Rising Costs Of Digital Advertising Will Force Spending Shifts

Polly Wong is President of Belardi Wong, a direct marketing agency working with retailers and DTC brands that is based in New York and the San Francisco Bay Area. She discussed with me the high cost of advertising on Facebook, Google, Apple, Pinterest, and Instagram and how it affects their retail clients.

Based on her agency’s  information, cost per thousand viewers did not increase in January 2021 but crept up in February +6% and jumped in March +68%. In April the cost topped out at +89%. May increased by +69% and June by +42%. July figures are not available yet, but are expected to be higher than June. That is scary, and marketers must look for more productive ways to communicate with customers.

Ms. Wong suggests that retail marketers have to shift their focus to find more economical ways to engage with customers. Some of the ways include direct mail, catalogues, and other direct communications with the customer. Old fashion e-mails can be effective on a specific subject. Also, outdoor signage and billboards have been very successful in communicating a message – such as the “Not Your Mother’s Tiffany” campaign which I discussed in my blog on August 2, 2021 (it is popping up all over New York City).

Brevity is important, and Berlardi Wong suggests to its retail and DTC clients (see below) that, if they choose to send out catalogues, their catalogues should be focused and not longer than 36 pages. People just don’t read larger mailings, or at least postpone perusal. In addition, targeted mailing is important and knowledge of new homeownership or arrival of a new baby can be very rewarding.

Clients at digital ad agency Tinuiti slowed their ad spending across Facebook properties on iOS in June; it accounted for 20% of the dollars spent on the social network compared to 50% in April. Nonetheless, overall ad revenue for the social network rose +56% year-over-year for a total of $28.6 billion in the second quarter of this year. However, there could be more dramatic shifts in spending in the weeks to come even as there is not a clear alternative to Facebook.

Apple has in their new iOS14 iPhone (and probably in their iOS15 phones that will be released in September 2021) tracking transparency. This privacy update requires that an app must have permission to track activity outside its own app, but it will still be able to capture data about customer activity in-app that can then be sold to advertisers.

Digiday quotes Dave Gross, founding partner and head of media and digital at Agency Anchor Worldwide, “Clients are trying to understand the difference in their performance where they were before, where they are now, and how much can be ascribed to the IOS update”.

One must conclude that social media’s high cost will veer advertising to lower cost direct communications like direct mail. Many of us are already overwhelmed by political direct mail solicitations and would probably welcome some merchandise specials with a sense of humor.

I picked out a few names from the more than 300 clients that Belardi Wong identified. They are either retailers or Direct to Consumer (DTC) manufacturers. They include such well-known retail brands as Allbirds, Birkenstock, Crate & Barrel, Minted, Naked Cashmere, Parachute, Ross-Simons, Sundance, and Todd Snyder New York. This says to me that retail is looking for alternative advertising platforms so we are likely to see new media options emerge and spending patterns shift in the future.


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