By Kateryna Novatska, Marketing Specialist, Epom Ad Server
COVID-19 has changed the world we live in. Businesses worldwide are struggling to stay afloat, as lockdown orders are reducing consumption, keeping people at home, and leaving many unemployed. Ad agencies are along for the bumpy ride, and here is why.
Countries and states are loosening the quarantine, but even as businesses open up again, the post-COVID world they will be operating in isn’t going to be the same as before. Brands and businesses are starting to cut their ad spend, with industries such as tourism seeing a 65% cut in ad spending in March 2019. These changes in marketing budgets are likely to extend long after COVID lockdowns end. As such, ad agencies’ revenues have also declined. But it’s not all doom and gloom and there is plenty you can do to help your agency stay afloat and even prosper during these troubled times.
Risks and Losses of Ad Agencies During an Outbreak
Businesses across all sectors have experienced a significant drop in demand for their products and services. Ad agencies are seeing risks and losses coming from every direction.
Ad agencies that are working on their COVID-19 strategy should be aware of the following risks and losses they are likely to encounter:
The decline of worldwide digital ad spend
At the beginning of 2020, digital ad spend was expected to increase significantly worldwide. However, those estimates have had to be readjusted. For example, if we take a look at China, before the COVID-19 outbreak, ad spending was expected to reach $121.13 billion. This estimate has now been pushed down to $113.7 billion. (Source: eMarketer)
Advertising budgets are often the first thing to be slashed when organizations go through a crisis. Thus, agencies need to prepare for clients canceling and reducing their marketing budgets.
Furloughs and staff reduction
Lower advertising budgets mean less revenue for ad agencies. To offset this trend, they need to start furloughing staff or cutting salaries. Businesses have already started doing this: in the US, unemployment has already reached over 33 million (source: BBC).
With reduced ad spend there will be less work for your staff to undertake and you may need to look at furloughing some of your team, or having team members take a pay cut so everyone can keep their jobs.
For many ad agencies, rent is a huge portion of their expenditures. Especially those located in cities such as LA and NY where rent is sky-high. Agencies may want to evaluate the risk that having an office space presents, as their staff works from home and it is not being utilized. Though, this does come with its own risks. Agencies without an office may experience a lack of team or company culture, team members may feel isolated, and collaboration can become more difficult.
Keeping up communications
A big part of running an ad agency involves face time with clients. They love to go out for lunch, coffee, or happy hour. In-person meetings at theirs or your office are also a strong part of maintaining relationships. These kinds of meetings are more complicated now, and many are being replaced with video calls. It is a challenge for agencies to maintain communications and relationships with more meetings switching to online.
Typical Ad Agency Crisis Response: What’s Right and What’s Wrong?
Ad agencies across the globe are taking different actions to stay on track during these unprecedented times.
Some examples of how renowned ad agencies are responding include:
The behemoth agency WPP, secured £600 million in loans from the UK government, under its COVID Corporate Financing Facility. This huge loan should help cover wages, pay suppliers, and minimize disruption due to declining cash flow.
IPG made difficult decisions to cut spending to mitigate the impact of the COVID-19 outbreak. This has included measures such as a hiring freeze, furloughing staff, and cutting all non-essential spending.
Cannes Lions had to cancel its Festival of Creativity due to restrictions on gatherings. But instead, they made the choice to host a virtual event on the same dates, that focuses on education and networking opportunities. The event, called “Lions Live” will include masterclasses with industry experts, world-class lectures, and online talks with the festival’s previously confirmed guests.
Creative Digital Agency, a San Francisco-based full-service agency sent its employees homes after implementing a work-from-home policy to keep in line with the county’s “shelter in place” mandate.
We can see from observing the actions of these agencies there has been a typical response across the board. This includes measures such as:
- Cutting or furloughing staff
- Sending staff to work from home
- Hiring freezes
- A move to online content — such as webinars, virtual events, etc.
- Taking out credit to secure finances through this time
It will be hard to say what was the right and the wrong strategy to take until we are on the other side of the pandemic. There are also location factors to take into account. For example, the UK government has the COVID Corporate Financing Facility and has implemented a furlough pay of 80% for staff earning under £2,500 per month. These resources will make it easier for UK agencies to furlough staff or take out credit and put their energy, finances, and strategies into other places such as retaining their clients.
Most Viable Retention Strategies for Ad Agencies
Retaining clients is where ad agencies need to be focusing their energy. With the dramatic cut in ad spend across all industries, holding on to each precious client is more important than ever. Even if their spending with your agency is reduced, you will want to keep them on board. Secure that income and look to the future, because when the market recovers, ad spends will start increasing again.
How can ad agencies retain existing customers?
Maintaining your long-lasting relationships will be essential to surviving the COVID-19 crisis. Some quick tips to help you retain your current clients include:
- Offering them alternative options for their campaigns, the ability to adjust their budgets, tactics, and come to them with suggestions of how they can improve their messaging.
- Be understanding with any changes they may have to campaign launches or budgets (as long as they keep communication open).
- Freeze any pricing increases. If you were planning to raise prices for campaigns, you will want to change that plan.
