Turning Turbulence to Triumph – How to Navigate Digital Ad Inflation in 2024

By the Tug Team

As with navigating most things in the aftermath of COVID-19, digital ad inflation has been a rollercoaster ride. 

Before the pandemic, digital advertising costs appeared to be on a steady downtrend, but come 2020, the landscape drastically shifted. During this time, there was a surge in demand for digital impressions, driving costs in these spaces higher and higher. However, with the world at a standstill and no one leaving their homes, there was nowhere else for advertisers to put money, and therefore, not a lot that could be done about these rising costs. 

“COVID flipped everything on its head.” claims Darra Naiman, MD of Tug’s North America office. “Everybody was cancelling their OOH (Out of Home) media, experiential budgets, and funnelling this into digital and social media.” 

Now, having emerged into a post-pandemic era, budgets are re-diversifying, but the rate of impressions hasn’t kept up. Demand for advertising space has diversified, but its impact is slightly blurred, with little transparency from Google on why this is happening. 

What’s more, CPCs are gradually increasing, while click through rates have declined. Alex Pitt, Tug’s Head of Paid Media in London, offers the following explanation to this: 

“I think this situation is due to the competition. Media Spend on PPC is rising YoY, suggesting there are more competitors entering the market (or running more ads) and as a result, there are more options for customers to choose from. This competition has made it more expensive to show your ads, and because there are more options, advertisers are getting lower CTRs than what they’re used to.”

 

Understanding the reasons behind these changes to the adlandscape is one thing, but how can companies navigate through this? Especially those operating in multiple markets?

According to Darra, “the key to navigating this environment is having an understanding of what the costs will be for the different markets you operate in. Unsurprisingly, the highest costs we see are in California and New York, so depending on where your business is and where you want to focus your spend, it may be worth considering excluding these two areas unless absolutely necessary. This could help businesses become more cost efficient, and thereby do better in other markets if there’s a good profitability story there. These are the kinds of conversations we’re having with our clients, establishing where the best, most efficient places for them to spend their money are – the places that’ll have the best return for them.”

Alex adds to this: “Businesses need to explore other channels that their audiences use to get a more holistic view on the most efficient ways to reach them. They need to utilise channels like PPC, but with this, they also need to utilise the AI available in smart bidding, and operate this on the right data to make the process as efficient as possible.”

“I also think businesses should consider, if they haven’t already implemented, having a nicely mixed marketing model, and explore omnichannel strategies – making the most of other platforms that their users interact with to reach them in more efficient and cost-effective ways.”

By staying informed and embracing innovative solutions, businesses can thrive amidst this evolving digital landscape. Learn more on how Tug can help navigate this landscape via our website, or get in touch with a member of the team.