The advertising industry is managing growing fears of inflation and an economic downturn as many top retail brand advertisers are dealing with the effects. For example, Snapchat lost 25% of its shares due to a decline in ad spending. Spotify, the music streaming platform, fears a softening in ads sales. Meta recorded a 1% drop in ad revenue for the first time in history related to shrinking ad budgets. Even companies less dependent on advertising, such as Microsoft, reported a $100 million loss in revenue in its second quarter due to a reduction in ad spending.
Two things advertisers don’t enjoy are a rocky economy and a frugal consumer. In a bid to recoup these losses, advertisers have raised prices. Meta’s CPM increased by 61% YoY, at an average of $17.60. TikTok’s CPM made a huge jump of 185% YoY, at an average of $9.40. This means brands will now pay more for the same number of clicks, views and impressions.
Large retailers may be able to offset this cost with little to no impact on their bottom line; however, small to mid-sized brands may not be so lucky.
The State of the Union: Paid Advertising
In the current market climate, running paid ads would only burn a hole in your pocket. The current ad prices are double what they used to be. In addition, consumers are more cautious about spending, making your ROI on paid ads less profitable than it was even recently. Per Statista, the global cost-per-click (CPC) of search advertising in Q1 2022 was at $0.62, compared to $0.52 in Q1 of 2021. This is referred to as “CPC inflation,” and it looks as if CPC costs will continue to climb through the end of the fiscal year.
There’s a paradigm shift in consumer behavior based on survival as opposed to luxury. According to reports from Jungle Scout, 59% of consumers are switching to cheaper alternatives for the product they want. Also, nearly nine out of 10 consumers expected inflation to impact their holiday shopping.
In this landscape, you need to invest heavily in digital ads for a long period before seeing any tangible ROI. Brands with a low advertising budget are on the thin end of the wedge here as it’s a risky investment for them. That said, there are cheaper alternatives to achieving the same result.
Until the cost of digital advertising comes down, retailers can focus on new customer acquisition and retention tactics that won’t break the bank. Three such strategies include:
1. Prioritize content marketing.
When people search for products and services on Google, they don’t want to see ads, they want content. In fact, 42.7% of internet users use ad blockers mostly because the ads are either irrelevant or flat-out annoying, so there’s a high probability that you’re missing out on reaching potential customers.
On the other hand, creating quality blog content allows you to rank on Google and puts you in the position to constantly attract new customers. Consumers are also more likely to trust your brand when they find your content reliable and truthful. While the ROI of content is only realized in the long term, its accrued results supersede paid ads.
2. Personalize every interaction with email marketing.
Personalizing your audience experience is nearly impossible with ads, but email marketing provides endless opportunities. Simply including your recipient’s first name in email subject lines can increase your conversion rate.
Another major benefit of email marketing is that you never have to compete with algorithms on social media or search engines. You control your data, the number of subscribers, messaging, and personalization — with better ROI compared to ads. According to Mailmunch, email marketing generates $42 for every $1 spent—that’s an astounding 4200% ROI!
Email marketing also opens your business up to increase revenue using your existing customers. Customer-retention strategies — cross-sells, downsells and upsells — are most effective in email marketing.
3. Become active on social media.
If you haven’t incorporated social media into your brand-promotion strategy, now’s the time to try it out. There are 4.2 billion active social media users — that’s more than half the entire global population. There’s a level playing field to compete for attention and to reach a wider audience around the world on a social media platform — and it’s free. Compare this to ads and you’d have to spend much more of your budget to reach the same audience.
An example is Nobel Leather CEO Kyle Hinds’ story. He began showcasing his leather craftsmanship on TikTok and created videos that garnered millions of views. Kyle now has over 1.5 million followers and sells out his handmade leather items in mere hours.
Social media has surpassed the cheesy captions and memes of the early 2010s. Today, it’s all about building long-term relationships with customers. Start by creating content your audience will love. The more you do, the easier it becomes to increase your brand visibility and awareness. Keep in mind, social media platforms change their algorithms regularly. Ensure you stay in the loop to keep up with the shifting terrain.
It’s unknown how long inflation will affect ad rates. Much like consumers trying to make their paychecks go further, many companies are downsizing and rethinking their marketing budgets to remain profitable through any means necessary. In the meantime, brands should not invest solely in ads. Leveraging the alternative strategies discussed here will enable brands to reduce customer-acquisition cost — while increasing revenues in the long run.
Jacob Loveless has had a 20-year career in making things go faster, from low latency trading for Wall Street to large-scale web platforms for the Department of Defense. He is a two-time winner of High-performance Computing awards and a frequent contributor to the Association of Computing Machinery. Today, as CEO, Loveless runs Edgemesh, the global web acceleration company he co-founded with two partners in 2016. Edgemesh helps ecommerce companies across multiple industries and platforms (including headless) deliver 20%-50% faster page loads to billions of users around the globe.