The impacts of the COVID crisis on the performance marketing industry are as varied as the businesses they serve. According to a recent report by the Interactive Advertising Bureau (IAB), digital ad spend is down 33% and nearly a quarter of survey respondents have paused all advertising spend through Q2. While ad spending is generally down, it’s not all doom and gloom for an ad sector as collaborative, diverse, and agile as performance and affiliate marketing.
In our discussion with our performance marketing customers, we learned how they are shifting the buying conversation and coming together as a community to support their partners and pull through this crisis.
Analyzing and Adapting to Changing Consumer Behavior
This crisis has changed everyone’s daily lives so drastically, it’s no surprise that consumer behavior has also radically shifted. “The conversion funnel is mutating because people are looking differently at our web pages and we’re trying to analyze this,” said one performance marketer. “It’s interesting from a business and human perspective, and we’re working with our data team to find emerging behavior patterns.”
One pattern, or lack thereof, that some performance marketers are noticing is erratic behavior by online consumers. They are bouncing around more from one vertical to another instead of the more linear comparison-shopping behavior that they normally see. “Our web efficiencies are changing and we’re trying to make sense of it — it’s challenging,” said one marketer.
There are a few likely causes to this. First, consumers are distracted and overwhelmed. I’m sure that all of us have had moments in the last few weeks where we just had no idea what to do, and random web shopping is sometimes a suitable therapy. Additionally, consumers are being more careful about where they spend their money right now, and prioritizing expenditures can lead to that “bouncing around” behavior.
The need to learn about rapidly shifting consumer behavior is getting performance marketers even more in tune with data-driven tactics. “This is a unique opportunity to learn and to test things we might not have ever tested.” “We can really learn about our customers and try and get the most out of this time.”
Shifting the Customer Conversation
This rapid change in consumer behavior has necessitated shifting the customer conversation to match their needs. The IAB survey showed that the majority (63%) of advertisers are adjusting their messaging and are significantly increasing mission-based marketing (+42%) and cause-related marketing (+41%).
Many are also shifting to a more content-focused approach to marketing as they are pulling back on paid search and other digital advertising spend. Our performance marketing customers are keenly aware of this, but their agency position can make adaptation a challenge. “We’re trying to reframe advertising or change the way consumers are entering the funnel, but we’re a performance agency so people don’t normally have those conversations with us,” one marketer said. “They are just looking at acquisition numbers.”
Opportunities and Challenges in Performance Marketing
It is an unusual time for performance marketers as even Amazon seems to have turned off a great deal of its paid search advertising and has pulled out of many categories entirely. This could be an opportunity for others to reach new audiences at a lower price.
But, of course, impressions and clicks don’t amount to sales. Performance marketers have seen cost-per-click (CPC) in many verticals drop significantly, but with the quantity comes dropping quality. There are more people surfing the web but not all of them are buyers, so the result is “more eyes but fewer buyers.” As a result, some of our performance marketing customers have seen cost per acquisition (CPA) jump as much as 5x.
While spend is down and CPA is up, paid search is the least impacted marketing budget area according to IAB. We found that some marketers are actually shifting budget to paid search to get new messaging out.
Performance marketers frequently work across many verticals, so they can shift focus to the ones that are still performing. Affiliates are now in a position where they must be wary of bidding for products that are out of stock or services that are unavailable. They must constantly monitor buying trends to make sure their bids are going to the right places.
Those who manage affiliates have taken to daily monitoring of affiliate traffic to see what can and should be turned on and off at the partner level, and keeping an eye out for anything that will give partners more call volume. Carefully managing budgets is important, said one marketer “we have to be very careful what we spend—if we don’t get the calls we don’t get paid.”
The Light at the End of the Tunnel
While things look dark now, there are still signs of light in this resilient business. “While we expect an epidemic in the US will cause contraction in advertising revenues, we expect it to normalize after the threat passes.” wrote Moody’s Senior Vice President Neil Begley. The performance marketers we spoke with see some positive changes occurring in the market already. “The good news is that we’re noticing people are getting over the shock and things are starting to pick up again,” said one marketer.
There are also many industries that are doing well, such as delivery services like DoorDash and Hello Fresh, as well as some financial services companies that are experiencing an influx of refinancing business. While, somewhat surprisingly, TV advertising has not been performing well, the budget is being shifted to OTT services like Netflix, which is experiencing better performance. This can be attributed to broadcast TV viewers who are there to get news and may be too overwhelmed by what they are seeing to react to ads. This issue is compounded by the expense of TV advertising during an election year.
On the other hand, OTT streaming viewers are there for escapist entertainment and are likely less distracted by the latest news on the pandemic. This is not to mention that audience targeting is much more precise with these services.
Direct mail has also been a bright spot, and one marketer stated that “direct mail cost per sale is remaining low and we’re pleasantly surprised…It has offset our slower channels so we’re stabilized with what’s working and what isn’t.”
Focus on Community and Compassion
Performance and affiliate marketing is well known for being a tight-knit community. This has become especially apparent during the crisis we are now facing. “We’re seeing some bad behavior, but most of us are trying to be thoughtful in everything we do right now with customers, peers, and partners,” said one marketer. We keep asking ourselves, ‘what and where are the business wins?’” Another reiterated this point saying, “While we’re looking at April and wondering how bad it will get…it’s been awesome to hear compassion is at the center of so many discussions and so many of our peers are putting people first and business second.”
The performance marketers we spoke with are seeing themselves less as competitors and more of a support group. They are working together to figure out what’s working and what’s not and just generally providing support during uncertain times. “Circling the wagons will help us all come out of this stronger — the performance marketing community really is a community and there’s a lot of compassion and help here.
Resources for Performance and Affiliate Marketers
Participate in an Invoca Industry Group Discussion – We would like to help you reach out and have these discussions with your peers, too. If you’re interested in participating, please contact us.
Invoca’s Performance Customer Hub on LinkedIn – This is a private group exclusively for Invoca performance and affiliate marketing customers who are interested in technology development, sharing ideas and exploring business opportunities within the context of Invoca’s customer ecosystem. You must be a current and active user on an Invoca subscribed platform to participate. You can request to join the group here.
LeadsCouncil Leadership Series – The LeadsCouncil Leadership Series webinars are designed to educate and inspire marketers with insightful content from industry experts. Experience a mix of informative and engaging topics that will help you grow your knowledge and develop a keener understanding of the issues that affect the digital and performance marketing industries.
Leadership Series will host a live webinar every Thursday at 3:00 pm ET / 12:00 pm PT.
Stay safe and healthy, everyone.