Inflation’s Impact On Ad Spend Detailed In Merkle Report

Continue reading to find out how advertisers prioritize machine learning and first-party data. Also, learn about the impact inflation has on marketing performance.

Merkle, a leading technology company that delivers data-driven customer experiences, has released its quarterly Performance Media Report.

The past quarter’s research provides valuable insight into marketers’ priorities, challenges, and performance.

These findings are significant as we face economic uncertainty and challenges.

I had the delight of sitting with Matt Mierzejewski (SVP of Search at Merkle), to discuss some of the most imposing stats in the Performance Report.

Prioritizing Privacy and Measurement

According to the Merkle survey, 45% of respondents said that accurate reporting is their top priority when measuring.

Many companies may be in the same boat, but they might not know where to begin.

Mierzejewski says: “Brands have a lot of success with cross-device measurement. Apple has disrupted the measurement industry. Many companies want to build data warehouses for multiple reasons.

• Too many conversions in one platform. This can lead to a poor company’s measurement.
• They are tired of using black boxes. Companies want to control and modify the way they convert.

Mierzejewski noted that more brands are looking to create their own reporting solutions. This changes the dependency between the platform conversion truth and their conversion truth.

Prioritizing Audiences & First-Party Data

Brands must create and manage first-party data because of the growing privacy regulations.

Only 35% of respondents value managing audiences and first-party data.

Mierzejewski was asked: “What do you see as the macro consequences of so many businesses waiting on this?”

He replied with some points:

“From a digital standpoint, they’re shifting toward getting their creative messaging right.” You’ll notice a shift in consumer expectations if you’ve ever interacted with a brand.

“Deprioritizing audiences or first-party data implies poor customer experience.” If these critical aspects are not prioritized, it will accelerate the deceleration and further diminish the customer’s connection to the brand.

“You must use these unknown audience signals to your advantage to meet consumers’ expectations and beat out the competitors.” In-Market audiences released by Google release more signals and intent to purchase. These signals are now available to the public.

Mierzejewski stated: “It misses the opportunity for the most customers.” You will be competing with the worst customers em>

Paid Social Gain In 2023

A staggering 67% of respondents ranked paid social higher this year than in 2021.

Increased prioritization is partly due to the increasing number of social platforms that offer ad opportunities.

If you were to ask which social platform would see the most significant growth in 2023, what would it be?

Mierzejewski said, “if we’re talking about raw dollars, Facebook or Instagram will still win.”

He also noted: “If you’re looking for percentage growth and who should watch out, it’s TikTok.” Matt gave some insight on user projections. TikTok’s growth is projected to surpass Snapchat next year.

Inflation Drives Faster Machine Learning Adoption

Inflation costs may mean that automation and machine learning might be put on hold.

According to the Merkle Performance Report, not.

• 41% of Respondents are starting to take action toward automation and machine-learning strategies
• 38% of Respondents have made significant progress with their ML strategies

Hence, inflation is driving automation adoption to a faster pace.

“Inflation is only one component. It is a result of the past few years. Mierzejewski pointed out that COVID has accelerated Ecommerce for many companies and the digital realm.” He continued by saying:

Companies are being scrutinized more closely. They want to beat the market and their competition. Leaders are under pressure to get involved in data collection and marketing measurement.

Resources are a critical aspect.

Mierzejewski concluded by pointing out that companies who are having difficulty hiring employees are trying to do more with less. To supplement their workload, they must rely on automation.

Advertising Strategies Impact of Inflation

We have seen the statistics on rising advertiser costs YoY.

We now have a better idea of marketers’ priorities for the future.

Advertisers might not be able to control economic factors, making it difficult to know where or how they should pivot their strategy. Mierzejewski offered his expert opinion when he was asked this question.

“Earn double-digit increases in ad spending.”

This statement can refer to an increase in or decrease in ad spending. However, it is based on strategy, cash flow, and inventory positions.

“The economic pressure reminds me of 2008, the downturn in the digital sphere. Some clients may reduce their ad spending. Matt said that some clients might seize the opportunity to grow in double-digits during a downturn.

CPCs are likely to decline.

CPCs will likely drop in these environments. Advertisers could use this to shift dollars according to what works best for them.

Matt says, “If your courage is strong, it’s time to be bold.” Advertisers with more financial resources can use the decreased CPCs as a buying opportunity.

Don’t be too proud of yourself.

Mierzejewski stressed, “Be cautious on the data.” He said that inflation and rising costs could also cause a natural increase in revenue.

If you see a 10% increase in sales but spend 15% more on advertising or COGS than usual, this can create a false narrative about growth. Inflation costs may have caused a 10% rise in revenue, indicating a decline in profitability.

Summary

The Q3 Performance Marketing Report offers valuable data that you can unpack.

You are not the only one who hasn’t taken steps to comply with privacy regulations.

While inflation, privacy, and other economic factors can lead to shifts in performance trends, they are not the only factors.

Every day, the landscape of paid media changes. This will help you understand the shifting priorities and strategies of others in the paid media space and what it means for your business.

Download the Performance Marketing Report.

Special thanks to Matt Mierzejewski (SVP of Search at Merkle) for taking the time and giving additional insight.