Effects of high interest rate on advertising (part 2)

interest rates2 We just experienced an unprecedented pandemic and we are still working through its consequences. Because inflation is going through the roof everywhere, governments around the world are tightening the money supply. The good time is basically over for easy money. It is much more expensive to raise capital now. Both companies and consumers are very concerned about their money going forward. We will continue to discuss issues with a high interest rate environment.

Industry disparity

While everyone is feeling the pinch in the current financial climate, there are some who are certainly feeling it more than others. There are things that you cannot stop buying, even if their price increases and those are consumer staples. On the other hand, there are things that you don’t need to buy if you don’t have the extra money and those are consumer discretionary. While not totally out of the woods, companies that make and sell essentials, such as food, clothing, household supplies, etc. are in a better spot than those who sell high-ticket items. Consumers aren’t really in a rush to buy those pricier items because they are worried about their future. Those industries will need to adjust their third-party ad serving strategy accordingly in order to survive during this business cycle.

Optimization and retention is key

When money is tight and you don’t have a lot to spend because of high interest rates, your ads need to really perform which means high quality and ability to convert into sales. Anything else is essentially a waste of money. Publishers need to find an adserver with an ad optimization feature. Advertisers need to optimize ads in order to retain clients because it is much more expensive to acquire new clients than keeping existing ones.

Cash is king

It is never good for any company to be saddled with a ton of debt or operate on credit, but it’s even truer now. It is important that the people making the financial decisions keep this in mind, as those who forget that might not be around in the future. Companies with cash will have more power while cash-strapped companies will have to make very tough decisions on what they can spend with their limited budget. When you do not have cash and need the money to pay employees, to pay rent, or to buy supplies, it will be very stressful or even impossible because capital will be expensive and hard to get. Therefore, all spending, including spending on ad serving, needs to be kept in line as much as possible during uncertain times. Do not overspend or splurge on anything. Try to raise cash and keep a healthy level of cash reserve when possible. Even if high inflation rates make your cash less valuable over time, it is a much safer bet that you need for the time being. The companies that survive and get out to the other side are the healthy ones and they can take advantage of extra talents and fewer competition.


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