Inflation’s Impact On Ad Spend Detailed In Merkle Report
Merkle, a leader in data-driven technology and customer experience, released its quarterly informational report on performance last week.
Research from the past quarter yields valuable insights into marketer priorities, challenges, and performance.
With over 57% of respondents reporting increased spending on paid search compared to last year, these findings are especially important as we face economic challenges and uncertainty.
I sat down with Matt Mierzejewski, senior vice president of research at Merkle, as he gave his take on some of the most telling stats from the performance report.
Prioritize privacy and scaling
Of the Merkle report, 45% of respondents stated that obtaining accurate reporting in the face of privacy regulations is a top priority in the measurement.
Many businesses are likely to be in the same boat but may not know where to start.
“Brands are big on measuring across devices,” says Mierzejewski. “Apple has disrupted the measurement game. Many companies are looking to build their data warehouses for a variety of reasons:”
- Excessive reliance on individual platforms. The more conversions that are engineered into the platform, the less perfect a company’s individual measurement will be.
- They are tired of black box solutions. Brands want to be able to own or change the way conversions form.
Mierzejewski also noted that as more brands look to build their own reporting solutions, they’re changing dependency from platform conversion reality to their own conversion reality.
Prioritize audiences and first-party data
Looming privacy regulations have triggered the need for brands to create and manage first-party data.
However, only 35% of respondents prioritized audience management and first-party data.
I asked Mierzejewski: “What do you see in the overall effects of the many companies that are waiting for this?”
He answered with a few points:
“From a digital perspective, they are shifting towards making their creations and messages right.” If you’ve ever interacted with a brand, you’ll notice how consumer expectations have changed.
“One of the effects of not prioritizing audiences and first-party data is a poor customer experience.” Not prioritizing these critical aspects of marketing will either accelerate the slowdown, or remove the customer’s feeling of attachment to that brand.
“You have to use these unknown audience signals to your advantage to meet consumer expectations and beat the competition.” For example, audiences in Google’s marketplace generate more signals and an inclination to buy. They allow these signals to be in the open market.
Mierzejewski summed it up: “It misses out on the best clients. It will leave you competing for the worst clients!”
Social driven growth in 2023
67% of respondents prioritized paid socials this year more than in 2021.
The increasing number of social platforms with advertising opportunities is partly a factor in the increased prioritization.
When asked which social platform will see the most growth in 2023?
“If we’re talking raw dollars, Facebook and Instagram will still win,” Mierzejewski stated.
Further, he notes: “If we’re looking at what percentage of growth and who to monitor, it’s TikTok.” Matt shed some light on user expectations, as TikTok’s growth is expected to outpace Snapchat next year.
Inflation is driving faster adoption of machine learning
With inflationary costs, the adoption of automation and machine learning may be put on the backburner.
Not according to Merkel’s performance report.
- 41% of respondents They started taking action on automation and machine learning strategies
- 38% of respondents Made great progress with their ML strategies
So why is inflation driving faster adoption of automation?
Inflation is just one component. Going hand in hand with the past few years. Mierzejewski noted that COVID has accelerated e-commerce and the digital world for many businesses. He went on to say:
“There is greater scrutiny of investments in companies. They are trying to beat the market and the competition. There is pressure on leaders to be connected to data and to measure marketing.”
Let’s not forget one of the most important aspects: Resources.
Mierzejewski ended by pointing out that if companies are having trouble hiring people, they try to do more with less. They have to rely on automation to supplement the workload.
The effect of inflation on advertisers’ strategies
We’ve seen the stats about advertiser costs increasing year on year.
We have a better understanding of what marketers prioritize going forward.
Amid economic factors that companies cannot control, advertisers may not know how or where to focus their strategy. When asked, Mierzejewski offered expert opinions.
“Expect double-digit changes in ad spending”.
Whether the above statement indicates an increase or decrease in ad spend, that change is dependent on a mixed combination of strategy, cash flow, inventory positions, and vertical.
The economic pressure reminds me of 2008 – the decline of the digital sphere. Some customers will fall back on ad spend. Others may seize the opportunity in an economic downturn and achieve double digit growth.”
Your cost per click will probably go down.
In these types of environments, your CPC is likely to drop. This could allow advertisers to swap dollars based on what will work hard for them.
Matt says, “If you can be daring, now’s the time to do it.” Low CPC has become a buying opportunity for advertisers who have the financial ability to spend more.
“Don’t pat your back too much.”
“Be careful about the data,” Mierzejewski emphasized. He explained that with inflation and rising costs, you may also see a natural uptick in revenue.
For example, if you see a 10% increase in sales but spend 15% more in advertising or cost of goods sold, that can provide a false growth narrative. The 10% increase in revenue may be attributed to inflation costs, in which case, it shows a decrease in profitability.
The Third Quarter Performance Marketing Report provides invaluable data to unpack.
If you haven’t taken action on the privacy regulations, you’re not the only one.
And while inflation, privacy and other economic influences can cause shifts in performance trends, they are not the only factors.
The paid media landscape is changing every day. Use this to understand how others in the space are changing priorities and strategies and what this means for you.
You can download your copy of the Marketing Performance Report here.
Special thanks to Matt Mierzejewski, Senior Vice President of Research at Merkle, for taking the time to process these statistics and provide additional insights.
Featured image: PopTika / Shutterstock