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Digital Ad Prices Are Up, but Still a Bargain

By Andy Amsler

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Digital ad prices are up sharply this year, causing some companies to reassess their marketing strategies after years in which Internet-based advertising was the most efficient way to get broad, inexpensive visibility for their brands and to target specific consumers.

In its third-quarter Digital Marketing Quarterly Trends Report, Skai estimates that the average cost per click of a paid search ad has risen 30 percent year-over-year, with mobile keyword searches increasing in price by 41 percent.

Despite those increases, digital advertising remains one of the best bargains around, particularly given the continued splintering of audiences for print publications and traditional television media. And while Meta, the recently renamed parent of Facebook, just announced it would eliminate advertisers’ ability to target users with promotions based on thousands of topics, the ability to precisely target ads online isn’t going away anytime soon.

The reasons for the price increases are several – the beginning of the pandemic caused a drop in economic activity, which led advertisers to trim their budgets. But this year the boom overtook the former decline. Greater competition for ad space has caused greater competition for digital ad space. And the shift to e-commerce by the millions of Americans who were stuck at home during the pandemic has continued, even as more traditional retail outlets returned to full-service functioning in recent months.

Even with the considerable price increases, however, the value of digital advertising remains high. Here are 4 reasons that advertisers shouldn’t forego digital advertising, but rather should keep existing budgets in place despite the higher cost:

  1. Digital remains one of the best buys on the market: Online advertising is a fraction of the cost of offline marketing. The average cost to reach 1,000 people (CPM) with online advertising ranges from $3 to $10, according to Top Draw Inc., compared with an average cost of $22 and up to reach 1,000 people through traditional or offline advertising.
  2. The most desirable consumers continue to spend increasing amounts of time online: The average Internet user spent 2 hours, 24 minutes on social media alone each day last year, according to We Are Social. That compares to 1 hour per day in 2012. Moreover, users are spending more than 3 hours per day on mobile Internet use of all types. That rivals the average time that Americans spend watching television each day, which various sources put at 3 to 5 hours per day. Further, the household reach of connected TV advertising is now larger than the entire U.S. cable household universe, according to Magnite. And CTV now reaches a much broader and more diverse audience than linear TV.
  3. There is no better way to specifically target your desired audience: Digital advertising allows for specific targeting of zip codes, demographics, and viewing habits. While Apple’s ad-tracking changes have altered the playing field for companies seeking to use targeted advertising, making it more expensive to pinpoint ads at some audiences, the changes weren’t as bad as many observers first feared. The changes recently outlined by Meta (formerly Facebook) mean that it will be increasingly challenging to target certain sensitive demographic traits such as race, ethnicity, religious views, political beliefs, or sexual orientation. To some degree that will require marketing and advertising departments to fortify their cultural competency so that they understand who the target audience is, what they care about, and how to communicate with them in a way that will actually connect.
  4. Prices are likely to rise even more next year: 2022 will bring the midterm elections, and political advertising prices and competition will heat up in battleground states next year as a result. Political digital advertising spending grew more than fourfold from 2018 to 2020, and it is certain to grow even more next year. So the period between the just-completed 2021 elections and the months preceding the 2022 contests could provide the best window for bargain-conscious advertisers to ply their trade.

Various factors will make digital ad prices fluctuate over the coming year, but it’s important to remember that the return on investment for digital advertising is much higher than for traditional advertising, plus digital gives an organization far more flexibility in targeting certain prospects and in reacting quickly to moving events.

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