Digital ads in the wake of COVID19 – great opportunities await those who dare…
Not all is grinding to a stop during the ongoing Corona pandemic, even if it sometimes seems like it is. Some of the online based businesses around the world find themselves in their most busy time ever, and companies selling b2b SaaS solutions focusing on online collaboration, video conferencing or team management solutions, are thriving.Even so, many companies are cutting costs big time to keep their cash from burning away.
Some of the worlds biggest advertisers have cut spending on ads by as much as 90% in March and April 2020. What is the opportunities that we see emerging in the wake of the current crisis?
The two elements of ROI* / ROAS*
Before we discuss why now is a great time to be using digital ads, I first wanted to describe the basics for the non-marketer. Feel free to jump this section and proceed to the next one if you dont want to refresh your understanding.
Cost per Click or CPM
The basis for most of the big-platform ad providers (Google, Facebook ++) is the CPC (cost per click) or the CPM (cost per 1000 views) . This is what you are paying your provider per interaction (click og view, in this case) the customer makes with your ad. If a lot of companies want to run an ad, the price increases.
Conversion rate
The conversion rate is how likely your paid (in this case) traffic will convert from the visitor that you get on your page, to a paying customer.
Together these two create one of the most important SaaS KPIs ever; the Cost per Conversion/customer acquisition (CAC) og Cost per Lead – depending on where you count the conversion.
Cost per Conversion = Cost per click / Conversion Rate
So, why is the ROI increasing in the worst recession since the 1930s?
The short answer is that at the current rate the cost per click is dropping faster than the conversion rate, and this leads to the decrease in cost per conversion.
The slightly longer answer is that in the last decade our increasingly online world have “primed” us to be comfortable with shopping online or buying and using SaaS-products in our business or personal life. When this current corona virus hit it was natural for a lot of people to just get the stuff they needed via the internet, and they also spend a lot more time online now than they used to.When the average internet user spends more time online, either browsing the web or using some app or another, they increase the total ads inventory for companies like Facebook, Google etc. I.e. the total number of slots where the ads inventory owner can sell your ad increases. This would roughly equate to the “total supply” in traditional supply chain thinking.
On the other hand, the worlds largest advertisers get hit all over from the current economic collapse, one of the areas that are easiest and fastest to cut is online ads. This means that overall demand for those slots mentioned above have decreased significantly over the last 3-4 weeks. Together with the increase in total available online ad space, this provide the online ads platforms with something like the “perfect storm” when it comes to decrease in CPC/CPM.
Numbers from Facebook presented at Statista.com shows that the average CPM on the Facebook Platforms dropped by 20% from January to March, in a period that has previously shown increase in CPC/CPM.
Conversion rates always fall in an economic downturn like the one we are now experiencing, both for B2C and B2B sales, as customers alike try to keep their cash handy and limit cost as much as possible. Usually, this will last a period, before rebounding when the “new normal” is established.
Together, the decrease in average CPC/CPM far outweighs the decrease in conversion rates currently. Niel Patel refer to a 73% increase in ROI since pre-corona times! This was based on research done with their clients in March 2020.
Source: https://neilpatel.com/blog/covid-19-marketing/
If you have the money – this might be the time to ramp up those Ads
It is always daunting to push the gas down in uncertain times, but if you have the money and are in a part of the business landscape that are still seeing a fair interest from customers, you might be able to keep growing with a great return on your money spent on ads.Or, if you have not used paid ads as a part of your customer acquisition strategy thus far, this might be the time to dip your toe on the water.
*ROI = Return on Investment
**ROAS = Return on Ad Spend