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InContext / An inside look at the business of digital content

See through the smoke: recognizing the cannabis ad opportunity

November 10, 2021 | By George Blue, Head of Publisher Partnerships – Smart Ad Server @SmartAdServerEN

The cannabis industry is currently the fifth largest and fastest-growing consumer industry in the U.S. More than 200 million Americans – about 70% of the population – now live in states with legalized medical or recreational cannabis use. However, despite medical and recreational use likely being the two things that most readily come to mind when mentioning cannabis, the industry encompasses so much more. Expanding legal access has resulted in record levels of investment capital pouring into the industry. And all this investment leads to product growth. The first half of 2021 alone saw $7.9 billion invested in cannabis deals according to New Frontier Data.

Consumer perceptions around cannabis are shifting. These days, it is found in everything from beauty products to machinery lubricants. In addition, larger brands are beginning to experiment by incorporating CBD and hemp into their products. Recently, PepsiCo in Germany made their first foray into the category with the launch of their Rockstar Energy+Hemp beverage (which does not contain any THC). Some additional examples include Unilever subsidiary brand Schmidt’s Naturals, which sells a line of hemp-oil deodorants and  Colgate-Palmolive’s recent acquisition of Hello Products, which offers a CBD oral care collection.

As more mainstream brands test the waters, it’s likely that shifts in advertising spend will follow. In fact, advertising spend is already growing in the category. In 2019, Kantar reported cannabis advertisers spent $370 million on digital display ads. That’s an increase from $238 million the previous year. Brands and marketers are eager to expand their advertising presence beyond just the endemic sites. However, they are struggling to find platforms and partners willing to help them spend their budgets.

Lost in the weeds

Because cannabis advertising is still new and quite complex, it’s understandable to feel a bit confused by it all. The rapidly evolving regulatory landscape can pose potential risk, especially as each state has established their own set of laws and regulations. Ensuring an ad is run only in the state it was created for is often the first and largest concern when it comes to accepting cannabis ads. Add in the challenges of age gating and privacy compliance and things get tricky fast.

Running cannabis advertising on your sites may also present some reputational risk. It’s important to realistically consider the potential impact the decision may have on your brand. There’s always a chance that running these types of ads may deter other brands from working with you. Certainly, there’s still a lot of consumer education needed around cannabis, CBD, and hemp before the messaging becomes truly mainstream. This will take time. But soon enough, any digital publisher not accepting cannabis advertising will be in the minority.

Preparing as a publisher

If you’re not quite ready to accept cannabis advertising, begin by researching and building relationships with advertisers in the meantime. In this fast-growing market, it will be beneficial to stay informed on the latest category innovation and regulation. This way you will be able to more quickly and effectively craft a strategy that supports your revenue goals when the time is right for you to enter the category.

For those who wish to begin accepting cannabis advertising, identifying the right tech partner is an important first step. A provider who understands the nuances of the space and is willing to work with you is critical to navigating the sea of state laws which vary widely. The right programmatic partner can help you easily and confidently ensure that you meet compliance standards. They will also provide access to a unique stream of demand in order to get your share of revenue in this rapidly-growing market.

With the amount of marketing dollars at stake in cannabis, there’s no time to lose to make sure you’re prepared to embrace the revenue opportunity when it’s right for you. 

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