Ad Sales Take a Dip with Covid-19 while Streaming Sales increases

yahoo | March 31, 2020

  • Advertising business is facing a major blowout in the wake of the Covod-19 pandemic.

  • Social media usage surges while the ad sales plummet.

  • Streaming will more likely withstand the crisis.


As Covid-19 continues to ripple through the global economy, we're starting to see its effects on businesses and consumer behavior and the digital ad ecosystem is no exception. Last week, Twitter Inc and Facebook, Inc. warned that the coronavirus-driven downturn was driving up usage but hurting their advertising business. Consequently, Wall Street analysts have begun to slash their estimates also for the giant, Alphabet Inc.

Learn more: Google ads improves asset reporting for app campaigns with 4 new updates

Social media usage is Blowing Up, But Ads Drop

Coronavirus made Twitter more valuable than ever as its daily usage has jumped by 23 percent this year. But last Monday, Twitter told investors it no longer believed in the projections it had provided to them in early February, leading Wall Street analysts to estimate a 20 percent drop in revenue. Consequently, Twitter's decline announcement was taken as an official warning to the rest of the industry about how quickly things have deteriorated with the pandemic.

The equation is simple: increased viewing hours won't do anything unless companies are willing to pay money to put themselves in front of viewers.

It's quite likely that both Alphabet and Facebook will see material drops in their ad businesses, in part simply because of the nature of the way their ad businesses are built.

We don't monetize many of the services where we're seeing increased engagement, and we've seen a weakening in our ads business in countries taking aggressive actions to reduce the spread of COVID-19.

-Alex Schultz, Facebook's VP of Analytics, and Jay Parikh, VP of Engineering

Depends On Where You Stand

On the bright side, both Google and Facebook are likely to come out of this mess in much better shape than the rest of their peers because of their size. Also, big TV networks are more protected, partly due to the fact that advertisers make commitments to buy from them many months in advance, but this doesn't mean they are shielded.

Learn more: Google Ads is enhancing asset reporting in app campaigns with four new updates to provide advertisers with detailed

Streaming and Roku – The Absolute Winner

Streaming is one of the rare sectors that is set to withstand this crisis. Moreover, some lucky ones could even benefit from the outbreak.

Roku Inc is likely to benefit from a huge surge in viewership along with Netflix Inc, Walt Disney Co , Walt Disney Co and its streaming peers. But additionally, the fears of an ad slump are considered overdone when it comes to Roku because it faces little competition when it comes to selling ads to companies looking for exposure to streaming TV users. Roku will also benefit from ads from other providers mentioned above, as well as Apple Inc. and other industry peers.

Experts say that, whereas the busy period for streaming in households would normally last around four hours on a weekday evening, that’s now risen to as much as 10 hours a day.

-Ryan Browne, CNBC

In this new normal, Roku will get a large amount of ad revenue from companies such as Domino's, Inc. that is booming along with other delivery-oriented companies. That revenue won't entirely make up for Roku's typical sales but its ad sales should not drop more than 15% year-over-year.

Roku's commission revenue should jump as Roku gets a 20% commission from the content ordered on its website. As viewing hours soar, Roku users are more likely to pay to try out more paid channels and more movies, all of which will boost the company's commission revenue. And this increase is able to offset much of the ad revenue it will lose from the downturn.

Outlook

Google's few segments have been hit hard as an overall economy being brought to a standstill. Its heavily hit segments include travel, lodging, autos, retail, and many others. Past downturns have proven that almost no company is immune to severe economic shocks. Moreover, this particular health crisis has its own set of unique dynamics. Although some companies have proven agile in navigating the initial stage of this global pandemic, everyone eventually succumbs to the inevitable. And these giants are no exception.

Spotlight

Marketing is the overall process of communicating and delivering products to a target audience through the marketing mix of product, price, place and promotion. Promotion is a combination of communication activities that include advertising and public relations. Deciding on what resources to apply to each of these promotion areas is a result of other factors identified in an overall marketing plan.

Spotlight

Marketing is the overall process of communicating and delivering products to a target audience through the marketing mix of product, price, place and promotion. Promotion is a combination of communication activities that include advertising and public relations. Deciding on what resources to apply to each of these promotion areas is a result of other factors identified in an overall marketing plan.

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