The Pandemic Media Paradox
Media planning and buying agency Bigeye examines why ad rates have fallen during the COVID-19 pandemic and the opportunities this paradox presents for brands.
IN CLEAR FOCUS this week: Media planning and buying agency Bigeye’s podcast features Tim McCormack, VP of Media and Analytics. In spite of high levels of user engagement online, Tim explains why advertising rates across major news and social platforms actually fell throughout March and April. We also discuss how this paradoxical situation has presented opportunities for brands to gain extra share of voice, and why connected TV has emerged as an especially cost-efficient media selection.
Adrian Tennant: You’re listening to IN CLEAR FOCUS – fresh perspectives on the business of advertising, produced weekly by Bigeye. Hello, I’m your host, Adrian Tennant, VP of Insights at Bigeye, an audience-focused, creative-driven, full-service advertising agency. We’re based in Orlando, Florida, but serve clients across the United States and beyond. Thank you for joining us. Over the Memorial day weekend, we saw efforts to reopen the nation, albeit with many social distancing restrictions still in place. For many people, this was the first time in months that they were able to visit stores and go to the beach. As we’ve been observing throughout the COVID-19 pandemic, consumer behaviors have changed significantly. In March, Nielsen forecasted that Americans would likely be watching a lot more television as a consequence of the lockdowns. Well, eMarketer confirmed last week that traditional TV viewing time is seeing its first positive growth since 2011. In fact, the lockdowns have led to increased consumer engagement with all in-home media, especially streaming video services. Disney reported earlier this month that its service, Disney+, attracted over 54 million subscribers worldwide in less than five months. Conviva, a company which provides optimization and analytics services for online video providers, reported that time spent streaming video during the daytime – which they define as between 10:00 AM and 5:00 PM – is up by 40 percent in recent weeks. Some streaming services are exclusively subscription-based like Disney+, but others are supported by advertising. Kantar reported that 92 percent of surveyed consumers thought that brands should continue to advertise during the COVID-19 outbreak. Seventy-seven percent of respondents said they wanted advertising to talk about how the brand is helpful in the new everyday life and 75 percent said advertising should inform about the brand’s efforts to face the situation. Yet nationally, about one-third of advertisers canceled planned campaigns outright while others ran modified ads, but deliberately avoided placing messages alongside COVID-related news stories and articles. Some brands didn’t want to be perceived as tone deaf to the seriousness of COVID-19 or were wary about consumer sentiments. This created a paradox for publishers of news content in particular. While most reported record levels of site visitation and consumer engagement, the decreased demand for advertising around their content actually drove the prices of media inventory down. To talk about this paradoxical situation and some potential opportunities that it creates, I’m joined in the studio today by Tim McCormack, Bigeye’s Vice President of Media and Analytics. Welcome to IN CLEAR FOCUS, Tim!
Tim McCormack: Hi. Glad to be here.
Adrian Tennant: So Tim, can you start by telling us a little about the scope of your role here at Bigeye and your team’s areas of responsibility?
Tim McCormack: I’d be happy to. As you were, so kind to mention, I am the VP of media and analytics here at Bigeye. And what that means is that the onset of any client engagement – now that can be a new client or just a new project – I work closely with you, Adrian and your insights team to take, for lack of a better word, insightful data that we are able to collect on the target audiences and the personas. And there really is just so much we’re able to activate on these days: credit card purchase behavior, media consumption data, first-hand research on attitudinal beliefs. And I work with you and my team to develop and build out an omnichannel media strategy that will effectively and cost-efficiently drive the results that the client is looking for, all really based out of that audience data. Once we’ve put that strategy into place, I work with account and creative to make sure that the ad creative we’re developing is really responsive to the audiences we’ve detailed is responsive to the different messaging and ad specs for the platforms we are advertising on, and it’s responsive to any kind of day-parting or segmentation based on the placement that could impact the consumer. I always say that I’m really lucky cause I get to work with your team and you to build this strategy. And then with our creative team, I get to take the just amazing assets that they produce and run them for media. So where I really feel like the media and analytics team pulls its weight is our ability to really look at the data and the analytics. Once we’ve begun a campaign and continually tinker and refine the campaign to drive better results. I always say that the optimizations are my favorite part because it’s an opportunity to come into work every day and look at and work on just such a wonderfully complex, interesting set of logic puzzles to continue driving the better results.
Adrian Tennant: A report from Audience Perceptions back in March showed that almost nine in 10 US advertisers had taken some type of action in response to COVID-19 with one-third canceling campaigns. Forty-seven percent of respondents decreased their budgets for digital display, 45 percent decreased paid social media activity, 43 percent decreased their digital video spend and 41 percent decreased traditional linear or broadcast TV. Tim, what drove these decisions, do you think?
