The ad market is part of our everyday reality. Throughout the years, businesses have started to realize the importance of online advertising and have shifted the way marketing was done. However, the ad industry is now facing a decrease in ad expenses. But, why is it happening? And, how is it impacting businesses? Let’s find out.
Ad market: what is it?
The ad market and advertising encompass the tactics to promote a product or service with the view to make people buy them. In order to be successful in this journey, it is important to define what is the ideal customer and where they are. After that, we can start planning our campaign. The campaign can be a printed ad, broadcasted on TV or radio, or an outdoor or digital ad.
Before starting a campaign, we must define a budget, consider the regions/cities to target, and plan the size and type of ads. Furthermore, we must elaborate on a competitive campaign that is different from the existing ones.
Online advertising has seen exponential growth in the last decades. This is a strategy that uses enormous amounts of data to reach customers in every stage of the buying funnel. Digital ads can be of 4 different types:
- Search: many of us use search engines before buying a product. As a result, companies can promote themselves on these platforms. Strategies like Search Engine Optimization (SEO) and Content Marketing are of great value to make buyers move along the buying funnel.
- Display: videos are increasing their popularity thanks to the amount of information they bring. That is the reason why they are becoming important means of communicating a brand’s message.
- Social: users are spending more time on social media. As a result, companies can interact with them by providing images or videos to captivate and generate engagement.
- Influencer: influencers represent more often than not trust and respect. By recommending products or services, they are increasing brand awareness and ultimately sales.
It’s all about measurements
To measure the effectiveness of an online ad, we can use, among others:
- Cost-per-lead (CPL): we pay every time the ad generates a new lead. These ads are more common in Google Ads and Facebook.
- Cost-per-clic (CPC): when a user clicks on the ad, we have to pay the publisher;
- Cost-per-action (CPA): every time a user interacts with an app and completes an action such as subscribing to a newsletter;
- Cost-per-install (CPI): it counts every time a user clicks on the ad and installs the app.
Nevertheless, sometimes marketers have to consider more than one method of measurement. This is the reason why a Mobile Measurement Partner (MMP) can be of use. The MMP is a company that analyses and organizes app data in order to give an overview of the campaign performance.
But if you are questioning what is good spending, the answer is simple: it is an efficient one. To evaluate that, we use the key performance indicator known as ROAS (Return on Ad Spend).
The biggest advantage of online marketing is that we can reach our target audience much better than traditional marketing. To do so, we can use relevant keywords, and filter by interests or demography.
Belt-tightening mode on
The ad industry is a reflection of the global economy. Recently, the fear of a recession and inflation made companies reduce their budgets. As a result, Meta (the owner of Facebook and Instagram) had their first decline ever in 2022. Alphabet Inc (Google owner) also reported a drop of 3.6% in Google’s advertising revenue. Despite the deceleration in its growth when compared to 2022, Amazon still grew due to the fact that some users look directly on their website for a product rather than searching on Google first.
The decrease affected the industries differently. Financial service, general business and technology brands were the ones who reduced their budgets. For example, entertainment marketing and technology registered a fall of 23% year-over-year growth. The reduction also affects their business strategy, as well as investments and hiring.
Nevertheless, it is expected that the industry will recover just as the economy starts improving, but not in 2023.
How is it impacting businesses?
The evolution of advertising media has accelerated in the last few years. In spite of that, many challenges were put forward, complicating the tasks of marketers.
As previously mentioned, the economic situation is impacting the industry, but there are other challenges that can’t be erased from the equation leading to this stark reversal.
Ad blockers are one of these obstacles. Since people were receiving many digital ads that weren’t targeted for them, ad blockers came to life. Thanks to them, it is possible to filter the advertisements we receive. By blocking ads, it is harder for advertisers to reach audiences. An efficient way to overcome this problem is by using Search Engine Optimization (SEO). This way, it is possible to reach customers in an organic search. Similarly, companies that own first-party data and use it for their campaigns are better positioned in terms of correct targeting and efficiency.
In 2021, Apple introduced changes in app tracking, resulting in a considerable impact on tech giants such as Meta, Snap and Twitter. The new features include the possibility for users to opt out of some tracking. As a result, companies have less access to crucial data and less capability to target ads effectively. Search ads remained less affected by these changes as they appear to people as a result of a specific request.
Having a presence online is very often a synonym for having a Social Media network. Nevertheless, social media became crowed platforms that display too many advertisements without captivating the public. For this reason, being creative and segmenting the public correctly are of vital importance.
The pressure on marketers is always on. Companies are now putting more emphasis on performance advertising to get a direct return on their investments. Resultantly, online advertising benefits more than traditional marketing since it is easier to monitor its results.
One of the Meta’s strategies to help companies overcoming the economic situation as well as the difficulties with the privacy changes is the Advantage+ shopping campaigns. By using Artificial Intelligence and automation, they hope to improve the general performance of ads. At the same time, they expect to reduce the time needed in campaigns as well as their cost, benefiting also smaller businesses.
Ad market: where to go
It is undeniable that the economic situation has a direct impact on the marketing business. Yet, companies need to find innovative ways of turning around and preparing for growth. Investing in Search Engine Optimization (SEO) and Content Marketing is a strong strategy to avoid being stuck to social media platforms while building a strong online presence.
The path is not always easy, but we must prepare ourselves to become more efficient and resilient.
