“There are very few clearly targeted ads with location or demographic tailoring in these spaces, and if advertisers could apply more learnings from performance marketing to target the right users with the right creative on these growing channels, they’d likely cash in.”
“Regardless of whether budgets go up or down, they will still be under more scrutiny, and so it’s more important than ever for marketers to optimise their output while delivering value. Working with a smaller budget, smaller team, and prioritising quicker conversions, high LTVs, increasing revenue and reaching the right consumers, all while being able to justify ad spend, should be at the forefront of every marketer’s mind.”
Performance budgets remain steady (for now)
“When looking at PPC over the past 10 years the reliance on automated bid strategies run directly in platform has increased alongside rise in more “blackbox” automation strategies (e.g., performance max),” she says.
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Interestingly, Welland cites a larger challenge with budgets, which she says is being driven by the change in privacy laws. “The move to implied data in the paid social arena [is] leading to advertisers questioning the validity of the data and the impact on their bottom line.”
Emma Welland, co-founder and director of House of Performance painted a similar picture within performance marketing.
Wesley Parker, co-founder and director of DemandMore also told Econsultancy that CPCs are rising, but that these clicks can still represent value.
“We are surprised that more brands have not transitioned to be driven by margin and CLV when assessing their marketing budgets,” Welland concludes.
“According to our recent research,” he said, “senior media agency professionals in the UK reported a 27% rise in their cost per sale through walled gardens in the last year.”
“Because of programmatic buying methods, CTV also has lower commitments upfront and can be added in as a line item to existing investments in mobile and desktop media.”
CPCs on the rise, brands need to look at margin and CLV
“With the privacy changes and discussions over the past few years, we expected this to be a priority. We anticipated a focus on CRM strategies, and audience activation strategies across all media investment, however, as a consumer and as an advertiser it doesn’t feel like the industry has prioritised this,” said Welland. “This should be something that all CMO’s/CDO’s etc prioritise over the next six months, as having a comprehensive data strategy will enable sophisticated digital activation strategies that drive both growth and efficiency in marketing and beyond.”
“The retail media wagon is picking up speed and one of the key things we’ve learnt is too few retailers currently offer brands mature advertising environments, highlighting the desire to diversify spend across these partners in the immediate future. Marketers need help building, scaling, and activating first-party data to make the most of commerce opportunities and retailers are offering them and their agency partners just that.”
“Higher interest rates, rising costs, a war in Ukraine, an energy crisis, supply-chain disruptions and shifts in consumer spending post-pandemic are all contributing to a slowdown in economic growth,” he explained. “While estimates vary as to how long this downturn will last, businesses have already begun taking action to tighten their belts and extend their runway.”
“With audience insights drawn from a retailer’s first-party data, retail media can immediately scale advertising campaigns, identifying in-market, new shoppers. It’s also inherently a brand-safe environment, relying on long-established, trusted retailer domains.”
DemandMore’s Wesley Parker suggests that Google’s repeatedly delayed deadline for third-party cookie deprecation is the reason for a lack of focus on first party data, leading many to view it as a ‘far off problem.’
Additionally, he explains that CTV is proving increasingly valuable, and more specifically, is “challenging the assumption that TV advertising is nothing more than an expensive brand play.”
Welland concurs, suggesting that there is a distinct lack of focus on first-party data from brands.
Advertisers can apply performance lessons to CTV
While House of Performance’s Emma Welland agrees on the benefits of CTV, she also suggests that marketers aren’t taking full advantage just yet, and that it is the same with programmatic podcast advertising.
Ekstein explains. “CTV also allows advertisers to create better, more contextual experiences. The combination of more specific engagement with improved ad buying systems allow advertisers to show their ads at the right place and at the right time, minimizing any room for mishaps or irrelevant ad placements. Advertisers can also place links and QR codes powered by deep linking into adverts, allowing them to run mobile app campaigns on CTV that bring users to the right content in their apps.”
