Social media ad costs are rising as consumer confidence returns

For brands that rely heavily on social media ads, many caught a slight break in the past year as CPMs (the cost per every thousand impressions) dipped across social platforms as brands pulled back on their advertising amid consumer confusion during the pandemic. But that break is now over. Social media prices are rebounding to more normal levels—and agency experts expect social media costs to accelerate along with consumer confidence and the arrival of new commerce ad formats and novel platforms. StitcherAds—which works with advertisers around their performance marketing campaigns on Facebook, Instagram, Pinterest, and Snapchat—saw a 47% spike in social CPMs beginning in March. Meanwhile, ad agency Aisle Rocket, which has worked with brands like BJ’s grocery stores and weight-loss program Noom on their Facebook ad strategies, found that Facebook advertising prices have gone up as much as 30% as of mid-March, compared to costs at this time last year when the pandemic hit. Facebook CPMs dipped to $5 last March and have now returned to their pre-pandemic levels of $8, the agency says. These studies are specific to the brands that these platforms and agencies serve and do not reflect platform-wide increases. Agency social strategists point to the recent round of stimulus checks as one reason for the sudden increase in March. With more money in American pockets, there's more reason for brands to show them ads and expect them to work. A Nielsen study out last week found that the majority of Americans (61%) are ready to return to their pre-pandemic behavior. As result of the stimulus income infusion, brands throughout the country considered "activating additional budgets for performance marketing channels like paid social,” says Bryan Cano, director of strategy at StitcherAds. Michelle Munera, director of paid social at Deutsch NY, says social spends are “definitely returning to normal,” saying she's particulary seen an uptick for ecommerce and car brands. Munera points to both the stimulus impacting spending as well as “smarter advertising” overall. “Brands had to learn to shift quickly last year, they had to fast forward digital transformations to ensure they could speak to their customers and give them vehicles to buy their products or services,” she says. “Now, one year later, they want to keep the momentum and sales boom they saw while folks were at home looking for things to entertain them.” Brands and agencies can expect those numbers to continue to rise as consumer optimism around the pandemic continues and new social opportunities on emerging social platforms like Clubhouse and Discord start to peak brand interest and ramp up their branding opportunities, adds Munera. Ross Shelleman, CEO of Aisle Rocket, says the agency’s social models are predicting Facebook CPMs could rise to as much as $11 by this summer and the mid-teens by November 2021 for clients. “Facebook ad prices have historically risen roughly 30% year-over-year before the COVID-19 pandemic, so the fact that we’re seeing a 30% rebound this year—still in the midst of social distancing and vaccination—means that pricing will likely remain very high for the rest of 2021,” says Shelleman. “The economy is set to come roaring back, and there’s a lot of competition to get in front of consumers who have been sitting on built-up savings they haven’t been able to spend this past year.” The social space is undergoing a lot of change with live commerce as people find new ways to shop from the comfort of their homes—YouTube has begun testing a new shopping feature and Snap recently acquired a fashion-focused startup. Experimentation around new social shopping ad formats like Instagram Checkout and YouTube’s shoppable product ads are enticing brands to increase their ad spend, driving up CPMs on ad units, says Jason Goldberg, chief commerce strategy officer at Publicis, who works with major global retailers for their social commerce needs. TikTok, he says, is another channel where a lot of experimentation is currently underway. “It’s a response to consumer behavior and pandemic optimization only accelerates that,” says Goldberg. “Video commerce has exploded in China and global brands are seeing huge success with their livestream campaigns and they’re wondering if they can work [in America].” The rising demand bodes well for social media networks, which steadily grew during the pandemic as people continued to turn to their devices during lockdowns. Facebook's fourth-quarter earnings in January saw the company soar to $28.1 billion in revenue, beating expectations of $26.4 billion, and reaching 2.8 billion users. Twitter netted $1.29 billion in revenue, an increase of 28% year-over-year, and grew to 192 million daily users. Snap increased its revenue by 62% to $911 million and daily active users by 22% year-over-year to 265 million. But for brands, rising CPMs are a concern because it usually means they cannot reach the same audience they would with the same level of spend. Looking forward, the rising prices could spell trouble for marketers with tightening budgets for the upcoming holiday season. “Holiday ad pricing is always a roller coaster on Facebook, and we expect this year to be particularly intense,” says Noah Freeman, head of product at Aisle Rocket. “It’ll be important for marketers to be smart in their media planning this year, and expect that CPMs and acquisition costs remain high for the foreseeable future.”

Social media ad costs are rising as consumer confidence returns

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