Advertising could be one of the casualties of tightening marketing budgets. The average digital marketing spend increased by only 8.8% YoY, a 45% drop from the 15% jump seen last year, according to this year’s CMO survey, a collaboration between Deloitte LLP, the Duke University/Fuqua School of Business and the American Marketing Association. There has also been a rapid erosion of pay-TV penetration. What’s going on?
According to research, marketing budgets are in the worst shape — spending growth falling by 72% during the same period, showing an increase of only 2.9%. 52.2% of marketers say inflation decreases marketing spending levels, while 16.% claim it is driving an increase, and 34.1% say it has had no impact.
Digital is now drawing 53.8% of the average marketing budget. The biggest digital spenders are in education (75.5%), technology (65.7%), and healthcare 64.6%), which is hard to understand since, in 2022, global spending on digital advertising surpassed $600 billion. By applying the average invalid rate for paid traffic against this number, CHEQ estimates $35.7 billion of ad spend was wasted on fake traffic in 2022 by analyzing more than a billion site visits from the 15,000 companies it works with to weed out bots and other phony web activity.
Where are the marketing dollars going?
For one thing, into mobile. Mobile now draws an average of 19% of the average budget, compared to the 18.7% projected last year. Moreover, firms that make 50%+ of their sales via the Internet are now spending 30% on mobile and expect that to rise to 50% in the next five years.
This occurs even though on a scale of 1 to 7, mobile draws only a 3.2 score contributing to company performance in the past year. The study states that “mobile marketing contributions to company performance remain weak over time, despite higher investments.”
Social media is also getting more money. It has risen by 17% and is projected to increase by 26.4% in five years. Even firms with no internet sales forecast will devote 10% to 20% of their budgets to social in the next half-decade. This is troubling because the ROI on most social media is low.
Facebook, a website ostensibly for finding and connecting with your friends, constantly floods users’ feeds with sponsored (or “recommended”) content and seems to bury what people want to see under what Facebook decides is relevant. And as journalist John Herrman wrote earlier this year, the “junking of Amazon” has made it nearly impossible for users to find the high-quality product they want — instead diverting people to ad-riddled results pages filled with low-quality products from sellers who know how to game the system.
Tech titans have decided to completely abandon the ideas that made them famous in the first place in a desperate bid for renewed relevance.
Social media companies have strayed from their core products — helping you find information, buy things, or connect with people — because their focus is no longer on innovation or providing a service but on finding a “good enough” service that they can then sell advertising around.
Here’s what’s really going on
The days of “free spending marketers” are closing as brands prepare for smaller market share because of rising prices and costs. Executives now want hard ROI data when marketers spend money on and offline. I know of one brand that stopped all advertising for two months, and market share was unaffected. I’m not suggesting that brands stop advertising. What I am suggesting is that they stop wasting money on digital and other channels that can’t be measured accurately.
Digital CAN be measured accurately if marketing teams take the time to analyze their spending against critical brand objectives.
The continued spend on digital marketing is an indication that there are too many marketers who believe the hype is adequate research.
