- Last year and especially during the holiday season, social media platforms like Facebook were highly effective in reaching consumers stuck at home and scrolling aimlessly through their smartphones.
- But this year, amid Apple’s privacy changes and the ongoing controversy over Facebook’s practices, more and more consumers are turning away from Facebook’s apps.
- Brands are left to question whether the money they spend on an online marketing blitz will reach the right customers? Instead, some are turning to catalogs, podcasts, and even stores.
It is not just raw material, transportation and labor expenses that are rising. Retailers are also facing rising digital advertising costs. The challenge is: is it worth the extra money?
Last year – and especially during the holiday season – social media platforms like Facebook were highly effective in reaching consumers stuck at home, aimlessly scrolling on their smartphones. But this year, amid changes in Apple’s privacy and the ongoing Controversy On Facebook’s practices, more and more consumers are turning away from Facebook’s apps, which include Instagram and WhatsApp. Or they are turning to new ones, such as TikTok.
This change has worried brands that an online marketing blitz will not reach the right customers. Some even hesitate that they may alienate consumers by staying on certain social media sites.
“When COVID happened, it affected everyone differently, but for many brands it really created a serious tailwind,” said Brian Berger, founder and CEO of direct-to-consumer menswear brand Mac Weldon. “For this nine-month period [in 2020]We were all back in the glory days of being able to really exploit being in the right place at the right time.”
He said major advertisers took off from channels like Facebook last March at the start of the pandemic. Companies, including hotels and airlines, were either trying to save cash during the uncertain times or hoping to avoid missteps with their ads during the health crisis. Companies that continued to market products were able to score top advertising real estate online for very little money. But that dynamic came to an abrupt halt earlier this year.
“Then 2021 starts and vaccines start rolling in, people start getting more comfortable and life starts going back to normal,” Berger said. “And we’re back where it was 2019, overnight. Rates are back. Competition is back.”
The final blow came when Apple made a privacy change in April that affected how apps could track users. Many consumers have since opted out of tracking by popular apps, meaning businesses are collecting less information about users’ daily habits and interests. As a result, it becomes even more difficult for advertisers to effectively target people on the Internet.
“When Apple rolled out its new changes and operating systems … overnight it rocked the entire digital marketing space, including Facebook,” John Merris, CEO of Solo Brands, said in an interview. “I cannot overstate how important it is for brands to actually have direct one-to-one relationships with customers by interacting and transacting on their own websites.”
Merris said many retailers are concerned about how the change makes it more difficult for shoppers to design ads.
“Every day it seems that the advertising technology space or the digital marketing space is changing,” said Merris, who owns outdoor-inspired products like Solo Stove, Chubby, and Oru Kayak. “And you’re hearing a lot of consumer brands being extremely concerned, or already facing huge challenges in getting new customers online because of those changes.”
Meta, formerly Facebook, meanwhile is facing widespread scrutiny after whistleblower Frances Hogen, a former product manager, released a trove of damaging internal documents. Among other things, the documents shed light on Facebook’s handling of hate speech and how it affects the mental health of its users. This led at least one retailer to reconsider its presence on the social media platform.
Sporting goods company Patagonia, known for its bold stance on social issues, said in a Twitter post on October 28 that it is boycotting Facebook even after it withdrew all its paid ads from the company last June. is continuing.
“This decision has affected our business and the environment [nonprofit organizations] Which we support — whose campaigns benefit from the expansion of social media that we fund and execute,” Patagonia said. “But we’ve learned to adapt. We are smart about how we grow our community as a result of this ad ban.”
The company did not elaborate further on how it has optimized. Representatives for Facebook and Patagonia did not immediately respond to a request for comment.
Facebook’s troubles became an even bigger headache for direct-to-consumer brands than for traditional retailers, according to Polly Wong, president of full-service marketing strategy firm Bellardy Wong. That’s because many of them got their start thanks to creative Facebook ads that took customers to their websites instead of relying on stores.
“There is no question that the vast majority of DTC’s [direct-to-consumer] Brands build their business on Facebook, with Google in second place,” Wong said. “But right now, more than half of our customers are doing Facebook poorly.”
Bellardi Wong’s customers include eco-friendly shoe brand Allbirds, bed maker Parachute, men’s clothing company Buck Mason and dozens of other direct-to-consumer businesses, according to its website.
An analysis by market research company eMarketer found that users in the US will spend less time scrolling on Facebook this year and in the years to come. eMarketer said time spent on the platform for adults over the age of 18 is expected to drop by 3.3% in 2021 compared to 2020 levels. It forecasts it will fall another 1.8% from 2021 to 2022, and another 0.7% in 2023.
Wong said, “As people have returned to their normal lives … going to restaurants and gyms and traveling outside, there is less screen time. And less screen time, in fact, means fewer impressions.” “And when there are fewer impressions, but there’s still a huge marketing demand, it drives up the cost of those impressions. There’s more competition from advertisers for the same impressions.”
CPM, a marketing term used to denote the cost of 1,000 ad impressions, is skyrocketing, Wong said. He said that in the summer months, Bellardi Wong was tracking a 50% increase in CPM on Facebook. And the company estimates that CPM could go up another 50% this holiday season.
Wong said more retail brands are testing direct-mail catalogs, podcasts and large-scale television campaigns to diversify their marketing mix. Brands are also trying to take advantage of celebrity endorsements. And these may be less expensive options in this environment, she said.
Activewear brand Woori is exploring the store as a marketing channel. After receiving a $400 million investment from SoftBank’s venture capital fund, it plans to open about 100 in the United States over the next five years. Brands such as Allbirds and eyeglass maker Warby Parker are similarly planning to ramp up their store growth.
“When you first launch [a brand]It can be cheaper to acquire customers through social advertising or paid search,” said Joe Kudla, founder and CEO of Woori. One Store.
But part of getting away from digital advertising can be fleeting. This is the case as Snap has suggested. The social media company told analysts during a conference call in late October that some retailers are withdrawing from marketing on Snapchat because they need to temporarily reduce costs or because they don’t have enough goods to sell. .
Snap Chief Business Officer Jeremy Gorman said, “We have heard from advertising partners in a variety of industries and geographies that they are facing headwinds in their business related to disruptions in global supply chains as well as labor shortages and rising costs. are doing.” “We expect that some of these customers may choose to slow down their marketing spend.”
Chocolate maker Hershey and consumer-products giant Kimberly-Clark both cut spending in the third quarter and cited supply chain issues as two examples. Companies are facing high commodity costs and, in some instances, there are not enough products to meet demand.
Other retailers are tweaking the messaging in their ads to reflect their inventory status. Berger said Mac Weldon is adding a “ready to ship” message to its marketing materials ahead of the holidays to emphasize to consumers that items are readily available and in stock.
“We have a global supply chain and we are not free from issues,” Berger said. “We have a lot of stuff related to vacation vacations. But we’ve anticipated a lot of it and have been able to implement fallback plans for a variety of marketing campaigns based on delays.”
According to Wong, many companies fall into one of two camps. Either retailer has enough products to sell, but that may sell out before Black Friday, so it’s encouraging shoppers to shop early. Or, the retailer is waiting for merchandise to arrive, so the business is holding off on a marketing blitz until then.
“We actually have a few customers, unfortunately, where we couldn’t pull the trigger soon enough,” Wong said. “In fact for some of our customers the catalog is going home where half the products aren’t even available within the catalog.”