Marketers Navigate an Uncertain Fourth Quarter Mired by Ad Softness

During the fourth quarter of this year, advertisers had to act more flexibly, as the uncertain macroeconomic environment made reaching revenue goals more challenging, according to post-mortem conversations with several ad buyers. Reflecting this cautious landscape, ad prices were down this year on Meta and Google, after already dipping in 2022. CPMs (cost per thousand impressions)—which can vary widely based on season, demand, device and targeting criteria—on Meta were down by 26% and 30% in November year-over-year, according to estimates from two different ad buyers. Meanwhile, for 15 of the 16 days following Black Friday, CPMs were down year-over-year, according to data analysis firm Varos. Certain days in 2023 were up to 11% cheaper than the same days in 2022, per Varos. “It was a lot of work to get the numbers that we got,” said Katya Constantine, CEO of digital agency DigiShopGirl Media. “A number of brands were somewhat disappointed—not that [results] were bad, but they were hoping for stronger outcomes.” Threads' Hashtag Feature Isn't Enough to Really Benefit Brands While brands had to work harder to meet targets, many eventually got there. Brands and their agency partners managed to report November revenues that were not drastically different than they were during 2022, four ad buyers said. And shoppers spent $38 billion overall in the five days between Thanksgiving and Cyber Monday in the U.S., a 7.8% increase from last year, according to Adobe Analytics. Here’s how buyers navigated a topsy-turvy fourth quarter. Spending more to mitigate a slower November At DigiShopGirl Media, clients met their goals by spending more on advertising than last year, even if that meant lower return on ad spend and lower conversion rates. “[Consumers] were clicking on ads and they were just thinking about it,” instead of buying the product, Constantine said. “That made a very tough Black Friday season.” Offsetting the slower Black Friday period was an uptick in sales earlier in November, particularly around Singles' Day, the Nov. 11 Chinese holiday that is growing in importance for sales and promotions, Constantine said. Other brands pulled back spending. At performance agency Brainlabs, ad spend on search was down 18% in November, while return on ad spend was up 18% during the month, spurred in part by the lower CPMs, said Andy Goodwin, head of paid search. Cost per click on Google was down 18% throughout November, he added. Promotions drove more sales impact Goodwin noted that while conversion rates were down 9% in November, promotions had more impact in driving revenue. In the days after a sale was launched, ROAS and conversion rates increased more than they had after promotional periods in 2022. Promotions also played a big part in the strategy at performance agency Wpromote. Heavy discounts of 50% to 70% were more impactful, while offers of 25% or 30% were less likely to move the needle for brands, said Darren D’Altorio, vice president of social media. But instead of characterizing the Q4 period as full of challenges for marketers, D’Altorio saw the dislocation as something brands could have better used to their advantage. Mixed revenue for brands During this November, total ad spend among around 50 Wpromote ecommerce clients was $58 million, down 15% from $68 million in November 2022, D'Altorio said. Nonetheless, clients notched some impressive results, including November conversion rates up 22% year-over-year and ROAS 36% higher than the previous November. Momentum Grows Around Brands Owning Ad-Tech Contracts Amid Supply Chain Murkiness But revenue for brands during this period was more mixed. Many brands saw single-digit increases in revenue from the previous period, with some big winners and a few losers, he added, and not blockbuster results. “It was an underinvested Black Friday and Cyber Monday,” D’Altorio said—something his clients are working to correct in December, where ad spend is already $40 million, compared to $37 million for all of December 2022. “Softness through mid to late Q3 created an environment where budgets had to be reflighted for a Q4 that was underserving of the demand in market,” he added.

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Marketers Navigate an Uncertain Fourth Quarter Mired by Ad Softness

Lower CPMs meant brands struggled to reach sales goals

Catherine Perloff

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Catherine Perloff