Tim McCormack: Yeah. Interestingly, it wasn’t for the Audience Perceptions report, but I was actually surveyed on a few of these reports myself. So I think I can speak to some of the things that we heard from our clients and what drove some of their decisions surrounding this. So more than anything else, what really appears to have been the biggest factor here, especially back in March, was the uncertainty. So if we remember back to that time, which although only about two months ago, seems like a whole lifetime, more than anything else, we didn’t have a great understanding of what would happen next: how long quarantine would last, how impacted individuals in different regions of the country would react, what the government’s economic measures would entail, and on and on. And I think in such a fluid environment as that, where it’s tough to clearly estimate what kind of return you’re likely to get from your media channels, it becomes very tempting to view advertising and especially media as expenses rather than as investments. So, even though the data is really clear and we’ve heard a lot about it and a lot about very clear examples – going back all the way to cereal in the Great Depression – of how important it is to keep advertising through economic downturns, I think with all the uncertainty that was in the air, there was a really strong pull for executives to cut budgets to hold and wait it out until they had a clearer picture of what was going on.
Adrian Tennant: The Audience Perceptions study also reported that almost one quarter of respondents – 24 percent – pulled back on their paid search campaigns. Now why do you think that was?
Tim McCormack: Yeah, so it makes complete sense to me that paid search is a much lower percentage of brands pulling back on spend. It’s much lower in the marketing funnel and it’s bought on a cost-per-click basis. So you have a little bit more fixed idea of what those users are looking for and what you can expect out of them. For example, if I’m a brand selling basketballs, I might have more worries about running a TV campaign highlighting my brand when I don’t know when people will be out playing basketball again. However, if someone is already searching for something like “where to buy basketballs,” it makes a lot more sense for me to continue running that paid search budget. And that speaks to kind of some of the differences in media here overall. So, while I definitely think the uncertainty was a major factor across the board here, I think there are some other things that really heavily impacted this as well. So paid search doesn’t really have much brand advertising and brand advertisers, they suddenly had a lot more to think about as all this came on in terms of their messaging. We talked about how consumers don’t want brands to stop advertising but a high percentage of them of course responded that they want to see certain types of messaging during this period. And then, you know, when we think about paid search, not much reason to pull back there, but for something like linear TV, there’s lots of reasons outside of the audience itself in terms of some of the best programming is really being pulled back on. So the Olympics not occurring until 2021, the NBA finals not occurring until we don’t know when, baseball canceled throughout. I think it makes a lot of sense that a lot of this mass media is suddenly a bit more of a struggle to reach, even through some of its primary channels. And so that also gives a reason for paid search where we’re lower in the funnel to get a little bit more investment as far as we think about media mix. Now of course, some people continue to pull back, there’s uncertainty around things like supply chain mechanics. So if you are a paid search advertiser who runs an e-commerce store that heavily utilizes drop shipping, you may be uncomfortable continuing your budget where it was when you’re not sure when you know your end consumers are going to be able to get their items.
Adrian Tennant: I mentioned in the introduction of course that news sites have seen record traffic during this period, but have been largely unable to monetize the increased engagement with their content due to advertisers’ concerns about brand safety. Could you explain for us why that’s the case?
Tim McCormack: Yeah, absolutely. So, you mentioned kind of at the beginning of this too how this really is impacted by supply and demand. And of course, all of advertising is supply and demand, the supply is the audience’s attention and the demand is the advertisers desire to be in front of those eyeballs. But programmatic advertising because it has real-time bidding makes this very, very clear and allows us to see this relationship much quicker than we would say, when we’re looking at upfronts for content on television that’s going to be running in a few quarters. So news websites are having a lot of trouble because, as you mentioned, they’re getting that record traffic which should be great for them, but what it’s doing is driving significant supply on their side. So the supply of that attention is up very, very high. And then the other problem is across digital display as a whole, as you noted, 47 percent of the surveyed brands pulling back on their budgets. The environment as a whole is not built really right now to take advantage of that increased supply and have high costs. But there’s a real problem for news sites, especially in that they are getting a lot of brand safety concerns. Now, some of this predates everything with COVID-19, news websites as we see increased polarization has seen a lot more brand safety concerns with our clients. We’ve had clients here at Bigeye who said, “we want to make sure that our ads are not running on websites like Brietbart – we have concerns about consumer groups and advocacy groups reaching out to us about that.” And there’s definitely a sense of as that polarization happens, the news is not necessarily the neutral arbiter that’s always been so great for it, for advertisers. And then some of it’s definitely with COVID-19 brands worrying about “will we have to make sure that we get our message perfectly right if we’re going to be running next to this content?” So there’s from that beginning a very strong dynamic and a lot to think through when you’re producing those ads. And as the COVID crisis has continued on, I think more and more brands are getting additionally wary of it as news coverage of it itself is getting more and more politicized. I think it’s just a very difficult decision for brands although there’s certainly an opportunity there. We know that avid news watchers generally tend to be higher income. Oftentimes they are more engaged with the content itself, so as the prices drop, there’s a huge opportunity if you are looking at that audience oftentimes a higher income, slightly older audience, that you can really reach an expensive audience for a relatively cheap price here.
