Stagflation effects on online advertising
While we are beyond the worst of the pandemic, we are all well aware that things are still a long way off from the world getting back to the way it was before COVID arrived. The harsh reality is that we may never see a full return to what we considered normal before. There is a lot of work to be done before we get to that point of stability. Across the globe, there are a number of different issues affecting businesses and consumers alike, all of which have to be addressed in the coming months and years. One thing that is proving to be an issue at the moment is an economic concept referred to as stagflation, which we will get into right now as we look at the impact it has on ad serving
Stagflation is a bit of a blanket term for a number of things happening at the same time. Specifically, we are talking about high inflation rates, rising unemployment, and slow or stagnant economic growth. Because of high inflation, central banks are raising interest rates to make it more expensive to borrow money and thus reduce demand. However, the problem is also on the other side of this equation, which is the supply of goods and services. Issues with supply chains are more difficult to control because they involve a lot more moving parts and likely take time to stabilize. When we have a higher interest rate and yet inflation does not fall back to a target level fast enough then economic growth will slow down. If it slows down too much, we will have a recession. If demand slows, supply increases and inflation goes slower then the central banks achieve their target balance. However, it is not easy to do because there are a lot of unknown factors and the indicators often lag current data. This is why everyone is taking a cautious approach to doing business. There are some things that advertisers need to be aware of, so let’s get into that now.
Given the current rate of inflation and supply chain issues, consumers are going to be more than a little conservative with their money. They will feel poorer because things are getting more expensive and a dollar does not go as far as it was before. Not only do they not have the level of disposable income that they would like, they are not always able to get their hands on the products and services that they want. Supply chain issues persist longer than many people previously anticipated and recent negative developments like the Ukraine-Russian war and other geopolitical conflicts did not help. It is a bad combination when things are both expensive and also hard to get. Advertisers need to be aware of this situation and tailor their ads and pricing to reflect these concerns. Many consumers can no longer afford the item or are going to wait so trafficking ads onto adservers
for high-priced items may not be as effective as they were before.
Part 2 - The power of promotion, ROI and product/market fit
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