03 Nov The Recession and Advertising: Let’s Talk
We’ve all heard the tantalizing tales of some smarty-pants who snapped up recreational property in Florida and Arizona during the trough in prices following the financial crisis of 2008-2009, or the ultra-wealthy who loaded up on railroads and farmland during the Great Depression.
So… am I about to tell you that you might be able to make a killing in the coming months buying… advertising?
Well, not exactly. But it’s important to note that company growth and new customer acquisition don’t only happen during boom times. For some advertisers, it could turn out to be quite the opposite.
The fact that Big Tech is hurting right now because their big cash cow is vulnerable to broader economic weakness is well known to all and sundry, thanks to the size of these companies and their weightings in the stock market indices, and thus in news headlines. You don’t have to look much farther than Google (the world’s largest seller of ads)’s recent quarterly earnings report to grok the pattern. Google stock has retreated to levels not seen since (gasp!) two years ago.
Looking ahead to our prospects for 2023, individual advertisers and their agencies can do a lot of great work together. The key is to keep a keen eye out for weaknesses in the auctions for the most desirable ad inventory (paid search, Shopping, or whatever is working best). The logic’s pretty simple. As much-touted reductions in marketing and advertising budgets kick in, other advertisers will be doing some funny things in the auction—if they’re there at all. They might:
- Duck out entirely, perhaps for an extended period of time.
- Reduce daily budgets or “run out of budget” halfway through a month, or towards the end of the month.
- Bid more cautiously, or reel in less profitable product lines or business units.
Even if it’s the latter, it should put downward pressure on prices, so advertisers who are able to stay the course should find relative bargains in the coming year. That, to me, is a stabilizing force in what appears to be a volatile economy.
Opportunities may become even more pronounced if advertisers and their agencies cut back in ways that are inefficient. I’ve always believed in an ideal strategy that would put just the right bid for your business logic into the auction for every potential scrap of revenue resulting from user interactions online.
In other words, advertisers who frequently overpay may also be paying nothing by “shutting down” or “avoiding a lot of potential interactions entirely.” As is so often the case, Goldilocks logic wins (so does the tortoise over the hare).
On behalf of our clients, we’ll be actively seeking better deals on ad inventory in the coming year. For that reason, we expect no major slowdown in budgets or traffic for many of our client businesses.
And if you know of any railroads out there to be snapped up for pennies on the dollar… hey, I’m keeping an open mind.