As any marketing professional knows, setting a media budget can be a difficult task. There are many factors to consider, such as the goals you want to achieve and the price of advertising. When prices go up, it can be even harder to stay within your budget.

It is no secret that social media has become one of the most important tools for businesses to reach their target audiences. With over 2.5 billion active users on platforms such as Facebook, Instagram, and Twitter, there is a vast pool of potential customers to be reached. However, as the popularity of social media advertising has grown, so too has the price. In recent years, the cost per click (CPC) of Facebook ads has nearly doubled, and the cost per thousand impressions (CPM) of Instagram ads has increased by 50%.

While the rising cost of social media advertising may be the cause for concern, it is important to remember that these increases in price are largely due to the growing popularity of these platforms. As more and more businesses flock to social media in search of customers, competition for ad space has become increasingly fierce. As a result, prices for social media advertising are likely to continue to rise in the coming years. For businesses, this means that it is more important than ever to create targeted campaigns to be sure to capture the attention of potential customers.

To get a sense of how prices have changed, we can look at the key figures CPC (cost per click), CTR (click-through rate), and CPM (cost per mile, cost for a thousand exposures). For our customer base, we see that the CPC has gone up by 17%, the CTR has decreased by 5%, and the CPM has increased by 21%. This shows that it is more expensive to place ads on social media, but we may see a decrease in prices if TikTok continues to grow in popularity.

  • 21% more expensive for CPM
  • 17% increase for CPC
  • CTR is marginally the same as last year (+3%) and clicks behavior for links as well (+5%)

However, it’s worth noting that these figures apply to campaigns with all sorts of objectives – from brand awareness to traffic or conversions. It’s possible that increases in your particular industry could be different. Nonetheless, with over 680,000,000 exposures analyzed, there is likely to be some truth in the data that could be applicable to your sector.

Why are there price increases on social media?

As any advertiser knows, prices for ad space on social media platforms can fluctuate wildly from day to day. While some of this is due to seasonal factors, such as increased demand during the holidays, much of it is due to the constant shift in supply and demand of the marketplace.

On any given day, there are a limited number of ad spaces available on a given social media platform. At the same time, there is a constantly changing pool of advertisers competing for those spaces. As more advertisers enter the market, or as existing advertisers increase their spending, prices will inevitably rise. Conversely, if fewer advertisers are willing to pay for ad spaces, prices will drop.

For some platforms (e.g. TikTok) there is a big shift in the number of users and consumption go up, which favors the prices (i.e. CPM and CPC going down) and vice versa. Something that Google Ads will experience as the price increases there seem to be even more.

Over time, we see that both the supply and demand of social media advertising tend to trend upwards. As platforms grow in popularity, they attract more advertisers competing for a limited amount of space. At the same time, users of these platforms are spending more and more time online, meaning that there are more opportunities for companies to reach them with advertising messages.

How increased prices affect advertisers?

An increase in price can have a significant impact on advertisers’ bottom line, as they may need to increase their spending in order to maintain the same level of exposure.

We believe that our customers need even better content compared to their competitors and probably also a slightly bigger bag of money in order to win bidding procedures on the respective platforms over time and usurp new customers. Besides taking care of the traffic that comes to the site and giving customers impactful offers, relevant advertising based on what product the person looked at but did not buy is also an important factor. Similarly, value in the form of USPs, ESPs, inspiring content, reviews from other customers, UGC, customer service, etc. can contribute to increased results even if the budget is smaller.

Will the price increases on social media continue?

The price increases on social media platforms like Facebook and Instagram is not certain to continue. As advertisers began to spread their spending across newer platforms like Snapchat and TikTok, the growth of ad spending on Facebook and Instagram may begin to stagnate. More mature social media platforms tend to attract more advertisers and fewer new users, and the amount of time users are willing to spend on these platforms may spread out across multiple platforms. For example, if TikTok were to get 90 minutes of users’ attention (which is the average time for what users spend on the platform in the EU), it would affect other platforms’ ability to deliver ads and cause prices to increase. In conclusion, the future of social media pricing is uncertain and depends on a variety of factors.

Are stricter legislation and technological updates affecting the effectiveness of social media advertising?

Recent changes in legislation and technology have made it more difficult for businesses to make full use of these capabilities. The introduction of GDPR has placed strict new restrictions on the way that businesses can collect and use data, making it more difficult to create targeted ad campaigns. Similarly, the new iOS 14 update requires users to opt-in to have their data tracked, which will likely result in a reduction in the amount of data available for businesses for targeting purposes.

For example, viewing content, adding to a cart, and buying are all important data events for machine learning to be able to deliver good results for e-commerce. However, this can be bridged with server-to-server integrations and we can get the data that we need, in fact, there are tracking platforms already offering this.

My piece of advice is:

Try to follow your target groups and learn how to create funnels that drive results while at the same time making sure to be present with relevant content (both organic and paid) where they spend time.

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