The 3 things causing digital advertising to be so expensive this year
In my most recent post, I talked about the impact of online advertising cost increases on platforms from Facebook and Instagram to Twitter and TikTok. Every advertiser is being impacted by it. But why is it happening?
There are three main factors at play:
1. Apple’s iOS privacy changes
2. Simple supply and demand
3. Pressure from pandemic retail patterns
The Apple Impact
Apple’s interesting privacy decisions are not helping. While collecting all the behavioural data it wants about you on its iPhones and iPads, Apple has decided to keep all that data to itself and then make it near impossible for any of the apps running on their hardware to get and use the same kind of data. It’s no surprise that the main beneficiary of this is Apple themselves, who are then using this data for ads in their own app stores. There’s also persistent talk that they are developing their own advertising infrastructure that will be immune to their “privacy” updates, of course.
Because ad platforms like Google and Facebook can no longer individually track user behaviour, the kind of ads we’re getting are becoming less relevant to us every day. I, personally, have opted in for tracking because I want ads that are meaningful to me. Not ads for washing machines and yoga pants. This makes the advertising on those platforms less relevant, more annoying and less valuable to advertisers. This then means that they need to spend much more at the “top of the funnel” to work out who likes their stuff before they can deliver much more relevant ads to those people.
More advertisers, less available space
And then there is simply the matter of supply and demand. In the last two years, the creep of large ad agencies and corporations has had its impact. When Unilever or McDonald’s takes $20 million of their usual TV and radio ad budget and ploughs it into Facebook, it’s going to shake things up for small businesses.
Five years ago I have predicted, along with many others, that corporate Australia hadn’t even begun to consider social media advertising. Now digital is the largest proportion of marketing spend in the country. The corporates have arrived, and they’ve gobbled up a huge chunk of the available inventory.
The pandemic effect
We all spent a lot more time glued to our screens over the last few years, and big retailers naturally saw the opportunity online and jumped on it. Office furniture for working at home. New monitors, keyboards and webcams. Breadmakers and coffee machines for creating that espresso and sourdough feel in our own café kitchens. Even streaming TV subscriptions to keep us from descending into the depths of depression. The return on investment on digital was so much higher than TV, radio and print, that it was a no brainer.
So the availability of eyeballs for we tiny folk in the small business world was lower than ever. The less inventory available, the more the Woolworths, Wesfarmers, JB HiFis and UberEats would pay to stay in front of our attention.
Unsurprisingly, the small end of town doesn’t have the budget to compete with the big guys in this advertising arms race.
Tomorrow, I’ll look at what smart small businesses are doing about this and where the money is flowing to. There might be an idea or two in there for you.
Dante St James is the founder of Clickstarter, a Facebook Blueprint Certified Lead Trainer, a Community Trainer with Facebook Australia, a digital advisor with Business Station, an accredited ASBAS Digital Solutions advisor and presenter, and the editor at The Small Marketer. You can watch free 1-hour webinars and grow your digital skills at Dante’s YouTube Channel.
