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THE FUTURE, BUT FASTER The changing programmatic landscape and COVID-19

INTRODUCTION

It’s a chaotic time for advertisers. The COVID-19 pandemic is creating all sorts of new challenges as the way consumers interact with each other and with brands changes. Advertisers have been forced to shift their strategies quickly to adapt - but are these consumer shifts permanent? Is this the new normal? And is the crisis really creating a new future for our industry or merely accelerating trends that were already well on the way?

To answer these questions and better understand the state of the state of the industry, MiQ looked at data from online sources tracking consumer behavior across connected TVs, PCs, laptops, and mobile devices. We also partnered with Advertiser Perceptions to survey 300 marketers and advertisers in the United States (150), Canada (75), and the UK (75) in Q1 2020 as part of a semi-annual tracking study of advertiser goals, intentions, and plans around programmatic and compared those results to more recent data form Advertiser Perceptions around advertiser response to the pandemic.

Since the coronavirus pandemic first started causing businesses to close and governments to put social distancing measures into place, brands and advertisers have worked quickly to adjust their advertising strategies, budget allocations, and messaging, taking care to avoid appearing insensitive or driving consumers to closed store locations and products and services they can no longer offer.

The impact on the advertising ecosystem has been immediate and severe, with nearly two thirds (64%) holding a campaign scheduled to launch and half (50%) outright canceling a campaign in the field. With only 24% launching new campaigns to address the pandemic, it’s clear that advertisers are currently in a holding pattern, waiting for a more appropriate and opportune time to restart that conversation with consumers.

EXPECTED IMPACT OF DECREASED AD SPEND BY QUARTER, 2020 TO 2021

Source: Advertiser Perceptions Coronavirus Effect on Advertising Report, Wave 2 April 2020

All of this comes as consumers, trapped at home, are now consuming more digital media than ever before, and during times of day and week when they’d normally be at work and otherwise indisposed. The result is more biddable opportunities to reach consumers than ever before. But, as upwards of two thirds of advertisers have pulled budgets, CPMs have dropped, particularly around inventory surrounded by coronavirus content.

INCREASING BIDDABLE OPPORTUNITIES ONLINE, BY REGION

While digital video consumption has been growing, ad spend on the channel has seen some of the largest impacts. Advertiser Perceptions reported that nearly four out of five advertisers (78%) had paused, canceled, or shifted budget from digital video campaigns as a result of the pandemic. However, as consumers have started watching TV in record volumes - both traditional linear and digital/OTT - advertisers have begun to return to the format with new, more sensitive campaigns. The result is that forecasts around digital video ad spending still show moderate growth from 2019, albeit slower.

US DIGITAL VIDEO AD SPENDING, H1 2019 AND H1 2020

Source: eMarketer

Accelerating changes in the industry

In many ways, the COVID-19 pandemic isn’t changing the future for advertisers so much as accelerating the changes that were already happening. This is in part because it is doing the same for consumers. As consumers have been forced to interact digitally and make purchases online, consumers who had previously never interacted with certain online media or made digital purchases are now doing so for the first time. This is particularly clear with older adults (P45+), among whom we’ve seen an increase in both digital purchases and interaction with OTT compared to prior to the outbreak.

CHANGE IN TOTAL ONLINE CONTENT CONSUMPTION BY AGE GROUPS

It’s not just about people stuck at home watching TV. Interest in online shopping has increased substantially in the US, Australia, and the UK as consumers at home look for ways to purchase goods and essentials digitally.

CHANGE IN SHOPPING INTEREST, BY REGION

As with OTT consumption, interest in online shopping has increased most significantly among people aged 45 and over, for whom the experience is most likely to be new. For these consumers, becoming familiar with online shopping and purchasing goods in this manner will create lasting habits that advertisers will need to be mindful of. Increased time spent in digital domains and on digital devices will mean that advertisers need to create strategies that better address where consumers will be spending their time and making the final purchase action.

At the same time, market forces and decreased consumer confidence and spending power will likely lead advertisers to place a greater emphasis on campaign performance metrics and ROI, similar to the period following the 2008 recession. The end result is that advertisers will more rapidly shift to programmatic.

Programmatic campaigns, which already account for more than 80% of digital ad spending, will continue to grow in prominence as the need to reach consumers digitally increases alongside the need to demonstrate clear ROI and optimize towards measurable business outcomes. The majority of advertisers and marketers (57%) already see programmatic as the superior channel when it comes to performance technology, and generally advertisers are more likely to see programmatic as a better channel for research and insights as well.

IS PROGRAMMATIC BETTER THAN DIRECT BUY? - COMBINED COUNTRY VIEW

When it comes to measuring success on programmatic initiatives, return on investment (ROI) and return on ad spend (ROAS) are the most common KPIs used, with just over half of marketers and advertisers (51%) optimizing toward these metrics, and confident about their use.