One of the most common solutions to this, says Benkel, has been to increase expenditure in these channels by roughly a third. “But investing more for diminishing returns is not a long-term solution,” he said. And while Benkel cites CTV as one such solution, he also states that retail media is where the real opportunity lies.
“With less focus on managing CPC’s and allowing the platforms to “choose” these algorithmically, a cynical mind might suggest that this has impacted the rise in CPC’s. A recent study by GOA (the search automation tool) showed CPC’s exceeding £00’s in some verticals where the CLV would not make that a viable marketing solution.”
“We’re also likely to see some businesses aggressively increase their spend in an attempt to take advantage of the downturn and increase the gap with their competitors,” he said.
AppsFlyer’s Gal Ekstein says that the biggest shift within social advertising is where brands are now investing. “Facebook and Instagram have long dominated but it will come as no surprise that TikTok, and video advertising in general, has seen significant growth and will continue to do so,” he said.
According to Merkle’s latest performance media report, only 35% of survey respondents are prioritising managing audiences and first-party data, despite the depreciation of third-party cookies.
Gal Ekstein, president and general manager EMEA & LATAM of AppsFlyer, sums up the various factors that are currently impacting marketing budgets.
Marketers need to prioritise first-party data
“Just over the last couple of weeks, Google has pushed the deadline back to 2024. I think that this transition will be accelerated by the increased automation within the platforms in areas such as bidding and targeting. In the past advertisers have found performance gains through optimising within advertising platforms like Google Ads. However, as this becomes more automated the advertisers that will excel are the ones that get the best possible third-party data into the platform. Whether that be conversion data, audience data or creative.”
Benkel cites further stats from Criteo’s own research, explaining that retail media can produce sharper audience targeting (51%) and better sales growth (53%). “The outlook is shared among brand marketers, with those investing in retail media upping their spend by 50% on average this year,” he says.
Marketing budgets will continue to be under scrutiny as the cost-of-living crisis continues. But digital media growth in particular seem robust.
“It depends on the industry, but in most cases, our continual campaign optimisations and improvements to data management have resulted in either rise in conversion rate or customer LTVs, if not both. Indeed, some of our clients’ CPCs have risen on purpose as we bid higher for clicks where the data suggests a higher quality of lead or AOV.
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I recently asked a few performance experts about the state of the current digital media landscape, and how brands should be adapting their strategies as a result.. Here are five trends that came to light.
“For example, brands are increasingly asking us about how to diversify their channels and place more emphasis on owned media that doesn’t rely on third-party data. For example, if you want to drive people to your app, running an email marketing campaign is free, uses existing first-party data that’s been provided by consent, and reaches an already engaged audience.”
Retail media continues to grow
While AppsFlyer’s Ekstein agrees that “like any major shift, it takes time to adjust” – he also suggested that marketers are starting to make this change.
Digital Transformation Monthly: The Rise of Retail Media Networks
“Budgets have remained consistent with most advertisers recognising that they need to continue to invest in marketing to maintain market share and drive growth over H2 2022,” she said. “The volume of data available, and the ability to optimise to key performance metrics (e.g. ROAS) means that advertisers are able to push budgets into areas that are driving the right level of return for their business.”
Sam Benkel, MD retail media northern Europe at Criteo, told Econsultancy that rising costs inside walled gardens are leading brands to explore new channels.
“As we head towards a recession, we are likely to see implications on budget and marketing activity, as advertisers will need to react to how their target audiences are behaving. We suspect that direct response budgets will remain, but brand awareness budgets will be reduced in line with overall business performance.”
“Finally, advertisers can measure the performance of their CTV ad campaigns, understand the return on ad spend, what’s working and optimise future campaigns accordingly. As we’ve discussed, these insights are crucial, especially in times of economic downturn.”
Another trend that Welland notes is the rising costs of CPC’s. However, she says that it’s hard to determine the exact cause of this, considering the changing landscape over the past few years.