Adrian Tennant: Let’s take a short break. We’ll be right back, after this message.
Karen Hidalgo: I’m Karen Hidalgo, Associate Account Manager at Bigeye. Every week, IN CLEAR FOCUS addresses topics that impact our work as advertising account professionals. At Bigeye, we put audiences first. For every engagement, we develop a deep understanding of our client’s prospects and customers. By conducting our own research, we’re able to capture consumers’ attitudes, behaviors, and motivations. This data is distilled into actionable insights that inspire creative brand-building and persuasive activation campaigns – and guide strategic, cost-efficient media placements that really connect with your audience. If you’d like to know more about how to put Bigeye’s audience-focused insights to work for your brand, please contact us. Email email@example.com Bigeye. Reaching the Right People, in the Right Place, at the Right Time.
Adrian Tennant: Welcome back. We’re talking about COVID-19’s impact on advertising media strategy. In addition to programmatic ad rates falling we saw the same phenomenon play out across social media. At one point, I think Facebook’s ad rates dropped 15 to 25 percent. Have you seen rates stabilizing since then?
Tim McCormack: Yeah, absolutely. So, rates definitely have stabilized on Facebook. And one of the things I think is so interesting here is that for a lot of the media channels, it appears that the decisions to pull back were very consistent across the board, across verticals and not always based heavily on data. We’re actually seeing with paid social and with Facebook in general here that that may not have been quite so much the case. So across the board, as you mentioned, we’re seeing that 15 to 20 percent drop in CPMs, especially through much of March and April. But it’s much higher than that, looking at some studies we’ve seen, in particular one from Digiday, we’re seeing that up to a 62 percent decrease in CPM for non e-commerce, non-retail brands. And interestingly, where we’re seeing for channels, like television, for a large part like connected TV, like we mentioned for display, that those decreases in CPM are leading to an opportunity and there wasn’t much change in user behavior. We’re also actually seeing that for non e-commerce brands, social showed a pretty significant performance dip. So between late February and mid-March, it looks as though conversion rates felt almost 10 percent from 14 percent to 4 percent.
Adrian Tennant: Wow.
Tim McCormack: So maybe a little bit of that driving the decreases and users pulling back behind it as well.
Adrian Tennant: Hmm. That’s-super interesting. Well, WARC has just published some new numbers reflecting budget changes in the first half of 2020 based on a survey of 38 multinational companies with around $50 billion in annual media and marketing spend. One thing really stands out: while back in March, as we just talked about, 43 percent of all respondents reported cutting back on digital video. These new numbers show that for the entire first half of 2020 for the largest advertisers, online video budgets are down by only 7 percent and online display budgets by just 14 percent. The Coronavirus outbreak has catapulted one medium – connected TV – into the limelight. What was already considered a promising premium digital video medium has quickly become a priority for many advertisers thanks to the boost in streaming video consumption. Tim, could you give us a definition of connected TV?
Tim McCormack: Yeah, absolutely. So there’s a lot of terms out here surrounding connected TV, over-the-top television. Connected TV is itself looking at those devices that are actually connected to the internet through smart televisions. It’s used relatively interchangeably with OTT, which is when users are activating on streaming video through set-top boxes such as a Roku device, as opposed to a Roku smart TV, or potentially through an Xbox or an Apple TV. So, not a whole lot of differentiation between those two and used relatively interchangeably. Connected TV itself is starting to become a little bit more preferred, because it’s more able to guarantee what we call “living room quality impressions.” So you’re much more likely to be advertising directly to a living room, a kind of center of the house television through connected TV than you are through OTT. But a pretty minor distinction there and like I said, both terms are used relatively interchangeably.
Adrian Tennant: Now even before the COVID-19 outbreak, we’ve been having conversations about connected TV a lot. Why do you think it’s received more attention now and what makes it an attractive option?
