Why Advertising Costs Spiked in 2021, Particularly in Q4 (and What You Can Do About It)
March 17th, 2022 by
Key Insights
- Advertising costs tend to be higher in Quarter 4 for all industries
- The iOS14 update in 2021 and the pandemic in 2020 magnified these trends in 2021
- Plan ahead and anticipate this spike by creating a full-funnel strategy in advance to help offset these costs
As we make our way into 2022, you may be high-fiving your team as you happily report that cost per impression has dropped across your Facebook campaigns, particularly for month-over-month comparisons. While this is exciting to see in the first quarter of the new year, it’s not exactly a coincidence. In fact, it’s actually the result of a trend we see in quarter 4 of the year prior. Q4 is notorious for driving advertising costs to their highest rates of the year. This is an important topic to address because it affects nearly all industries and can negatively affect your bottom line as the year comes to a close. The biggest driver of elevated CPMs during this time is increased competition.
Starting with Black Friday, more and more marketers are rushing to push their ads live in time for the holidays, meaning more competition and higher advertising costs for you. While this likely doesn’t come as a huge shock, you might be surprised to learn that 2021 advertising costs were particularly high.
To find out just how high, Search Influence has pulled our internal Facebook data to best answer this question. We have also included three proactive measures to help you plan for and cut these costs down each year.
Internal Case Study
In this review, we compared our 18 active Facebook clients, regardless of campaign objective, to the 17 Facebook clients active in 2020 during the same period. The results showed that Facebook cost per impression rose 29.48% in quarter 4 of 2021 compared to Quarter 4 of 2020.
The results were even more drastic in December. In December alone, CPM rose 43.07%!
For our higher education clients, in particular, we saw even more fluctuation. In quarter 4 of 2021, Higher Education CPMs rose 49.51% compared to the year prior.
And in December alone, CPMs grew 72.13% for this industry compared to December 2020.
But, Why 2021?
The most likely culprit is the iOS14 update that went into effect earlier in the year. Now that privacy is under the magnifying glass, Facebook has to revamp. Retargeting and Lookalike audiences are largely unavailable or tanking in performance due to most iOS users opting out of tracking. The result? Much smaller retargeting audiences.
Additionally, Lookalike audiences, which come from Pixel data, aren’t being tracked the same way. Therefore, the data source for much of your Lookalike audience quality has been falling, and performance will suffer as a result. In sum, your ads are targeting a broader audience than before. Add that with the seasonal trends we see in Q4, and what do you get? Record high CPMs.
Lastly, 2020 was a truly difficult year for everyone. As companies made cuts across their business, advertising budgets were often the first item on the chopping block. If you could keep your advertising campaigns running during this time, you might have been pleasantly surprised by the reduced competition. Now that the world is growing more and more accustomed to the new “normal” in light of the pandemic, companies can get back in the marketing game, and boom, competition is back, as are high CPMs.
So What Does This Mean for You and Your Industry?
Higher CPMs are here to stay, and you can expect them to be the highest towards the end of the year. The biggest spikes will likely hit in November and December, beginning around Black Friday.
At Search Influence, we recommend the following strategies to help you counterbalance the increased costs in the final quarter:
- Plan and execute a full-funnel strategy
- The best way to prepare for this is to be proactive about your advertising strategy and plan at least six months in advance again. We would recommend allocating additional budget towards the end of the year to help compensate for the seasonality OR start running your campaigns earlier to ensure your ads are out of learning and optimizing towards your goals before the holiday rush hits. Beginning early in the year with a brand awareness strategy that leads into a conversion or lead generating strategy closer to the busy season allows users to grow familiar with your brand before it’s time for them to convert.
- Create early incentives
- Another strategy we recommend would be to set initiates for users to convert early. For example, an education client might waive an application fee if submitted before November 20. Likewise, an eCommerce click might benefit from offering an early bird promo code to encourage shoppers to purchase before marketing costs surge.
- Increase awareness with high-quality video assets
- Using video assets is an excellent way to improve performance. They almost always outperform static images, and 81% of customers decide to buy a product or service by watching a brand’s video content. Videos are also a great tool because you can use them to remarket to users that have viewed them before.
Failing to plan ahead of this seasonal push could have a detrimental impact on your business. At Search Influence, we believe it is essential to build a full-funnel strategy throughout the year that can help you with most of your marketing budget. Reach out to our expert team at Search Influence to find out how you can improve your marketing strategy today!
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