Digital ad market not yet 'back to normal' but recent stability fuels optimism

The digital advertising market appears to have settled into a holding pattern after demand for inventory on Facebook and Google plunged in March amid coronavirus lockdown measures.

While the key cost-per-clicks and cost-per-milles metrics are not yet showing price increases, several sources have told Campaign that they are broadly holding steady across UK, European and North American markets. Asia, whose countries have begun to ease lockdown restrictions, are seeing an increase in prices as economic activity picks up.

According to Socialbakers, CPCs on Facebook and Instagram have held steady in western Europe, and were even beginning to creep up in the third week of April. 

The average CPC on Facebook and Instagram in the region was $0.22 for the week commencing 20 April, up 22% from $0.18 in the week beginning 23 March. However, this is still only two-thirds of what the average figure in February of $0.30.

The picture is slightly worse in North America, where the average CPC on Facebook-owned platforms was $0.27 in April, compared with $0.32 in March and $0.40 in February. 

Yuval Ben-Itzhak, chief executive of Socialbakers, said: "As we saw adspend pick up in east Asia towards the end of March, we predicted that this would also happen in other regions after the initial shock of Covid-19. We can already see adspend increasing and CPC picking up in North America and Western Europe, suggesting these markets already feel more in control. This is a positive sign that marketers and brands around the world can and will navigate this crisis. Savvy marketers need to take advantage of this window of opportunity to reach and engage with their audiences."

Meanwhile, several UK performance agencies have told Campaign that they have begun to see CPM and CPC rates bounce back in recent weeks, albeit at a lower level than February before the economic shock caused by the pandemic. 

For example, Incubeta NMPI provided an aggregated chart of 500 client accounts in the UK and the CPCs they are being charged on a weekly basis. It shows rates fell dramatically between weeks 13 and 16 (between 16 March and 6 April), but have steadly increased up until the end of April. This covers text ads and shopping ads but not display, but the agency reported that display followed a similar pattern, albeit with a sharpeer decline and slower recovery.

Andrew Platt, managing partner, media, at M&C Saatchi Performance, estimated that CPCs in April were about 20% down on where they were before lockdown measures were imposed in the UK in March.

He said: "We’re continuing to see CPCs steadily increase over the previous weeks – come the end of May, if we continue on the current path, we’ll be back at pre-Covid CPC levels."

However, Platt explained that this did not mean the digital ad market was "back to normal" – rather that it is settling at a new equilibrium, where advertiser demand is lower but internet user impressions are higher.

He also noted that the traditional daily "peaks" in user click-through rates – normally during 7-9am, 1-3pm and 7-9pm – have disappeared during lockdown as people browse the internet consistently while working from home instead of during commutes and lunch breaks.

"People are open to purchase at these times because they’re more open to an outcome or a task," Platt explained. "That has now disappeared and we’re seeing that reflect in click-through rates being flattened out during the day. The rate is also stretching later at night now – people are obviously going to bed later!"