Will spike in digital traffic eventually translate into gain in ad revenue?

According to industry experts, the COVID-19 crisis has resulted in marketers shying away from advertising spends despite the growing reach

e4m by Tasmayee Laha Roy
Updated: May 6, 2020 5:44 PM
Digital ad spends

With almost the entire global population being forced to stay indoors for weeks now in the fight against COVID-19, digital platforms have seen a massive growth in terms of time spent by users. This has also led to a surge in the number of user-generated snackable content that pops up on a user’s timeline. But has all this spike in engagement translated into substantial revenue gains?

Calling the spike in traffic an anomaly, most industry heads say these numbers will not necessarily bring much revenue because of liquidity drying up and marketers shying away from advertising spends despite the growing reach.

Harikrishnan Pillai, CEO, TheSmallBigIdea, points out, “The spike that we are seeing is an unnatural behaviour. The surge in viewership is a forced habit and not in natural course. The screen consumption and ad spends are not corroborating because businesses are not firing all guns.”

The medical crisis is slowly converting into a financial crisis, Pillai said. “The crisis is impacting advertising. And hence this surge in viewership is not giving any direct or immediate gains to platforms.”

COVID-19 seems to have not spared even the major global tech giants who have been reporting poor numbers for the quarter ended March 31, 2020.

Facebook has already expressed concerns about flattening of ad revenue in the wake of the pandemic. In spite of seeing a 17% jump in ad revenues in the first quarter compared to the same quarter last year, the social media giant has acknowledged the negative sentiments in the market. “We experienced a significant reduction in the demand for advertising, as well as a related decline in the pricing of our ads, over the last three weeks of the first quarter of 2020. The April trends reflect weakness across all of our user geographies,” Facebook said in its financial report.

Likewise, Twitter too has recorded a net loss of $8 million for the first quarter of 2020 in spite of the daily active users on the platform touching 166 million for Q1, up from 152 million in the previous quarter or 134 million registered in the same period last year.

Alphabet (Google’s parent company) also recently reported its earnings for the first quarter and the story was almost the same. Alphabet’s revenue for Q1 2020 did increase by 13% as compared to last year, but according to its CFO Ruth Porat the quarter ended on a low note. Porat has acknowledged that the company expects Q2 2020 to be a difficult year in terms of ad revenues.

In spite of having recorded good numbers in the first two months of the quarter, Porat said the company has experienced a momentous slowdown in ad revenues in March.

Sharing further insights was Ankur Pujari, Co-founder and Growth Lead, Hyper Connect Asia. “Traffic has increased on Facebook and Insta live but video calling and messaging are not easy to monetize. Essential goods brands are not finding a need to advertise as people are buying whatever they can find on the shelf and for the rest of the discretionary goods, brands are holding back on ad spends,” Pujari explained.

Gopa Kumar, COO, Isobar India, says, “While there has been lot of engagement and there is an increased traffic on all web platforms, be it social or OTT , we have not seen any direct impact of that resulting in increased spends on these platforms."

According to Kumar, a change in scenario will happen only when e-commerce delivery of non-essential commodities commences after the lockdown.

"Overall there is a dip in advertising spends on all popular platforms, this is inevitable due to change in the utility value that a customer currently sees in the product and the service," said Gautam Anand, Head of Content at AGENCY09. 

Dhruvi Joshi, Co-founder, Head – Strategy and Media, PivotRoots, says there has been an impact in adex on digital platforms across multiple categories. “While we have seen an increase or consistency in spends for edutech, gaming, OTT and other categories, few other categories have seen a significant drop. Some of the heavy-spending verticals such as travel, ecommerce, banking, auto, real estate and others are reducing their ad investments during these times.”

COVID-19 has forced the consumer products and retail industry to review its core markets and operating model. The sector will have to reassess consumer preferences as many of the shifts in consumption habits are likely to stick around, said experts.

“The need of the hour is to create an empathetic and transparent communication to comfort the consumers which adds dependability on the brand rather than talking about the brand activities. While the content generated should be authentic, concise and adds value to the brand, one should be able to engage its consumers with quality content instead of quantity,” said Harmeet Singh Arora, Vice-President, Marketing and Strategic partnerships, of fintech firm Zaggle.

All hope now rests on relaxation of lockdown rules as only an active economy will open up opportunities for sale that will lead to communication from brands. As marketers start loosening purse strings to spend on ad bills, digital is expected to enjoy the maximum benefit from their spiked user base. Even if 50 per cent of spiked user base is retained by platforms they can take it to the brands offering them a reach like never before, said marketing experts.

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