Perspectives

Getting Past Flat – Marketplace Pulse: September 9

Getting Past Flat

We took a longer than normal break between newsletters. With the summer quickly coming to an end and folks away on holiday, it felt like a good time to step away from industry analysis. I thought by virtue of living in some kind of time soup this summer would feel longer than it did. Pandemic or not – fleeting summers are a constant. Hoping you all got some much needed rest and relaxation.

To welcome everyone back, we will take a deep dive into some of the latest industry trends. An interesting thing has happened over the last couple of months – it no longer makes sense to compare Ad Spend to Pre-Covid levels. By and large, the dips we saw back in April and May have worked themselves out. This doesn’t mean there aren’t still significant impacts to Ad Spend. Travel and Auto are still down significantly year over year, but overall, many sectors are not only back to flat but in some cases back to growth. It’s a positive sign as we are about to embark on a peculiar Retail season. With brick and mortar still compromised, ecom is dominating and the traditional Retail calendar is much more fluid than anything we have experienced in the past.

Hope you are Staying Safe, Healthy, and Happy. 

Will Doherty
EVP, Global Marketplace Development
Index Exchange

Alright, Alright, Alright

In a normal year, we usually see a significant increase in activity at the end of the summer as folks get ready to go back to school. This increase continues through Labor Day weekend in the US and Canada. With schools opening in a stuttered and inconsistent way and physical stores still compromised, I wanted to see if there were significant impacts to Ad Spend in the Retail sector. I compared August 1 thru Labor Day weekend for 2019 and 2020.

A comparison of Ad Spend between 2019 and 2020 - index to Aug 1 chart

A CPM comparison between 2019 to 2020

Both spend and CPMs are trending above what we saw last year. While Labor Day fell much earlier last year (September 2nd), it softened over the long weekend. Not the case this year. Spend was strong and increased throughout the entire holiday, and Spend went up YoY along with CPMs.

This makes me very optimistic about Q4.

CPG 

 CPG Category (YoY) between Ad Spend and CPM

The other industry leader in programmatic is CPG. It tells a similarly positive but slightly different story. It took off in mid-August and continued through the long weekend. Perhaps because it’s less cookie reliant than its Retail brethren, it was able to keep CPMs down for most of the month before it ramped up towards the end. CPG has taken full advantage of the softness in the market and turned it into a strength. As a percentage of overall spend, they have never been bigger than now.

Auto

Auto has struggled to get back to where it was, and this is probably going to be the case for some time. The trend is fine and continues to make incremental progress.

 Auto category (YoY) Ad Spend and CPM

The key takeaway is that spending is down significantly YoY while CPMs are up significantly. It mirrors another trend where overall car sales are down considerably YoY, but car prices are up significantly.

The Wall Street Journal Article: Car Sales Are Down Almost 20%, but Prices Are Setting Records
Source: The Wall Street Journal, Nora Naughton (Reporter)

The market for used cars however is booming.

The New York Times Article: Looking to Buy A Used Car in the Pandemic? So Is Everyone Else
Source: The New York Times, Neal E. Boudette (Auto Reporter)

Travel

The Travel and Hospitality industries still have a long way to go before they get back to anything like normal, and that is still reflected in Ad Spend. Airlines might not be back in full force until 2024. My airline of choice has generously extended my status through 2021, but I’m not so sure that’s going to cut it. This is going to take years, not months.

CNN Article: Global air travel won't recover till 2024, says airline body
Source: CNN, Maureen O’Hare (Senior Digital Producer, Travel)

Travel category (YoY) for Ad Spend and CPM

Conclusion

While our industry has certainly climbed out from the depths, it would be naive to think it’s representative of the overall economy. The delta between the strong performance of Retail and CPG contrasted with that of Auto and Travel delineates an uneven economic rebound. While programmatic might be seeing a “V” shaped recovery, it’s hardly uniform across categories. A “K” shaped recovery theory has started to emerge to explain the macro economic trends. Certainly the rise of car prices seems to align with this theory. With the bottom of the market stalled but more expensive cars still moving off lots, the average will go up. It also delineates the inequity of the pandemic on consumer spending. Those with the means are feeling confident enough to invest in newer and expensive cars while cars on the lower end of the spectrum are still on the lots. Overall, I think a “K” Shaped recovery theory has some merit, but it’s still too early to say how our trends may correlate. This is something we will watch going forward.

See here for all of Q3’s insights and trends.

MSNBC Article: Worries grow over a K-shaped economic recovery that favors the wealthy
Source: MSNBC, Jeff Cox (Finance Editor)