The Impact Of An Economic Recession On Ad Budgets And Publishers

The 2008–2009 economic recession has impacted the entire world, as whole markets succumbed to alarming drops. Today’s economy, although recovered, seems to be heading in the same direction, as the same mistakes are repeated by those in charge of the world’s biggest economies and financial institutes.

The advertising industry did not elude the effects of recessions over the years. One of the first departments that sees budget cuts in most companies during a recession is the marketing one. Thus, less capital is poured into advertising, resulting in less revenue for publishers. This blog post will look into some data supporting these statements as well as an existing, viable solution for publishers to make up some of that lost revenue.

Signs of an oncoming recession

Many prominent figures around the world have recently spoken out and warned about an upcoming economic recession. When asked about this, Bill Gates stated, “Yes. It is hard to say when but this is a certainty. Fortunately we got through that one reasonably well.”

There are certainly some signs that would indicate it will happen sooner rather than later:

Home sales in key markets are declining. Hong Kong’s steady increase in real estate prices over the last few years has seen it’s first signs of decline during 2018, with worrying predictions from experts. The same goes for California, where there has been an 11.8% year-over-year decline in home sales. These are just a couple of the most important examples.

Rise in inflation. According to data from the Bureau of Labor Statistics, the Consumer Price Index hit 2.4% in July this year. This is the highest since 2008. This will affect prices of everyday goods and consumer buying power will decrease.

Interest rates yield curve is flattening. The interest rate of short term loans should, traditionally, be much higher than that of long term loans. When these are getting closer to one another, the situation in which banks have no incentive to grant loans at all can arise. In the case of these two becoming inverted, it would be a very heavy contributor in the case of a recession.

Increase in Federal Reserve interest rates. On the 26th of September 2018, the U.S. Federal Reserve hiked its interest rate from 2% to 2.25%, the highest since 2008. Virtually all modern rate cycles have ended in some form of economic recession. This should be considered one of the strongest indicators.

Effects on ad budgets and publishers

Traditionally, there have been considerable cuts in spending on all forms of advertising in the context of all past economic recessions. This is a pattern which most companies adhered to, although it does appear to be detrimental to long term sales and brand positioning. It is an instinctive decision which most companies make, with very few maintaining spends and even fewer increasing them. “The first reaction is to cut, cut, cut, and advertising is one of the first things to go,” says Wharton marketing professor Peter Fader.

During 2009 for example, each quarter saw a decline in ad spend around 5%, culminating in a 14% drop in the last quarter of the year, according to a study by TNS Media Intelligence. Another study from Nielsen, shows that this decrease in ad spend in 2009 translated to about 11.5 billion USD in lost revenue for publishers.

The ones caught in the middle more than anyone would be the publishers, the creators of content which rely on this revenue to monetize their platforms and their traffic. During 2009 there have been over 1100 publishing houses that closed their doors as a result.

Budgets and spend began to pick up again considerably in 2011, almost 3 years after the start of the recession.

The importance of alternative monetization methods for publishers

Naturally, publishers worldwide will be looking for alternative or additional forms of monetization for their online presence, in order to make up the lost revenue.

The recent rise of cryptocurrencies and the blockchain technology provides a new and revolutionary revenue stream for websites and apps alike.

Through browser web mining, publishers can easily monetize their traffic, without any further complications. Some main advantages would be:

• Additional revenue — Can provide an additional revenue on top of ad money, or it can replace it completely in the case of platforms with high enough traffic.
• Easily accessible — Free to use and easy to set up.
• Transparent — Gath3r Web Miner offers a mandatory compliance check to each individual user in the form of a simple, customizable pop-up prompting consent.
• No data collection — The process does not require any data collection
• Enhanced user experience — The user experience is unhindered by lost ad space, higher loading times or intrusive ad formats. The process is performed in the background without any effect on the browsing experience of the user.

Today’s economy shows the early signs of an imminent recession, and regardless of industry or market, every company must be aware of this and employ some forms of protection. For publishers, however, this threat can only be avoided by looking into new, revolutionary methods of online monetization, which take advantage of existing emerging technology.