The worst thing about marketing is the cost. There is no denying that it’s expensive and we’ve continued to see marketing expenses increase in recent years. Not only is there more you have to have and do in order to remain competitive in the market, but the cost of ads has been on the rise.
There are a number of factors increasing the amount companies need to spend on ads in order to hit their annual goals. We’ll take a look at those factors and what your team can do to manage ad spend more effectively.
1. Increased Competition
2021 was a record year for ad spending. Rebounding off of an unexpectedly low 2020 (due to the pandemic), 2021 ad spend grew 25% YoY totaling $284.3 billion according to Magna Global. Magna projects 2022 ad spend to grow by 13%, clocking in at $320 billion. Growing ad spend numbers are due in large part to the rapid expansion of e-commerce businesses.
Ecommerce giants like Amazon are securing the first ad slot and driving the competition within ad auctions. This is forcing businesses to increase their spend to get the same (or worse) results as they did in previous years.
What can you do?
- Evaluate your keywords
- Test new ad copy
- Ensure your conversion path is clear and complete (make every ad count)
2. Poor Targeting & Placement
With the cost of advertising increasing, you have to make those ad dollars count. If you’re targeting accuracy is off, you can waste thousands of dollars by sending messages to the wrong audience.
Similarly, you could be leveraging ad platforms that don’t reach your target audience. There have been countless shifts in user behavior and in social media platforms that have changed where people spend their time online. Choosing the right platform for your business depends on your target audience.
What can you do about it?
- Invest in audience research
- Re-evaluate channel strategy and messaging
Changes Within Ad Platforms
In 2018, Google introduced its smart shopping campaigns that operate with automated bidding and dynamic ad placement. Smart shopping ads include search, display, Youtube, and Gmail ads. The automation and dynamic placement of these ads are great, the issue with these ads that we’ve noticed is that there is a point where the ad sets that drive conversions stop serving and are replaced by the lower-performing ad placements and will continue to serve to reach the daily budget. The budget and performance should be monitored closely to ensure that the campaign goals are set to maximize your return on ad spend (ROAS) and limit wasted ad spend.
*Note: as of Sep 1, 2022, Smart Shopping Ads have been discontinued and replaced with Performance Max campaigns which works similarly to Smart Shopping ads.
In April 2021, Apple released iOS 14.5 which gave users more control over their information and privacy by limiting the amount of data that apps are allowed to track. As a result Facebook ads, which had been a money maker for many brands trying to find interested buyers, suddenly became much less effective with the shortage of data.
What can you do about it?
- Research and prepare
- Closely monitor and test ad placements/targeting/bidding structures
- Diversify your marketing investment – don’t put all of your eggs in one basket
The cost of ads will continue to increase. Businesses that find the most success will be dialing in their targeting and bidding and staying in front of major platform changes. If your marketing team could use help getting your paid media performance up and running, contact us to discuss paid media management options.
