Do The Current Changes Represent Any Advertising Opportunity?
The past month has brought considerable challenges to the media and advertising industries, with what would have been considered as stalwarts of the industry suddenly needing to slash budgets and certainties having become uncertain. Events have been cancelled, subscriptions have been halted, print ads have become like gold dust.
However, in times like these, where the existing paradigm has shifted so dramatically and so quickly, those companies who adapt quickest are those that thrive. We saw this after the 2008 crash, where amongst the rubble of a destroyed financial system the seeds were sewn for some of the world's most successful companies today. The distrust of banks allowed companies like Sterling and Monzo to grow, the failures of large incumbents allowed smaller more agile companies like Netflix and Airbnb to grow, and the challenges of getting lines of credit meant that bootstrapping and self-sustainability saw companies being founded on more secure footings. To some extent this is happening with companies now, with several either shifting their business model or seeing their existing models becoming essential.
We are currently in the midst of the crisis, meaning that getting information about impacts is difficult and nobody will be able to get the kind of objective picture of the changes happening for some time. For ALF this is clearly not ideal given that we pride ourselves on the data we can offer. Nevertheless, below are some sectors that are worth a look:
Shops, restaurants, pubs, cafes, and museums are all closed, which is an inconvenience for people trying to get a pint or a coffee, but has a huge impact on the companies supplying these businesses. For instance, New Covent Garden Market in London has supplied London eateries and florists with food and flowers since 1670, with this one market providing 75% of all London's flowers. With the majority of their clients now unable to sell anything the market, and wholesalers who use it, have shifted away from a B2B model to selling B2C.
With the inability for many people to get to shops, and when they get there having a very limited supply of food, the opportunity has arisen for millions of food boxes to be delivered across London directly to consumers. This has seen an arms race amongst companies who have never needed to take this approach before, with advertising, media strategies, and digital spend all brand new to them.
Food is the most obvious area where this is happening and the one industry that has been impacting the most people, but this is likely to be emulated across many areas where B2C companies can no longer sell the stock their B2B suppliers sell them.
The media has a reputation for networking events, whether it's Cannes Lions, MIPS, film festivals, awards etc. The fact that none of these can happen for the foreseeable future has meant that glasses of bubbly have been replaced by keyboards and the snap of event photographer cameras has become a small black circle at the top of your screen. Virtual meeting spaces are now big business, with the difference being particularly starkly shown with Zoom.
The average daily downloads of the app sat at 56,000/day in January, on March 23rd alone that number was 2.13 million. On December 6th the stock price of Zoom sat at its second lowest since its IPO in April 2019 at $62.7, today that number is at $159, a near tripling in value in a little over 3 months.
Many virtual meeting companies have been forced into a freemium model given their general focus on B2B clients, but with the huge number of consumers now using the app, if they did not adopt some form of advertising in their freemium model then they could be missing out on millions in revenue.
For years we have been told by our parents to go outside more, spend less time on the computer, stop watching TV etc, now we have a paradigm shift. Suddenly our screens are often the only escape we have. My screen time over the past two weeks has almost doubled and I am sure that I'm not the only one.
Whether this has been staying in touch with friends and family or just needlessly browsing through websites, the truth is that this represents a huge opportunity for digital advertising for B2C customers, the challenge will be finding companies who want to advertise, as many who could previously be relied upon suddenly find themselves struggling.
As social distancing continues, companies will begin to adapt, and this will become the 'new normal'. We are going to see digital advertising grow once again, simply because without people outside, with the already diminishing print advertising numbers, and without events, this will become the most effective place to advertise for many companies.
At the moment we can go outside to exercise once per day, we can run, we can cycle, we can walk - but for many this simply is not going to be enough. 1 in 7 people in the UK have a gym membership, so 10 million people are suddenly finding that they can't do the kind of exercise they could only one month ago.
There have already been several famous faces, like Joe Wicks (playfully dubbed 'the nation's PE teacher') showing the potential of remote workout classes, and with several companies offering this service for a fee, there will be increasing competition amongst them. Companies like Classpass, Peloton, and several Yoga classes are going to see a big increase in demand as people look to stay fit outside the gym.
Where template 'for all' classes are doing enough for now, in a few weeks time the chances are that this will not be enough, especially when 15% of the UK are so used to having completely custom workouts. Therefore as this goes on, there is a likelihood that we will see an increased uptake in these kinds of apps and an increased demand from them to get as much market share as they can.
On the opposite end of the activity scale are computer games, which, having already been in ascendency for the past decade, are likely to see a huge push as bored people look at ways to stay entertained at home.
Although we are yet to have the exact data on this, there is anecdotal evidence of the sudden spike in demand as Nintendo Switches are currently selling at 2 to 3 times their RRP on Amazon and Game. We have also seen game manufacturers' stocks perform well above the S&P average since the start of the outbreak, with the S&P average down by 14.6% whilst Take-Two Interactive, makers of game franchises such as Red Dead Redemption, GTA, and Borderlands, have seen their stock rise by 3.58% despite having no big releases in that time.
Another piece of anecdotal evidence here comes from companies like Nintendo, who have been pumping money into digital advertising and influencer marketing for their new game Animal Crossing, which has seen their share price spike by 24% since March 13.
Companies like Uber Eats, Deliveroo, and Just Eat have been seeing their popularity grow over the past 5 years, but the current crisis has changed their service from convenience to close to a necessity.
This necessity has come from both sides of the supply chain, with restaurants unable to serve customers on-premises and consumers being told to stay at home whenever possible. These app-based delivery companies have traditionally been loss makers, but with this sudden change in everybody's circumstances, the use of the these companies has likely significantly increased (although, again, this is based on anecdotal evidence).
With the large supermarkets currently struggling with capacity for food deliveries, these companies are also moving into grocery deliveries, which will further increase their use and require effective advertising strategies to spread the message outside of their traditional customer demographics.
A few years ago people mentioning 'the cloud' were classified as either geeks who knew too much or marketers who flippantly used the word without really knowing its meaning. For everybody currently working at home the cloud has become an absolute necessity and without it working from home would be almost impossible.
We have seen some of the biggest companies in London (who shall remain nameless) being forced to stagger working hours due to pressure on internal servers from external connections. For the last few years with companies often having a small number of people working from home, the strains on older systems has always been small, but with the current situation likely to last for the next few months at least, the need to move to cloud-based technologies will become increasingly clear.
In addition to the current situation in which we find ourselves there is little doubt that spending this much time working from home will have knock on impacts on how people work in the future. Where fear previously existed around allowing large numbers of employees to not be in the office, being forced to work apart has largely allayed many of those anxieties and changing those mindsets back may not happen or even be necessary. The improvement in cloud technologies and with more persistent use of them in this period will likely drive more people towards them, increasing competition amongst platforms to get these new customers onboard.