By François de Laigue
Seasoned AdTech executive. Columbia Professor. Microsoft alum. MIT.
Winston Churchill is remembered as a hero and a leader, not because of his time before the war (he was sidelined and discredited), but rather his time during the war when he displayed exceptional leadership. That’s because true leadership is not needed when everything is under control, but rather when things are at their worst.
As of April 17, nine major publishers laid-off or furloughed an average of 8% of their employees, many in their sales departments (AdExchanger). And we’re only a month and a half into what looks like a multi-quarter recession. Not everyone is born to become Churchill but we all play our parts and all have an opportunity in front of us to demonstrate true leadership!
What can I do Today? Weather The Storm.
In the teeth of the storm, a ship’s survival depends on two things: sea room and steering-way. Sea captain Max Hardberger.
- Sea room is a safe distance from anything it might crash into, like a coastline
- Steering-way is sufficient propelling power to steer rather than getting pushed around by the waves and wind
Similarly, what can publishers do to weather the storm?
Sea-Room: How Far are you from the Irreparable?
For a publisher, 3 key considerations apply:
- Demand drop: Adomik tracked a drop of 30%+ in March across programmatic buyers (whether direct demand or open exchange). In the US, we’ve seen a significant CPM drop (-40% over March, flat in April) while ad requests and impressions sold rose, but not enough to counter the CPM drop. We all know why. 65% of CMOs are bracing for moderate to significant budget cuts (Gartner) and 70%+ of campaigns have been canceled (IAB). The overall trend largely depends on economic activity which is expected to pick back up in the second half of the year and see accelerated growth through 2021 (as forecasted by Goldman Sachs, JP Morgan, DB).
- Bad debt and write-offs: as we enter a period of recession, buyers with weaker business fundamentals may leave your accounts payable departments hanging dry. Being able to understand who’s best positioned to be a viable partner and cutting your losses today could turn invaluable. We have run DSP-level analysis for AdExchanger. The majority of DSPs’ spend compressed by 30%-50% over March. Some have much of their spend concentrated within a smaller customer-base which can be a double-edge sword: these DSPs can pivot faster to capture budgets and represent much needed demand, but also tend to be skating atop thinner balance sheets.
- Opportunity cost: This crisis has taken the world by surprise. As a response some companies resorted to layoffs to lighten their P&L. The weight of these decisions far extends beyond what can be read on a P&L or balance sheet. Employee morale, lower employer brand, soured ex-employees, innovation opportunity cost, strained relationships with clients and partners can all come to haunt your company. Worse, they may signal an unimaginative leader unable to navigate challenging times. I personally subscribe to Peter Drucker’s wise words: “If we were to decide now, would we still enter the businesses we are in today?” which help tease out your company’s core strength and focus. If the answer is no, then perhaps it was never meant to be and now would be a time like any to divest the parts of your business that don’t accrue to its mission. Short of that, layoffs are most often a bet against your own company. It is worth noting that economic signals pointed to a recession around now as of the past 12+ months.
Steering-Way: Drive Viable Traction
Just like ‘steering-way’ is the ability to propel and steer your ship out of danger, it is critical for publishers sales teams to operate optimally during these difficult times – this means working smarter, not harder! For programmatic and media sales team, the question remains: When budgets are shrinking (almost) everywhere, which brands should I talk to?
Using the Adomik platform, this is what we found: during the crisis, budgets started shifting on a weekly basis, including for top brands. March saw a decline in demand overall. But here’s the bright side. During March, 32% of large and mid-sized brands (i.e. representing the top 75% of spend, excluding long tail brands) initiated or grew their programmatic ad spend via directly sold and negotiated deals. These brands were primarily mid-sized brands with smaller shorter-term budgets than the usual juggernauts, many of which have decreased their spend.
In order to capitalize on where budget increases are and depend less on declining budgets, publisher sales teams need to refocus accordingly. Doing so will require some agility!
- sales velocity: with deals usually going on for quarters with the largest brands, and month(s) for mid-sized brands, the current deals are to be planned in weeks (1-2 weeks). There are also more than 10x more mid-size brands than there are in the top quartile, which means 10x more potential opportunities for your pipeline.
- deal size: third quartile brands are significantly smaller. For every $100K that a top quartile brand would spend, we see that a third quartile brand spend $8K.
- deal cycle: fortunately, smaller companies tend to be much more agile and you may be able to close deals in a shorter timeframe
- pitch: during the crisis and upcoming recession, it is key to highlight value, especially in the US where CPMs have taken a black eye.
With a high throughput pipeline, the key is focus. You can burn a lot of cycles knocking at the wrong doors.
Strategically, I recommend following Gartner’s 3 categories of Dark Sectors (travel, brick & mortar, etc), Shaded Sectors (automotive, tech & telco, utilities, etc) and Spotlights (news, essential CPG, etc). Adomik found the same brand vertical clusters in our analyses of the programmatic market. Having a strategy that weighs in on spotlight and shaded sectors will be key to navigating the next few quarters and through 2021. By allowing to track brands’ spend across programmatic in real-time, that’s where the Adomik platform can be of most help to programmatic media sales teams.
Now is a great time to think about what your business should focus on today for a better tomorrow.
Will you be ready to capitalize on growth on the other side?
What do you need to do today for your business to survive and thrive?
by François de Laigue
« I compiled a few thoughts based on discussions with execs running monetization at ComScore publishers and Adomik’s data on the programmatic industry. »
👉A publisher’s guide for the COVID-19 era.