as some US agencies and advertisers hold USD DSP accounts, and so use USD for any bid regardless of local operational management.

For algorithmic bidders, this is just another factor that the DSP should take into account if this is to have an impact relative to the goals set. Where bids are fixed, GBP and USD bidders may see a reduced and increased win-rate respectively, although this must be considered in the context of the general reduction in competition intensity mentioned above. The other influential factor is that all exchanges have shifted to 1st price auctions in the last couple of years. In this landscape, the USD bidder is at greater risk of not reacting to the market conditions as they are competing against reduced rate GBP bids, yet they are now without the self-adjusting mechanism of the 2nd price auction. Ideally, their DSP’s countermeasures here would be to employ bid-shading techniques. The level of protection that each DSP offers against these auction dynamics varies and buyers should assess their DSP options on their capability to ensure the most effective and efficient buying at scale.

What these trends show is that in these most volatile of times, marketers and agencies will need to draw upon their collective internal experience and, where necessary, look to consultants to make sense of their unique situation and plan a path through a landscape that is shifting beneath our feet.

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