New research by WARC Data shows that brands have invested more money in e-commerce platforms and less in conventional media in the months following the COVID-19 outbreak. This is demonstrative of a pivot to lower-funnel tactics in the wake of the outbreak says James McDonald, Head of Data Content, WARC.

An analysis of company reporting, aside ongoing market monitoring by WARC Data and our sister companies, has found that brands are set to spend $58.5bn on e-commerce advertising combined this year. For context, this is almost double the size of the outdoor market, and spend is growing rapidly amid the worst economic downturn in living memory. 

The 2020 total, if hit, would represent a rise of 18.3% from last year, meaning spend is growing some 30 times faster than the wider internet ad market. This growth is also happening at a time when the entire ad industry is set to fall by 8.1% – $49bn – or 10.1% if you discount the spend from the Trump and Biden presidential campaigns.   

The sharp uptick in brand investment has coincided with a boom in online shopping. An additional $183bn will be spent online by consumers as a direct result of the coronavirus outbreak, and e-commerce will account for 88% of all retail growth worldwide in 2020, per data from Edge by Ascential

Amid this backdrop, Ebiquity finds that 62% of advertisers plan to pare back investment in brand building this year, while 32% intend to raise e-commerce spend

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I find this shift in strategy fascinating as it mirrors what we recorded during the Great Recession over a decade ago – advertisers redirected money into performance marketing at the expense of brand building in a bid to exert greater influence over lower funnel activity. 

This may seem logical at a time when every dollar counts, but it was subsequently proven to be damaging, particularly for the financial services sector which was acutely exposed to the last downturn.  

Our monitoring of advertising spend in 96 markets – which has been ongoing since 1980 – shows that search was the only ad format not to record an annual decline during the advertising recession of 2009. Indeed, Google was largely unscathed; its ad business grew by 8.5% – $1.9bn – as the wider internet market was flat and total media spend fell 12.8%. 

Fast forward to today and performance marketing is again seen to offer a surer footing during an economic tailspin. 

The complexion of the operating climate is completely different, however. There is a 'perfect storm' in which e-commerce has achieved a 10-year jump in penetration in just three months, and this has come at a time when marketers have never before been afforded so many options in reaching consumers at the point of purchase with data-led, targeted messaging.

This is why, when Google's keyword search revenue fell 8.6% in the second quarter of this year, Amazon's rose by over 60%. 

To further illustrate this shift, we looked through the financial reporting of 36 major media owners to plot the difference in ad earnings per second pre- and post-COVID-19. The findings are stark: all e-commerce business have recorded a jump in ad receipts while almost all other media owners have witnessed a fall.

In recent years, advertisers have become weathered by an online operating environment fraught with fraud, negative adjacency and inflated performance metrics, and are now having to prove the worth of every dollar invested in an hostile economic climate. When e-commerce platforms are able to marry sales data with ad performance, they place themselves in good stead to capture reallocated budgets.

A sample version of Global Ad Trends – the pivot to e-commerce, which explains the findings above in greater detail, is available here.