In the ever-evolving realm of digital advertising, two giants are shaking the landscape yet again. Google and Meta, previously known as Facebook, are orchestrating a spectacular rebound in their advertising revenue. Yet, this resurgence comes with a twist – a dizzying influx of short-form video ad inventory is unleashing a maelstrom of price fluctuations, reshaping the competitive arena for advertisers.
While ad prices typically experience a dip in the second quarter as advertisers reserve their fiscal firepower for the imminent holiday season, this year’s decrease is especially eye-catching, especially following the inflationary surge in ad prices witnessed in 2021.
Scrutinizing this dynamic dance of numbers, Insider has meticulously compiled data from five cutting-edge adtech firms and ad agencies, which specialize in closely tracking the mercurial evolution of digital ad prices. This data, meticulously shaped by a multifarious range of variables like budget allocations and the diverse identities of advertisers, has been distilled into the quintessential barometer of ad pricing: the cost per mille (CPM), embodying the cost an advertiser shoulders to engage with 1,000 individuals. For ads engineered to trigger immediate responses – think Google’s and Amazon’s shopping and search ads – the focus pivots to the cost per click (CPC).
Let’s delve into the intricate web of ad pricing across platforms, dissecting the landscape as it stands.
Amazon: A Steadfast Climb Amidst Change
In the bustling world of Amazon, where every click translates to a sales opportunity, the price dynamics exhibit a narrative of resilience. Cost per click (CPC) prices have experienced a modest 3% upswing YoY in the second quarter for Sponsored Product ads, as revealed by the insightful minds at ad agency Tinuiti.
These Sponsored Products, Amazon’s veritable rockstars of the ad format universe, strategically positioned in search results, have not only refined their sales-driving prowess but also managed to coax advertisers into parting with slightly more of their treasured funds. Andy Taylor, Vice President of Research at Tinuiti, attributes this enhanced allure to the delicate equilibrium between surging ad spend (up 8% YoY) and a congruent 8% growth in attributed sales. In essence, the symbiotic bond between sales and expenditure.
E-commerce adtech firm Pacvue, entering the fray with a separate dataset, provides a tantalizing glimpse into the world of Sponsored Brands, capturing a 5% QoQ price hike in the second quarter, while the average CPC for these prominently placed ads swayed at $1.21. Zooming out, the average cost for Sponsored Brands stood at $1.54, showcasing a respectable 3% QoQ escalation.
This retail behemoth, true to form, reported an impressive $10.7 billion in ad sales during the second quarter, riding a wave of 22% YoY augmentation.
Google: The Dance of Stability and Transformation
Google, a timeless bastion of information, is in the midst of an intriguing act. On the search battleground, CPC prices remain steady, having braved the tempestuous currents of the past year. This steadfast stance is attributed to the unfaltering return on ad spend (ROAS), where advertisers find their mettle.
Delving into the numbers, the average CPC for Google’s search ads coasted at $1.10 during the second quarter, as meticulously chronicled by analytics platform Triple Whale. However, an exhilarating dip of 18% YoY greets the YouTube domain, emblematic of a sea of fresh inventory surging forth for advertisers’ selection. This inundation of YouTube inventory arrived in the form of new ads for the concise and captivating short-form video format, christened “Shorts.”
As Andy Taylor of Tinuiti aptly puts it, “Anytime you’ve got an influx of newer ad inventory, typically that inventory does come with lower ad pricing.” This influx, though, is juxtaposed with a receding wave of demand, as branding ad investments have witnessed a year-long decline, exerting a downward force on pricing.
Furthermore, the kingdom of programmatic advertising, with its tentacles adorning publishers’ digital domains, saw a 2% QoQ CPM decrease from the first quarter to the second, as reported by Mike Ryan, the beacon of e-commerce insights at agency Smarter Ecommerce. This picturesque panorama settled at an average price of $1.50.
Meta: A Symphony of Change
Meta, a chameleon donning many a digital visage, is orchestrating a metamorphosis under the blazing sun of Apple’s privacy update. Amid this transformation, ad prices are dancing to the rhythm of change, echoing the company’s frantic efforts to accommodate an ever-growing stream of ads within the embrace of Facebook and Instagram.
Reels, the beacon of Meta’s financial aspirations, finally stepped into the limelight, proclaiming a resplendent $10 billion annual run rate during the second quarter. This crescendo, ascending from a $3 billion November baseline, symbolizes the dawn of a new era. Plentiful and 39% more affordable than its Instagram Feed counterpart, Instagram Reels ad inventory, as unveiled by Tinuiti, unfurls a promising path forward.
The implications ripple further, casting their spell on the Instagram Feed. A cascade of Meta’s Marketplace ads culminated in a staggering 25% price drop, rekindling the age-old debate of quantity versus quality. Yet, even amidst these markdowns, the enduring Meta ads retain their premium aura, according to Measured’s data. The second quarter unfurled an average Meta CPM of $9.77, surpassing the likes of Pinterest, TikTok, and Snap.
TikTok: Navigating Predictability
TikTok’s turbulent ad pricing trajectory is a tale of two chapters. From the tumultuous rise of a nascent platform, the journey now embarks on a path of stabilization. A 4% YoY drop in CPM prices during the second quarter, as illustrated by Tinuiti, beckons towards an evolving landscape.
Tinuiti’s Andy Taylor observes this stabilization as a signal of maturation, a herald of predictability in TikTok’s ad auctions. The initial rush of advertisers flocking to this nascent stage has settled into a steadier rhythm, promising a future replete with potential.
Measured, expanding the tableau, places the average TikTok CPM at $7.36 during the second quarter, encapsulating the enduring allure of this burgeoning social media haven.
In the grand tapestry of digital advertising, Google and Meta emerge as two titans, scripting a narrative of metamorphosis. Their dance of supply, demand, and innovation casts a spell upon ad prices, transforming the landscape into an ever-evolving canvas where advertisers find their fortunes woven into the threads of innovation and consumer behavior.
As the sun sets on this chapter of the ad price saga, the industry stands poised to pen yet another chapter, replete with twists, turns, and transformative technologies that promise to reshape the very essence of digital engagement.