‘Stability, not flexibility’: Making sense of 2022’s ad spending narrative

By Seb Joseph

If the digital ad market is at a moment of existential peril, as many of its observers seem to be warning, it’s a good time to pause for breath. Unfortunately, it’s also a moment when several misconceptions are clouding marketers’ thinking about privacy, macroeconomic pitfalls, walled gardens and how they intersect.

Perhaps the most widespread of these misconceptions is that slower growth of ad spending online is a bad thing. So bad, in fact, that Meta’s (previously Facebook) market value dipped by $230 billion in one day after it warned of a slowdown in ad dollars flowing into the platform throughout the year.

But that rationale doesn’t necessarily hold — and hasn’t over the earnings season. Of course, advertisers were going to stop spending as much as they have on online media. After nearly two years of literally unprecedented growth, it was bound to plateau — especially during the first half of the year when it was always going to be artificially lower due to well-understood tough comparisons. That’s not really a slowdown — especially when spending in those areas was already growing at a clip pre-pandemic.

Take Google’s latest results, for example. Yes, its ads revenue slowed in the fourth quarter compared to the same period the year prior, but it’s a warped view of what’s actually going on. It disregards the relative pace of growth versus pre-pandemic levels.

On this basis, comparing Google’s ad revenue in the fourth quarter last year, with the same quarter in 2019 shows growth averaged 27.1% each year over the past two. This represents the fastest pace of two-year growth since 2011 when the comparable figures included the global financial crisis and when the company’s advertising business was a sixth of its present size.

This is to say that whatever a slowdown really is, it’s not happening in digital advertising anytime soon.

A second misconception, related to the first, is that Facebook is dying. It’s a theory that’s been making the rounds for a while but brought into sharp focus by its aforementioned grim 2022 forecast. The idea being that Facebook is terminally caught between a rock (stuttering user growth amidst intensifying competition) and a hard place (privacy changes).

Not quite. Sure, those problems are real, (and costly) but they’re not existential. Time and again Facebook has shown that it’s not the data advertisers ultimately value it for, it’s the promise of cheap reach. Otherwise, recurring instances of fake users and blunt measurement would have done more to slow spending on the platform over the years. Granted, it’s brand advertisers that tend to adhere to this view, but performance advertisers have had to adjust their own expectations too since Apple’s privacy change kicked in.

“Large app advertisers have been able to fare OK with the change because they can easily get over the 100 install a day requirement for accurate data from the SKAN network,” said Playbook Media’s Bryan Karas. “However it is still next to impossible to get accurate downstream data to understand the …read more

Source:: Digiday