Digital Ads Are More Expensive Than Ever, Here’s Why

Advertising has been crucial for businesses for decades because of the fact that this is the sort of thing that could potentially end up it allowing them to access a broader range of customers, and the invention of the internet resulted in an exponential increase in what marketing could do. Digital marketing became a profession in its own right, one that allowed companies to get exposure to vastly more customers at a price that initially seemed unbelievably low.

With all of that having been said and now out of the way, it is important to note that the era of cheap digital ads is now long behind us. The pandemic in 2020 kicked enormous demand for digital ads, and greater demand with the same level of supply inevitably leads to increasing prices. That has led to digital ads being more expensive than ever before, and there are a variety of factors that are contributing to this starting off with less than stellar earnings by tech companies over the last few quarters.

Increased demand is one factor that has definitely contributed here, but in spite of the fact that this is the case there are several other factors at play here as well. The rise of TikTok has resulted in dramatically shifting digital ad prices with all things having been considered and taken into account. The platform started off with some very cheap ads, but as it became the platform of choice for the younger and more valuable demographic from a marketing standpoint the company logically raised ad prices across the board.

Another factor that is hard to ignore is that of Apple’s new tracking policy. The lack of third party tracking for the majority of Apple users has throttled the supply of personalized data at a time when demand was soaring to ever increasing heights. That invariably resulted in Facebook increasing digital ad prices because its ad system is largely reliant on third party data that it tries to collect under the radar without informing its users that it is doing so. First person data is more expensive, and since more of it is required ad prices will naturally go up.

Amazon is also playing a massive role in the expensive ad landscape that marketers are dealing with. It has become a much more popular advertising resource, and this saturation is making marketers spend more and more money to get views let alone engagement. Every single platform that marketers might want to run digital ad campaigns on has become more expensive.

Instagram’s CPM has gone up by 39% in the last year, and Facebook’s CPM has gone up by $5 as well to reach $16 from $11 last year. Google has faced a less severe increase, but its CPM has become 12% more expensive as well although its access to quality first person data helps mitigate some of the cost increases.

The biggest increase by far was seen by TikTok whose ads are now 70% cheaper, although that has more to do with the overnight success that the platform displayed. People are still buying ads on the platform despite the startling price increase, so there is a chance that they will go up further.

H/T: Insider.

Read next: Marketers to face challenges as the world of internet enters into a new Cookie-less phase; What measures has the advertising industry taken?
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