The Price of Digital Ads Is Down 16% Due to Economic Impact of the Pandemic

Total U.S. digital ad revenue for Q1 surpassed $31 billion, but that began to drop in March

Photo of Times Square with falling TVs
Sixty percent of publishers have seen CPMs drop since the onset of the pandemic. Getty Images
Headshot of Andrew Blustein

The price of digital ads is down across the board because of the negative impact the coronavirus pandemic is having on the economy.

Digital media owners have seen CPMs drop by 16% compared to what they had originally planned, according to a report from the IAB and PricewaterhouseCoopers.

The economic impact of the pandemic has forced a majority of advertisers to pull spend, while stay-at-home orders have led people to consume more and more content, creating loads of new inventory along the way.

“For the foreseeable future, we will be operating in a unique marketplace, testing the boundaries of supply and demand in a way we haven’t seen before,” said David Cohen, president of the IAB.

Publishers have been hit hardest, with 60% experiencing a drop in CPMs for their direct deals, according to the report. Overall, CPMs on direct deals are 14% lower than deals executed programmatically.

Publishers already had trouble monetizing their content as advertisers block their ads from appearing against content related to Covid-19. That drop in CPMs, plus the sudden halt of events businesses, has forced many publishers to furlough or lay off staff.

In total, U.S. digital ad revenue for the first quarter totaled $31.4 billion, a 12% increase compared to last year’s mark. However, many publishers started reporting a decline in revenues at the end of the quarter in March, coinciding with the onset of the pandemic.

Sue Hogan, svp of research and analytics at the IAB, said nearly 70% of advertisers paused or canceled campaigns in the wake of the outbreak.

“Media that provides flexibility in targeting and creative execution, like audio and search, is better positioned in the near term to meet buyers’ needs as they continue to make changes to adapt during the pandemic,” said Hogan.

The cost of ads on connected TVs are also showing signs of life. CPMs on the big screen are down 6%. CTV is becoming a more viable option for buyers hesitating to commit to an upfront as it can offer digital-like flexibility, especially as more people stream content while they stay home.

Hogan said that in “normal times,” pricing in CTV would likely be seeing significant growth.

Ads on desktop, mobile and tablets are down 27%, 28% and 29%, respectively. In particular, CPMs for display ads on mobile and desktop have dropped by over 30%.

In 2019, before the impact of the pandemic was felt in the U.S., total domestic digital ad revenue reached $124.6 billion, a 16% increase compared to 2018.

IAB/PricewaterhouseCoopers

Two major growth areas last year were video and audio. Digital video revenue across mobile and desktop reached $21.72 billion, a 33.5% increase compared to 2018. Audio revenue jumped 21.2% from the year prior, to $2.72 billion.


Andrew Blustein is a programmatic reporter at Adweek.
Publish date: May 28, 2020 https://stage.adweek.com/digital/the-cost-of-digital-ads-down-by-16-due-to-impact-of-the-pandemic/ © 2020 Adweek, LLC. - All Rights Reserved and NOT FOR REPRINT
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