The second half of 2022 saw a decline in social spending for the first time in the UK since records began in 2014, which has carried over into Q1 2023. What does this mean for brands that rely heavily on paid social?
According to Marketing Week, expenditure reports by the Advertising Association (AA) and WARC suggest that during the second half of 2022, advertising spend on social media platforms plummeted by almost 14%, a decrease of 28.3% from the first half of the year.
The growth during the first half of 2022 was attributed to strong ad spending post-pandemic but with lockdowns over and direct-to-consumer brands on the wane, this has finally started to tail off. AA and WARC suggest that the low advertising spend on social media channels has continued into early 2023, with companies continuing to reduce their spend on digital advertising.
Meta and Snapchat have experienced the most significant declines in demand from advertisers. Advertising revenue for Meta decreased by 4% in the final quarter of 2022 alone, which has been attributed to “weaker advertisement demand” amid growing competition from TikTok. Meta has, however, managed to recover this decrease in spending during the first three months of 2023. Snapchat has also witnessed a “rapid deceleration in their digital advertising growth.” According to Marketing Week, Snapchat’s parent company Snap has reported its slowest-ever revenue growth as a public company.
The rapid and sustained decline in social media spending has been attributed to the looming recession, adding financial pressure and decreasing confidence for many SMEs whose margins are stretched due to rapid inflation rates.
The decline has also been attributed to changes in the economic landscape, including Apple introducing its ATT framework which imposes difficulties for advertisers to track their users – Meta in particular has been vocal about the impact on its business.
Meta’s CFO suggests that the rapid fall in ad spend is attributed to “wider economic challenges” with accelerating inflation creating uncertainty around the advertising market into 2023. It is difficult to predict whether ad spend will continue to decline for the second quarter of 2023 and into the rest of the year, or if it will start to recover. Some brands, however, remain bullish.
Change and unrest amongst social platforms and the wider landscape has also contributed to the decline in ad spend. This comes after Elon Musk’s Twitter takeover and his re-establishment of banned accounts which has created concern for brands who do not want their advertisements next to controversial content.
As a result, in the first few weeks of January, more than half of Twitter’s top 1,000 advertisers ceased spending on the platform. Prior to this, CNN reported that billions of dollars were spent on Twitter advertisements each year, reaching $4.5bn (£3.9bn) of advertisement revenue in 2021.
However, since Elon Musk’s takeover, Twitter’s company accounts are private, making it difficult to know exactly how much brands are spending on Twitter advertising. Advertisers face much uncertainty around the future outlook of Twitter under Musk’s leadership, whether brands will trust Elon Musk to re-establish their ad spend during these turbulent economic times is unknown.
With many businesses scaling back on social media spend across multiple platforms, how should your brand react?
Less competition should, in theory, bring down CPCs, and with fewer advertisers vying for your customer’s attention, getting in front of the right audiences could be easier than it has been for a long time.
If you need help deciding where paid social fits into your 2023/24 marketing budget…