Why Economic Recovery is Making it Harder to Sell Online

By Brian Burt, CEO of CANOPY Management

During the spring of 2020, when Covid-19 lockdowns spread across the U.S., numerous advertisers on Facebook, Amazon and elsewhere paused their campaigns. It seemed unseemly to push consumer products during a moment of widespread public anxiety and suffering. Simultaneously, people suddenly confined to their homes started spending huge amounts of time online, searching for news from loved ones and the broader world.

Digital ad prices cratered. The abundance of eyeballs coupled with a paucity of competing advertisers caused CPCs and other digital ad metrics to fall dramatically at the outset of the pandemic. They dipped again during the summer of racial justice protests and social unrest, and since then have been on a steady recovery as new and legacy brands have positioned themselves to take advantage of lower costs.

Now, almost as suddenly as it started, the pandemic seems to be receding in the U.S. With mask guidance from the CDC loosened and reopening well underway, hiring has picked up and most agree that the country stands at the precipice of a robust economic recovery.

Some economists worry, however, that government largesse coupled with accelerating economic activity puts the nation at risk of inflation. While much has yet to be seen, the circumstances surrounding the current digital ad market seem like an inflationary example. Advertisers would do well to understand the current forces at play, and to familiarize themselves with some of the methods they need in order to adapt.

What’s Happening Now?

Ad metrics like CPCs are rising quickly across platforms, and a number of factors play a role: First, as the nation opens up, people are spending less time online. Fewer eyeballs mean more competition for each impression, driving up prices. At the same time, data suggests that when people are online this spring, they may be less inclined to shop. Physical retail has reopened, and consumers with money to spend may have satisfied many of their immediate needs via online shopping during the last 14+ months.

In light of these conditions, advertisers should take stock of their current and planned campaigns and reconsider some fundamentals, starting with KPIs. Reaching customers online is going to be more expensive for the foreseeable future, so the first step should be for advertisers to start optimizing for conversion rates lower in the funnel, rather than CPCs.

Secondly, now is the time to optimize creative. Advertisers that have gotten comfortable with their campaigns should take this opportunity to do new rounds of split testing, explore new imagery, refresh product catalogues and try different pricing and discount strategies.

Lastly, the depreciation of the third-party cookie and other digital privacy regulations mean that the entire system is in the midst of a structural shakeup. Nobody yet knows what kind of value exchange will replace current cookie-based practices for targeting individuals, but the hard fact is that the coming months are going to be expensive and unforgiving for online advertising. Companies and brands need to be aware of how this will affect their overall strategy, and advertisers specifically should be closely monitoring the development of privacy-compliant targeting alternatives.

In the meantime, it’s time to get back to basics. Advertisers should be thinking about things like contextual targeting and better, dynamic creative. Fortunately, few industries boast as much creative ingenuity as digital advertising. It’s a very safe bet that the industry will find a way forward that works better than that which we’ve grown accustomed to as the pandemic recedes and new privacy standards take hold. Time will ultimately show us what that looks like.