Stagflation effects on online advertising (part 2)
In part 1, we described the term stagflation
and what governments around the world are doing to prevent and control it. We will continue to discuss its effects on advertisers, publishers and the whole online advertising industry in general.
Power of promotions
During a stagflation period, inflation runs high while the economy growth is slow. This means people are more worried about their future. When people feel like they need to watch their spending, they will look for deals, discounts and promotions. This is a good time for businesses to use ad serving
as a way to push deals and promotions that will attract buyers. Promotions are really powerful in moving any existing inventory. The fact of the matter is that everyone is taking time to look for those types of deals before parting with their hard-earned money. Yes, things have always been that way, but the number of people doing their due diligence before a purchase is on the rise when inflation is high, things are expensive and money is getting tighter.
As we discussed earlier in this piece, some people will be more careful when making expensive purchases of high-end products. We can expect this behavior to continue for as long as we stay in this period of stagflation and during any economic downturn. The ads that are going to be successful will be those that offer essential items, product staples, necessities and needed items, such as household goods. Fancy and luxurious items are not going to be as popular during this phase of the economic cycle because only a smaller and more selective audience still has the disposable income to make these big purchases. As an advertiser, you should evaluate which products or services to focus on. As a publisher, you should create content and match with advertisers that are going to thrive during this period of uncertainties.
Importance of ROI
It’s not just consumers who are looking to pinch pennies during these trying economic times. Businesses are also being very careful about how they spend their money, including the amount spent on advertising. Unlike the R&D budget that is a long-term investment, the advertising and marketing budget has a short-term outlook because it is often tied to sales. Companies often adjust their ad spending frequently to adapt to the current environment. Advertisers are looking more closely at ads that deliver a good return on investment. If an ad does not deliver the target level of ROI, it won’t be renewed. On the other hand, if an ad reaches or exceeds the target ROI, advertisers will very likely renew with future campaigns because they understand it takes money to make more money. This concept is not new but it comes into focus during lean times. Your objective is to monitor ROIs across campaigns, boost high ROI campaigns, improve medium ROI campaigns, and terminate those campaigns with low ROIs. To measure ROI, it is important to explore the features offered by your ad server
, especially the ad conversion tracking functionality so you can understand how much sales resulted from each dollar spent.
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