Less clear however is how they are measuring ROI: 47% of marketers and advertisers are still using click-through rate as a primary KPI, and most of those (80%) feel it’s the right metric to be advertising toward. We’ve still got work to do.

KPIS USED TO MEASURE PROGRAMMATIC CAMPAIGN SUCCESS

Top KPI's are ROI/ROAS, engagement and CTR. Most are confident they have the right KPI's to optimize against

While offline and in-store measurement will become less important, as foot traffic and time spent in stores has bottomed out due to closures and social distancing efforts, customer retention and customer lifetime value optimization will become even more important as advertisers compete for consumer dollars in an environment where a customer can easily browse multiple stores at once and not just the things in one physical location.

In short, the entire consumer journey is largely online now, and paths to purchase exist almost completely within the home. This means that it has become more important than ever for advertisers to have the right pixels in place so that they can understand their consumers in terms of browsing behavior, demographics, and online activity so they can best target and optimize delivery when attempting to drive online purchases and customer retention.

PERCENTAGE CHANGE IN FOOTFALLS ACROSS US REGIONS, BY STORE CATEGORY

Taking control of programmatic buying

As brands grapple with the new realities of consumer purchasing, brands that have already built out the infrastructure to sell directly to consumers are at a clear advantage. For those brands, the impetus has also been to bring programmatic buying in-house, executing campaigns directly (52%). For these brands, the need to control data and have full transparency around costs and outcomes puts a clear value on in-housing the buying process.

HOW PROGRAMMATIC CAMPAIGNS ARE EXECUTED

In-house and agencies lead programmatic execution

For those brands and agencies working with external partners, managed and full service shops are the clear favorite, providing end-to-end support and programmatic solutions that deliver more than just performance. With the current climate, in-housing efforts may be somewhat hampered by the fact that workers have to stay at home, making building internal capabilities difficult. At a time when brands need programmatic solutions more than ever, managed service solutions that are ready to go and can react quickly may be a more practical answer.

TYPE OF SERVICE FROM PROGRAMMATIC PARTNERS

Half rely on managed service, one-third are managed and self-serve

Among these partners, ad tech firms dominate the landscape, with more than half of advertisers turning to ad tech firms to manage or execute programmatic campaigns, particularly in the United States. Though as more firms bring their buying in-house and look for self-serve solutions, there’s a clear, growing interest in software and applications to assist in the trading process and improve outcomes.

TOOLS/PARTNERS USED FOR PROGRAMMATIC BUYING - COMBINED COUNTRY VIEW

Ad tech companies are significantly higher than previous wave at a 90% LOC

TOOLS/PARTNERS USED FOR PROGRAMMATIC BUYING - INDIVIDUAL COUNTRY BREAKDOWN

Ad tech companies are the top programmatic partner in the US
The UK and Canada more likely use consulting services - note Canada's use of enterprise software apps.

As consumer habits change, so must marketers’, shifting to take into account how consumers are spending time in digital spaces, interacting with brands, and shopping online. Even as overall ad spending - and with it, programmatic spending - slows as a result of the pandemic, the importance of programmatic and its share of the digital marketing pie will continue to grow at an accelerated rate.

Whether advertisers are managing their buys in-house or through an agency, they’ll need programmatic partners who can help them navigate the space, understand consumer trends and changes, and deliver more than just perfunctory service.

RECOMMENDATIONS

As advertisers look to prepare for these shifts, we’d recommend the following:

Track consumer activity to stay ahead of behavioral trends.

Staying ahead of these trends requires spotting them ahead of time and staying abreast of developments that are starting now or already in process. Have your partners deliver regular intelligence around consumers in your space and their consumption habits, and look for long-term changes.

Keep an eye out for digital activities becoming common for older consumers

Many digital activities such as OTT viewing and online banking have skewed younger as a result of reluctance among older consumers to change their habits. As these consumers take the plunge, they’ll develop new habits that last beyond the pandemic’s immediate effects.

Work to predict which activities are going to be “pent up and released” vs. “altered permanently”

Not everything will be affected by the pandemic in the same way. While it’s likely that consumers, sick of their time indoors, will rush to fill restaurants and bars when it is safe to do so, eager to have those experiences, the same may not be true for going to movie theaters or driving to department stores. Work with your partners to understand and predict which behaviors will be back and which ones will continue to decline.

Focus on the channels where consumers are spending their time

As consumer habits shift, advertiser habits should shift with them. Focus your efforts on those channels where consumers are spending more time, and the content they’re consuming.

METHODOLOGY

MiQ partnered with Advertiser Perceptions to survey 300 marketers and advertisers in the United States (150), Canada (75), and the UK (75) in Q1 2020 as part of a semi-annual tracking study of advertiser goals, intentions, and plans around programmatic. Information around the impact of COVID-19 on advertiser spending comes from the Advertiser Perceptions COVID-19 survey research conducted in March and April 2020.

Data around biddable inventory and opportunities comes from MiQ’s integration with multiple DSPs collected in Q1 and Q2 2020.

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