Is it time to increase ad spend? Here's what the data says.
We know the advertising market is in bad shape.
"The advertising market is currently weaker than at any point during the coronavirus pandemic slowdown of 2020" according to what Warner Bros. Discovery Chief Executive David Zaslav told investors last week. “It’s messier than we thought, it’s much worse than we thought”.
Advertising budgets are being cut left and right.
Snap put it like this: "We are finding that our advertising partners across many industries are decreasing their marketing budgets."
But just because others (fine, it's like many, many others) are cutting back on ad spend and marketing budgets, doesn't mean you have to. Actually, we've seen some very encouraging data that may just be reason enough to keep those advertising dollar flowing.
So, as we're just a mere few days away from Black Friday, we must ask ourselves if now is really the time to follow the trends and decrease advertising budgets or maybe we should look closely at some key data and be open to a contrary view.
Here at Digipave, we always prefer to look at the data. So let's dive in.
First, as we showed above, it's been well documented that companies are advertising less. Fewer ads means less competition for ad placements. That's a good thing.
Additionally, when Facebook released its 3rd quarter earnings report, they include a line called "price per ad" which we highlighted below. Last quarter "the average price per ad decreased by 18% year-over-year" or in other words, you've been getting more bang for your buck. Isn't that what we all want? Another great reason not to stop advertising.
But wait, you may say. That was LAST quarter. What are costs right now to run my ads? While there are many factors that help determine the cost per ad, we do thankfully have revealbot's "always up-to-date Facebook ad cost data from hundreds of millions of spend per month."Let's take a look at what we can find:
When looking at a graph of Facebook CPM (cost per mil or the cost to get 1000 impressions) from last year to this year, we can see that during November 2021, the average CPM was $17.58 and this year, November 2022, the average $12.35. So yes, compared to last year, we're saving money.
What about CPC (cost per click)? Well, yes, here too we are buying ads at a discounted rate. $1.18 last November vs $0.77 this November.
What do we recommend?
On the one hand, we know this holiday shopping season is full of challenges for advertisers. We outlined some of those challenges in detail here.
On the other hand, the above data above showing discounted ad costs and less competition can lead to unique opportunities for advertisers. We have been fully confident that consumer is willing to shop if the price is right and actually just saw some strong numbers reported today across much of the retail space including consumer electronics, sporting goods and apparel. Therefore, we are recommending to take advantage of these tailwinds in the ad space as long as you have an attractive holiday sale to offer.