Tim McCormack: I think one of the things that’s really driven it to be talked about so commonly now was it was poised for a big 2020 even before we hit COVID-19. We’ve been slowly growing and growing what TV’s are capable of, how we’re able to track impressions and performance of impressions, as well as the medium itself has just been growing to maturity for almost 10 years now. And then of course, when we had COVID and people were in quarantine in their houses with lots of free time, people started watching more and more video content. And one of the things that we were able to really see as an industry is that when people are stuck watching more scripted video content, especially they’re not turning to linear television, they’re not turning to broadcast and cable, they’re turning to Hulu, they’re turning to Netflix. They’re often going to their favorite cable channels’ apps on their smart television and watching their shows that way. So that’s been a big boost for the talks of connected TV.
Adrian Tennant: Yeah, you mentioned Roku. In its February report to shareholders, Roku predicted that half of all US homes would cut the cable and satellite cords by 2024, which is not that far away. In what ways do you think this trend has likely been impacted by the pandemic?
Tim McCormack: I do think that there’s probably been a high percentage of people, and this is more anecdotal than data-based, who have sat down, at least some point during this crisis, and scrolled through 200 cable channels, and found nothing that they were interested in. And I know, at least for myself, that was the biggest driver to be a cord-cutter years ago. Probably even more than the cost. More than anything else, there’s a real frustration that’s born from that. And so I think it probably acted as rocket fuel for a trend that’s been growing steam for a long time. You know, we can look at some of the big plans that are coming to fruition, either late last year or kind of throughout this year. So Disney’s plans for creating a streaming service, Disney+, Apple’s plans. We have HBO and really, beyond just HBO, the HBO Max service, their wider parent company of Warner getting into the game. We have NBC looking to do the same with Peacock. These are plans that these companies have put in place and invested a lot of resources in for several years now. So they’ve obviously, even before this inflection point, were very heavily believing that this was the way the industry was going and where they had to go to get eyeballs.
Adrian Tennant: And to your point, in this moment, unfortunately within unemployment being at record highs, a lot of families are going to be scrutinizing the nonessential expenditure and it’ll be interesting to see how this plays out. What are some of the benefits of investing in connected TV right at this moment?
Tim McCormack: There is still a pretty good value on it comparatively to linear TV. That’s especially true when you think about the ability to more easily measure its impact. When you think about the ability to more granularly target, whether that’s on a geographic level, whether that’s on an audience level, you’re much more able to do so. And then when we get into our more expensive placements, in particular with streamers like Hulu, they’ve been able to take the more reduced price difference between them and linear TV and find additional value for it by coming up with just some absolutely fantastic ad units themselves, that give the user a little bit more choice and agency in the ads, as well as doing significantly more than we see from cable or broadcast to ensure that the ad creative itself is closely matched to the programming.
Adrian Tennant: And just help me understand, do we buy connected TV programmatically or do we work with representatives? How does that work?
Tim McCormack: Yeah, absolutely. So we do a little bit of both. We have historically been heavily a programmatic buyer of connected TV. However, in this environment, we’re seeing that some of the value is more easily grabbed, by doing upfronts, by doing direct buys with some of the publishers. And that’s because there are so many people jumping into the space for programmatic, and that’s because there is a lot of connected TV advertising ad space that is not in that very premium environment where you’re getting the best results from it. There’s quite a few channels, that are streaming-only channels, that you just can’t be sure have the right quality and brand safety that you can get going directly to a high quality publisher. And as we look at, especially through the second half of this year, political campaigns looking to utilize streaming, and how much inventory they’re going to take up. Right now we’ve been really looking to lock in at good deals for our clients directly from the publishers.
Adrian Tennant: Tim, thank you very much for sharing your thoughts on all these media opportunities today.
Tim McCormack: Absolutely. It was great. Thanks for having me.
Adrian Tennant: So as we’ve heard, brands that maintain their ad budgets during economic downturns tend to come out better off on the other side. As we’ve discussed, the supply and demand nature of advertising means that as some brands exit, ad rates go down. These lower rates represent an opportunity for the advertisers that are in-market to maximize the value of their investments. When marketers cut back on ad spending, they lose brand awareness, which can’t simply be ramped up by the resumption of spending once the economy is restored. So with media consumption at record levels, advertising costing less and fewer competitors, now is the perfect time to create extra share of voice for long term brand building and activation campaigns alike. My thanks to our guest this week, Tim McCormack, VP of Media and Analytics here at Bigeye. You can find our show notes with links to resources on the IN CLEAR FOCUS page at bigeyeagency.com under “Insights.” Just click on the button marked “Podcast.” To ensure you don’t miss an episode, please consider subscribing to the show on Apple Podcasts, Spotify, Google Podcasts, or your favorite podcast player. And if you have an Amazon Echo device, you can use the IN CLEAR FOCUS skill to add the podcast to your Flash Briefing. Thank you for listening to IN CLEAR FOCUS produced by Bigeye. I’ve been your host, Adrian Tennant. Until next week, stay safe. Goodbye.