The Short- and Medium-Term Impact of COVID-19 on Digital Marketing

By now, we know the overall impact of COVID-19 in the first quarter of 2020 on some of the larger players in the digital advertising ecosystem was not as bad as initially feared. This is broadly consistent with what Kenshoo saw in its quarterly reporting on the state of online advertising as well. However, it may be instructive to dig a little bit deeper to understand just what happened and what it means for Q2 and beyond.

With the exception of the travel category, the impact of the pandemic wasn't really felt across the online ecosystem until the end of the second week of March. The cancellation of the NBA season and the high-profile diagnosis of Rita Wilson and her husband — I think his name might be Tom? — ushered in a weekend of uncertainty, looming stay-at-home orders and panic buying. What transpired over the next two weeks across different digital channels could serve as an introductory course in how customer demand interacts with the traditional purchase funnel.

In short, e-commerce advertising, which we define as the online equivalent of point-of-sale advertising on sites like Amazon.com and Walmart, spiked during those two weeks, with categories like household goods and computers and electronics leading the charge. Toilet paper for the home and big-screen monitors for the home office were in significant demand. Meanwhile, paid search ads sagged, and paid social ads sagged a bit more. They’re both doing better now, but clearly felt the effects initially.

However, as we peel back layers of that spending, we see that across shopping and retail advertisers, lower-funnel ad types in both the search and social channels weren't affected nearly as much as other ad types, and recovered much more quickly. These are Search Shopping Campaigns in the search channel, and Dynamic Ads for Products in the Facebook environment.

This, effectively, reframes the disruption as lower-funnel ads strong, upper-funnel ads weak in the immediate aftermath of the March disruption, and this subsequently points to something we as marketers already know: Heightened levels of purchase intent require less nudging into the purchase funnel to fill the pipeline. It just hasn’t usually been laid so bare, even during the holidays. I've seen references to “Black Friday/Cyber Monday in April,” but that may even understate what we’re seeing. This is a marked boon for companies concerned with holding cash reserves close to the vest during an economic downturn — they can focus advertising dollars on displacing competition at the moment of truth, or on simply sealing the deal.

Therefore, for the likes of retail and e-commerce, having that lower-funnel presence is going to be crucial. You need a base level of findability as more and more consumers turn to online shopping, and those ad types cover that scenario, typically at a lower unit price than a keyword ad in search or a video ad in social. It used to be that filling the funnel and accounting for connection points across the entire consumer journey meant looking across channels. However, while that’s still a consideration, now it can also all exist within a single channel, with the difference boiling down to ad type. More broadly, this also means you may need to revisit your channel key performance indicators (KPIs) to reflect the new reality of lower-funnel focus.

But whither the upper funnel? Filling the upper funnel is less critical during this intense period of purchase intent, yet brands that continue to stay visible there are likely to recover more quickly. That leads to at least two conclusions for those that can afford to keep spending.

First, you could use traditional upper-funnel advertising for something more straightforward and informational, and we’ve seen through this crisis how much consumers value transparency about how, when and where you can provide value with your brand. Updates on curbside pickup, honest estimates about fulfillment times, even links to charitable giving are all options here. To paraphrase something I heard put eloquently on a recent webinar, putting all of your eggs in the lower-funnel basket may get you the sale today, but what you really want is the longer-term relationship with the customer. Giving the upper funnel short shrift puts that relationship at risk.

Second, just because we're currently experiencing high demand for certain categories doesn't mean this applies across all categories, or that this surge will last forever. It's the exception that proves the rule, and if you aren’t considering your upper-funnel strategies when and where they'll be needed, you may already be falling behind. In our data, we've already seen spending start to come back in multiple categories, and not just in those lower-funnel ads.

This crisis has forced marketers to get back to basics. Right place, right time, right message. Listen to the customer. Understand the conversion funnel. While we're reminded constantly how these times are unprecedented, the fundamentals of how we manage through the crisis are not. What has changed is that we need to level up on how we measure performance, and particularly how we look at return on investment both within and across channels.

How well we balance the fundamentals of marketing with innovation in measurement will determine how we emerge from the other side of this crisis. I’m hopeful we have the tools and the levers to ensure we get through it more quickly and more effectively if we use them the right way.

Chris Costello is senior director of marketing research for Kenshoo, a global leader in marketing technology.