Why COVID-19's Digital Ad Markets Are A Boon For The Cannabis Industry

The biggest contributing factor to this opportunity is the impact that shelter-in-place orders have had on both ad supply and consumer behavior.
Why COVID-19's Digital Ad Markets Are A Boon For The Cannabis Industry
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Chief Marketing Officer, Fyllo
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For cannabis marketers, generating mass awareness is far more difficult than it is for marketers in traditional consumer goods.

Cannabis marketers must navigate scores of disparate regulations that limit where, how, and who they can target with their message. This creates a serious challenge for brands that aim to move the needle on awareness or ad recall. 

However, recent shifts in consumer interest and supply and demand dynamics due to shelter-in-place orders have created an environment where cannabis marketers have a unique opportunity to generate brand awareness more efficiently than ever before.

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The biggest contributing factor to this opportunity is the impact that shelter-in-place orders have had on both ad supply and consumer behavior. With consumers stuck at home, the amount of time they are spending engaged with digital media has skyrocketed, creating a glut of digital ad supply. The circumstances around the health crisis have also recently shifted consumer interests with users flocking to content about natural and holistic health. This has led to a large number of new users interested in cannabis’ applications in stress relief, anxiety, and sleep.

Stay-at-home and ad supply dynamics

Nearly all digital media is now bought programmatically on a non-guaranteed basis, meaning shifts in supply and demand dynamics can create timely opportunities for markets to buy broad reach at a discount. These opportunities can arise during "tentpole events," where special events, such as highly-rated sporting matches or awards shows, create an increase in ad supply for a short period of time. Generally, advertiser demand rises to meet supply around these events. It means those efficiencies can be difficult to capture.

However, recent shelter-in-place dynamics have created a supply increase similar to those seen during tentpole events, but without the rise in advertiser demand to meet it. This is because marketers in other industries are slashing budgets as quarantine orders drag on. The supply increase is also far more prolonged than those seen during “normal” tentpole events. 

Video supply alone has seen a huge increase in avails since the first shelter-in-place orders were issued at the end of February. Industry data points to conventional televisions (CTV) supply experiencing a 124 percent increase, web supply increasing by 18 percent, and in-app supply up by 4 percent.

This shift in supply and demand dynamics alone creates a lucrative opportunity for any brand marketer to reach users more efficiently than they typically can. For cannabis marketers, this opportunity is compounded by the increase in interest around legal cannabis products since shelter-in-place orders began.

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Consumers interest in cannabis

Faced with this persistent health pandemic, consumers have taken an interest in natural and holistic health products. A majority of this newfound interest has been directed to cannabis products as natural ways to relieve stress, anxiety, and treat sleep issues.

The number of users who have expressed direct interest in cannabis products via content consumption, search behavior, social shares, and other online behavioral signals increased by 14 percent from February into March. This creates an opportunity for a cannabis brand marketer to reach users who are new to the category right as they notice potential customers developing an interest in their products.

This also means that the number of users who are the most likely to respond to cannabis ads is growing while the opportunities to reach them are increasing in a way digital ad markets have never seen before.

Stay competitive and compliant

The confluence of these two dynamics has led to a major increase in reach efficiencies. Fyllo has seen a 10.22% decrease in CPMU (cost per thousand unique) from January to March meaning cannabis marketers are now in an environment where reaching net new users is significantly cheaper than it was at the beginning of the year. 

All in all, cannabis marketers should be thinking about how to capitalize on the current market dynamics to generate mass awareness. Recent headlines have highlighted how tech giants, who previously charged a premium rate to advertise on their platforms are projected to lose billions of dollars in advertising revenue due to COVID-19 market contractions. As a result, many of these institutional tech companies are slashing their digital ad prices at unprecedented rates to stay competitive.

Considering how almost 70% of advertisers who have pulled out during the pandemic are small businesses, cannabis brands are well positioned to snap up these advertising deals and potentially broaden their reach to millions of new users. However, before legal cannabis companies commit to this strategy, they must be certain that their products and messaging are fully compliant with FTC and internal platform regulations. Since cannabis marketing rules are constantly being amended by public and private regulators, cannabis marketers should run their campaigns through a trusted industry compliance provider. Making this decision ensures that the company attracts welcomed consumer attention instead of regulatory fines down the road.

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Cannabis brands must act swiftly to address increasing user demand and interest in their products. These activations are essentially trading at a discount, and it is unlikely for this opportunity to persist through the end of the year. As states begin to open back up and people start returning to work, ad markets will become more competitive again and efficiencies will be lost.

That means that it is extremely important to reach the “new to category” users now. While ad price dynamics are going to shift after shelter-in-place, consumer interest in the category will remain. Reaching these users during their current time of need and creating brand recognition will put brands in a much better place in a post-pandemic world. This kind of opportunity has never existed before, and it is unlikely these overlapping dynamics will be present again anytime soon.

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