How should ad agencies change their customer service strategy?
Before the pandemic, a lot of customer service in ad agencies would have been done face to face. Meetings, lunches, coffees, are all common occurrences if you are an account manager.
Now, you will have to change your strategy. Customer service will be delivered almost entirely online. And it will need to be stepped up a notch. You may have some clients that you don’t have much communication with, if you haven’t checked in with a client in a while, do it now. Keep them in the loop and address concerns that they may have. Let them know where things are changing, where metrics are coming down, and what you can do to improve campaign results.
What should be changed in the ad campaigns you run on behalf of your clients?
Consumers’ behavior is changing due to the pandemic. As such, you may want to revisit some of your ad campaigns to re-optimize them for the current times and ensure the maximum ROI for your clients.
- Don’t assume your clients’ audiences are consuming content in the same fashion they were before the COVID-19 outbreak
- Don’t share anything insensitive or that may cause panic to viewers. Now is the time to assess all your active campaigns and remove any with inappropriate content.
Corona Beer has possibly the most unfortunate brand name you could ask for during these times. However, in one of its latest ads, it did the opposite of trying to repair this damage.
The original video ad that was uploaded by Corona back in Feb 2020 for their NEW Corona Hard Seltzer. Four delicious flavors. One splashy entrance. is no longer possible to view online. Their current ad can be seen below.
The launch and advertising of this product have received criticisms due to this type of summer drink being associated with spring break and beach holidays. This year, spring breakers became “super spreaders” of the virus. Corona may have done better to simply postpone the launch of its product.
For a better example of a beer brand that is navigating the tough waters of advertising, a product usually associated with social gatherings in these times, you can look to the Heineken ad created by Creative Agency Publicis Italy.
The video ads message of “We’re further apart. Yet, we’re closer than ever.” addresses the issues of the pandemic in a sensitive way, acknowledging the current reality.
How to modify your brand positioning and service portfolio?
Now is a good time to start some out of the box thinking. You will want to start brainstorming ideas with your team for ways to stand out against competitors in an effort to retain your clients and drive new leads.
Focus on two or three strong offerings that your company can deliver to an extremely high standard. Now is not the time to diversify your portfolio. When reaching new potential customers, your audience should clearly understand what your ad agency is about. Such awareness gives them the feeling of stability and trust in your specific expertise rather than perceiving you as “a jack of all trades but master of none”
Anti-Crisis ToolKit for Agencies: Which Software to Use?
Implementing new software can help ad agencies facilitate their business processes. Some examples of software to consider adding to your toolkit right now include:
For large scale agencies, an ad server is the best software option. An ad server is an ad tech platform that is used for launching ad campaigns, supervising ad placements on websites, or bringing together publishers and advertisers with a single interface.
An ad server gathers data on key metrics that media buyers and sellers can use to help optimize their ad campaigns. If an ad server is not used, this data will have to be manually collected with HTML code on the website.
White-Label DSP & SSP
A DSP (Demand-side Platform) and SSP (Supply-side Platform) are the two reverse sides of a whole. A DSP allows advertisers to purchase traffic and run ad campaigns whereas an SSP is designed for publishers to sell and manage their inventory.
Ad servers might have an RTB integration, but that’s not always an option. So, if an agency relies heavily on programmatic media buying, you might prefer using a different ad tech stack.
If that is the case, you can set up a white-label DSP, SSP or even both to unite all supply and demand partners in one interface. It also has the additional benefit to cut out the middleman represented by ad tech vendors, which add their bid markups in case you use a self-serve platform. Thus, you can save up to 10-30% of your ad spend depending on the vendor you used before.
Also, if your clients want to get full access to their campaigns and their results, you can create and assign self-serve accounts to your advertisers. This might be a serious edge over your competitors, as agencies are often criticized for being non-transparent “black boxes” in terms of campaign data.
Agency Trading Desk (ATD)
An ATD (Agency Trading Desk) is similar to a DSP on the surface. But besides media buying, it is used to hire developers, account managers, and data analysts to work for your agency’s clients. The main advantage an ATD presents is that your agency can buy media for a lower price compared to in house management of campaigns.
Is it Possible to Win New Clients in a Post-COVID World? YES!
COVID-19 came quickly. Ad agencies were not prepared for the impacts it had. Many businesses are experiencing negative effects and in turn, slicing their ad budgets to cut costs and stay afloat. But it’s not all doom and gloom. There are businesses that are working through the crisis, some that are even thriving, and those that are sinking are looking at marketing to help them get back afloat.
Marketing strategies and offers need to adapt to the post COVID world. But it is certainly possible to win new clients. Focus on how you can help your current clients thrive and see great ROIs on their ad spend. Use these examples in case studies and target new clients that you know you can get great results for.
COVID-19 has made the outlook for ad agencies’ future seem a little bleak. This was an unprecedented event that agencies did not forecast for but now that we are more aware that the effect will be rolling out for the long term, there are many ways to prepare. Agencies should not throw in the towel and accept defeat. Focus on retaining your important clients by being flexible and tending to your client relationships. For the long term look to your services and how you can adjust your strategies to stay competitive in a post-COVID world.