The new reality of marketing under COVID-19 has entered week four.  It’s time for our fourth edition of “What’s Going On Out There?”

Executive Summary (Full Details Below)

The past week saw a number of unexpected changes, proving that this fast-moving situation is a truly difficult one to predict. Overall, we are seeing costs increase, CTRs decrease, and a significant boost in onsite conversion. We are recommending that clients shift from retention (where CPCs are up) and to prospecting (where CPCs are flat). We’ve seen site-wide promotions succeed in this environment, as well as creative that addresses itself to the realities of the current crisis.

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Summary of Changes:

  • CPMs were up 3% this week, reversing a steady drop since the beginning of the month.
  • CTR fell 20% this week after staying relatively flat over the past few weeks.
  • CPC was up 30% this week, a reflection of a flat CPM and a drop in CTR.
  • Onsite Conversion rose 28% this week, something experienced by most of our clients across the board.
  • Cost of Customer Acquisition went up 20% this week. Last week it was up 10%

What Does it Mean?

  • The downward trend in CPM has stopped. It’s now stable.
  • We are seeing a meaningful drop in CTR across clients. Customers are getting bored and are clicking on fewer ads.
  • Retention (past customers, typically your best audience) continues to weaken overall.

What will Happen Next?

  • CPMs seem to have stabilized, and project to be flat to up going forward – a big change from last week.
  • CTR may continue to drop as people feel bored and increasingly under financial pressure.
  • Costs overall are now beginning to rise.

Strategies to Adapt:

  • Shift away from retention
  • Change creatives to include safety and not calling out COVID-19
  • Test site-wide promotions-Sitewide promos in the 20% range tested very well. 

Detail: What is ad performance like right now?

Cost Per 1k Impressions (CPM):

Facebook CPMs rose 3% this week. Facebook CPMs have hit bottom, and are now flat to slightly up.  We had expected a continued drop, but didn’t see it.

Chart
  • What are we seeing?
    • CPM had been dropping 20% each week, which we expected to continue.
    • But instead CPM have bottomed and actually rose 3%.
  • Why are we seeing this?
    • The supply side is now steady.  Everyone is spending a lot of time on Facebook, but the growth in time has stopped (there is no more screentime than 16 hours per day, after all)
    • The demand side has also stabilized- there was a wave of budget cuts over the past few weeks, but if our client budgets are any indication, budgets are now stable at a lower level.
    • So net net with stable supply of impressions, and stable demand, we are seeing flat pricing.
  • What happens next?
    • Expect CPM to continue flat to slightly up.

Click Through Rate (CTR):

Overall, Facebook CTR had a meaningful drop this week, which was also unexpected. CTR is down about 20%.

Chart
  • What are we seeing?
    • CTR had been steadily moving upward during March
    • But across almost all accounts we saw significant moves down in both Retention and Retargeting CTR.
  • Why are we seeing this?
    • There was a surge in “catch up shopping” (people doing deferred non urgent shopping) that seems to have ended.
    • Boredom is setting in.  While clicking on a Facebook ad was novel 2 weeks ago, its less novel now.
    • The fact that the drop seems to be in Retargeting & Retention suggests that accounts may need to add creative variety to those, so they don’t fatigue.
  • What happens next?
    • Not sure, to be honest, but generally expect similar trends.
    • As burnout and frustration (and sickness) increase, we may see a steady drop in CTR.

Cost Per Click (CPC):

The flat CPM, combined with the drop in CTR, combined to create a meaningful uptick in CPC this week. CPC up 31% this week.

Chart
  • What are we seeing?
    • CPC had been dropping steadily on flat CTR and falling CPMs
    • But the drop in CTR this week is now driving CPC up, especially in Retention
  • Why are we seeing this?
    • CPC = (CPM/1000)/CTR
    • So as CPM goes up slightl, and CTR decrease meaningfully, they combine for an increase in CPC.
  • What happens next?
    • CPC don’t have their own trends, they are a function of the trends in CPM and CTR.
    • Given flat CPM and dropping CTR, best estimate is that CPC will continue to rise.

On-Site Conversion:

Luckily, there was a meaningful uptick in conversion rates, which partially offset the large increase in CPC.  This uptick was observed by almost all clients, even without promos. On-Site Conversion rose 28%

Chart
  • What are we seeing?
    • Conversion rates fell aggressively early in the month
    • Last 2 weeks have been improving, the most recent week most notable.
  • Why are we seeing this?
    • This is unexpected, and its odd that the two campaign types with the biggest drop in CTR are seeing the biggest increase in conversion rates.
    • In other words, people are less likely to click on ads, but if they do, they are more likely to convert, so net net they are about as “buyey” as before.
    • We are seeing a meaningful drop in on-site browsing.  If people click they want to buy, they arent just burning time like before.
  • What happens next?
    • Given that we have now seen 2 weeks of rising conversion rates, we expect that to continue.

Cost per Purchase:

Overall cost per purchase is up 20% , and did not improve this week, as we had hoped (because the surprise drop in CTR)

Chart
  • What are we seeing?
    • Cost of Acquisition had been dropping, a trend we hoped would continue.
    • But across almost all accounts we saw significant moves down in both Retention and Retargeting CTR.
  • Why are we seeing this?
    • Cost per Purchase is a function of CPM, CTR and Conversion Rates
    • The recent rise in cost per purchase is because CTR has dropped more than on-site conversion has risen.
  • What happens next?
    • This one has so many moving parts (CPM, CTR, and Conversion) that Im hesitant to make any forecast at all.

How can we improve performance?

Strategy #1: Shift away from retention

  • Prospecting is the least impacted
  • Retention is the most impacted
  • Whatever campaign budget allocation you had before is wrong now

Strategy #2: Change your creative

  • Ads mentioning COVID-19 by name do poorly, but ads that say things like “In this difficult time…” or “You want convenience and safety” do very well.
  • Ads that show boxes on doorsteps are doing very well
  • Eliminate creative that shows groups of people
    • Instead try single-person or leverage product imagery
  • Emphasize safety & convenience
  • Creative that calls out “rapid delivery” and “ships from US” are doing very well right now

Strategy #3: Test site-wide promotions

  • Multiple clients have done “20% off sitewide,” and all have had a huge impact on performance. All at least doubled ad ROAS
  • We have tested more complex promos, and they have not worked (discounts on certain products, etc)

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