Financial markets are sliding 7 to 10 percent per day; countries are locked down; and travel from Europe to the United States has just been banned. And we are only at the beginning stages of the COVID-19 panic. Cases in the United States will continue to grow exponentially, and people and businesses will pull back.
The last time there was this level of panic in 2008, digital advertising in the US was only $23.4 billion. In 2018, the last year for which we have full year data, it was $107.5 billion.
This is the first time most businesses are experiencing global panic and its impact on digital advertising and online customer behavior.
The question for advertisers and agencies is: How should we approach this moment of panic to minimize downside risk and take advantage of possible opportunities?
The most important thing we can do is stay calm and not panic. Fear clouds our judgment and impairs our ability to make good decisions. When everyone around us is making decisions based on fear instead of fact, simply acting rationally is a competitive advantage. Operate based on data as you normally do and don’t let fear cause you to make any rash decisions like cutting all your ad spend.
But don’t trust your data implicitly. In 2008, I made my money in the financial markets, and data and models that worked under normal market conditions break down when volatility spikes. We are in a period of massive volatility, and the systems and models we have built do not function properly when volatility is high.
As such, it is important not to overweight massive short-term changes in performance. Be aware and strategize, but never forget that all the systems you rely on are not functioning properly.
And this lack of trust is doubly true for automated systems. Even under normal conditions, the automated strategies and machine learning driven systems from Google and Facebook are young and fickle. There is a reason that both companies suggest giving their algorithms a few weeks with no changes for learning purposes. It’s because machine learning systems don’t do well with massive changes.
These algorithms are now getting fed massive, unexpected changes. If you’re leveraging smart campaigns and automated strategies, you should be monitoring them extremely closely. Even if they have been running smoothly for a long time.
A natural consumer behavior in times of panic is to pull back and hunker down. Conversion rates across the board for purchases are likely in freefall, as consumers pull back and avoid buying.
In the near to mid-term, bottom of the funnel traffic is likely to see large drops in conversion rate. But non-monetary top & middle of the funnel conversions are unlikely to see a similar drop in conversion rate.
By moving budget allocation up the funnel to non-monetary conversions like email list signups, you will be able to position yourself well for when the panic subsides and people return to normal buying behaviors.
There’s a saying in the financial markets that goes “When people are yelling you should be selling. When people are crying you should be buying.” What it means is that the best opportunities come when you are running the opposite direction of everyone else.
With competitors panicking and slashing ad spend or turning it off outright, we are actually presented with opportunities. Opportunities to increase market share in a vertical, for example.
Savvy allocation of ad spend today can set you up for success for the rest of the year. Additionally, we are likely to see a short term decline in CPCs and CPMs as the number of auction participants declines.
When there’s blood in the water, fish for sharks.