Digiday: Marketers pay higher ad rates for social video as demand returns

Brief:

Marketers are paying a higher price to advertise on video content that publishers create for social media outlets, as demand starts to recover from a slowdown brought on by the coronavirus pandemic, Digiday reported, citing five publishers. Facebook, Snapchat and YouTube command a higher cost per mille (CPM) than they did in early April amid advertiser pullbacks.
Video ad CPMs for publishers on Facebook increased 28% last month from April, though they are still 20% lower than in February. A publisher cited by Digiday saw CPMs hit $7 in early April before rebounding to $10, which was comparable to pre-pandemic levels in March.
On image-messaging app Snapchat, revenue per thousand unique views (RPMs) this month recovered to $3 from a low of $1.50 in late March and early April, almost reaching a pre-pandemic level of $3 to $4. YouTube's CPMs are now about $23 after falling from $25 in March to $20 in April, Digiday reported.

Insight:

Rising CPMs for video ad inserts in publisher content on social media are an early sign that demand is picking up among marketers, though it's still not as strong as pre-pandemic levels. It's not clear that CPMs will rise much further during the summer months amid typical seasonality, per Digiday, but marketers seeking to reach audiences who are spending more time on digital media may find some deals. That's especially true for companies like retailers and restaurants that are reopening and need to drum up business.

While marketers generally don't want to pay more to reach the same number of people, rising CPMs are good for publishers that depend on ad revenue to support their operations. The pandemic has hammered the publishing industry, with companies including Condé Nast, Meredith, Vox Media, BuzzFeed and Gannett Media reporting steep drops in ad revenue and cost-cutting measures, as reported in WWD. A bounce-back in CPMs would help publishers that distribute video content on platforms like Facebook, Snapchat and YouTube.

For social media companies, the higher CPMs indicate that the digital advertising market is beginning to thaw, possibly setting the stage for growth later in the year. Social media companies had reported higher revenue for Q1, though they also warned about a slowing that started in mid-March as pandemic lockdowns went into effect in the U.S. and Europe. The current quarter will likely show a significant pullback in ad spending in April, followed by a recovery in May and June as many regions began to reopen businesses. A clearer picture will emerge when social media companies report their Q2 results in July and August.

Even as advertiser demand dipped for many social media platforms at the start of the pandemic, usage spiked, and the higher engagement could stick around. Beyond the surge in activity, some features that previously failed to take off, such as livestreaming on Facebook and Instagram, are also drawing more attention, and brand dollars could follow as pressures start to ease.