With the prospect of a financial downturn in the offing, GumGum’s General Manager – EMEA, Pete Wallace tells us how contextual advertising offers the prospect of safe passage through these treacherous times.
The world is experiencing a global economic downturn, and quite possibly a period of recession. How will this affect the digital advertising industry?
I’m afraid you’re right. Retail sales in Europe are falling, the UK is now technically in recession, and TD Securities suggests that in the next 18 months there is a greater than 50% chance of the US doing the same. We’re living in tough times and everyone is going to be affected.
Naturally, that includes the digital advertising industry. GumGum’s platform is picking up the seasonal increase in political, retail, consumer electronics and travel ad spend. Yet, there’s no denying CPG, entertainment and financial services ad spend is already under pressure, as those industries batten down the hatches in preparation for the impending storm.
How are you seeing this downturn manifest itself in consumer behaviour?
We are seeing it in various ways. First of all, we know people are tightening their belts. They’re putting off major purchases, switching to cheaper brands and evaluating the number of content streaming subscriptions they own.
Sustainability is playing a big part in all of this, too, as people become increasingly aware of how manufacturing processes impact the environment, and look to save money buying second hand products. Consumers are pivoting towards a more conservative lifestyle in which financial prudence plays a key role, where people do things like aiming to buy more refurbished goods. There’s also a sense that people are shopping differently online, with a lot more shoppers making purchases directly through social media.
So consumer behaviour is changing and evolving on a lot of fronts, and this can complicate things for brands and advertisers looking to target their audience.
What should advertisers in the midst of an economic downturn do to give their campaigns the best chance of success?
Well, tough times call for smart measures, so brands and advertisers need to focus on ensuring that each ad dollar delivers the maximum return on investment. That’s easier said than done, but we believe advertisers that embrace contextual advertising will help brands be more strategic in engaging their audience, and drive better outcomes. As we’ll see shortly, this is because contextual advertising allows marketers to efficiently target appropriate audiences, reducing waste in the budget.
A contextual strategy also helps advertisers plan for the cookieless future, because it is a privacy-first targeting method, and will future proof advertisers looking to operate in new, exciting digital environments, such as in-game and the metaverse, when traditional data targeting methods can no longer be used.
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How powerful a tool is contextual targeting in the context of a recession?
Contextual’s ability to understand an audience’s mindset, and deliver appropriate adverts, is critical during these tough economic times because it allows brands to reach the right audience quickly and make every dollar count. A study from Dentsu found that contextual targeting is 29% more cost efficient than behavioural targeting, because marketers spend less cash reaching the right audience. That represents a huge saving for advertisers.
Also, given that the recession is encouraging people to shop for new products and services, contextual advertising can help brands unlock these new audiences and customer segments without the need for personal data or traditional tracking methods that rely on historic behavioural information. Contextual offers a fast-track route to the mindset of your audience, and the places and spaces they inhabit.
Contextual advertising is really one part of a set of capabilities that are proving so effective in this financial climate. When you combine it as part of an offering that includes rich media and high impact ad formats and measure and optimise based on consumer attention, it’s a potent framework that can help advertisers drive growth in these uncertain times.
And finally, have you any advice for brands at this difficult time?
I think a critical message is this: regardless of how tempting it is to cut marketing budget, don’t do it. A report from eMarketer shows one in five CMOs have already reduced their budgets, but history shows this is a mistake, and those that double down on marketing spend during a recession will reap rewards.
There are a few classic examples of this. In the Great Depression in the US during the 1930s, the cereal brand Kellogg’s doubled its advertising spend and witnessed a 30% profit spike, cementing itself as the market leader – a position it has retained. In more recent years, P&G doubled down on marketing when Covid hit, and achieved 4% revenue growth in 2020 alone.
The message is to maintain and even expand marketing activities if possible, but do so in an intelligent, strategic manner to offer the most value for money – and contextual advertising will help you achieve this.
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