Marketers are left head scratching over 2023 after the pure chaos that was digital advertising last year

This article is part of a limited editorial series, called The 2023 Notebook, and is designed to be a guide to marketing and media buying in the new year. More from the series →

In the Bible, there’s a parable about the man who built his house upon the sand versus the man who built his house upon the rock. When the rain fell and the floods came, the house on the sand washed away. Meanwhile, the house on the rock stood.

That parable may have become more relevant across the digital advertising landscape after the advent of Apple’s iOS 14 data privacy measures made performance marketers’ jobs more difficult.

Those that built their businesses upon Meta and or Google Analytics reporting faltered. Meanwhile those that diversified both client ad spend and reporting metrics weathered the proverbial storm that was 2022, with many already making plans for 2023.

“So much of what technology has been trying to do for the last 25 years is democratizing expertise and saying if the pixel is so good, then everybody can be a digital marketer,” said Gogi Gupta, founder and CEO of Gupta Media. “Agencies that built their businesses on tools that democratized expertise are going to suffer because tools are getting worse and worse.”

Digital media drawbacks

There are problems everywhere.

The golden age of digital advertising, when Meta was considered the so-called holy grail of e-commerce, isn’t what it used to be. There’s still no standard resolve for Apple’s data privacy measures, rendering targeting and attribution on social media unreliable, Twitter’s turbulent takeover has spooked its biggest advertisers and at least one digital marketer said they were “burning money” with CPMs on Meta ads fluctuating from $22 one day to $41 the next.

While the pandemic did devastate many, those in the digital advertising space stood to see major dividends as online shopping took off for the last two years. E-commerce sales increased by $244.2 billion (43%) in 2020, increasing from $571.2 billion in 2019 to $815.4 billion in 2020, according to the Census Bureau’s Annual Retail Trade Survey (ARTS). But 2023 ushered in a quasi-post Covid era with changing consumer habits layered by economic uncertainty and inflation, in which there was more scrutiny for how ad dollars were spent. There was also ATT, dulling the promise of digital advertising, in which everything is trackable. And admittedly, marketers say, the industry as a whole failed to reckon with what the new normal would be.

“Most of the industry is still trying to do the same strategy and implementation that they did last year and the year before,” said Harry Kargman, founder and CEO at Kargo, a mobile brand advertising firm, in an email to Digiday, referring to media buying agencies relying on purchase and audience data to precisely target the right audience. “We used to always ask ‘is this the year of mobile?’ We should be now asking, ‘is this the year the cookie actually dies and we need to rewrite the targeting and measurement rules,’” he added.

Predicting the unpredictable

It’s not to say marketers didn’t see ATT coming. But the pace to adapt to the changes was more of a leisurely stroll than a sprint, with many still heavily invested in Meta for its targeting capabilities. This year, eMarketer forecasted that U.S. advertisers would shell out $58.11 billion on Facebook ads, up 15% YoY in spite of iOS changes.

“Often the things that performance media channels have historically been very good at is being able to show a linkage to a sale,” said Ed McElvain, evp and director of P3, Mediahub’s media buying arm. “That sale was maybe not necessarily totally driven by that media.”

The industry’s dirty secret is that although performance marketing is good at directly tying a click or impression to a sale, correlation doesn’t always equate to causation, he added. Meaning, there’s no sure way to know if the sale would have happened with or without the impression.

Companies using last-touch attribution may wrongly attribute the success of a sale to a Google or Meta ad because that was the last click, but that person may be more influenced by other more immeasurable ads. Seemingly iOS 14 exacerbated already present issues, forcing advertisers to diversify, marketers said.

Gupta added a similar sentiment, noting that Meta’s perfect pixels “lulled a generation of marketers into making something that felt like simplistic ROI decisions.” Apple’s changes were a valid excuse for frustration through the better half of last year, he continued. But at this point, agencies need to have worked out the kinks for their clients.

It’s a revelation some marketers, including Gupta, came to last year, opting to divest from Meta, invest in TikTok, build up internal first-party data reserves and expand the rules of measurement. (More on that here.) For some, that looked like a bigger bet on TikTok ads. Albeit a small bet as TikTok’s direct response capabilities don’t compare to Meta just yet. Per Digiday+ Research, about 51% of agencies reported only dedicating a small portion of their clients’ marketing budgets to TikTok. And 25% reported not spending any of their clients’ budgets on the platform. For others, efforts drove back up the funnel, increasing investments in things digital tv for brand awareness.

By the first quarter of this year, agencies were in growth mode, still riding the online shopping wave of 2020. By Q2, things started to slow down as the impacts of data privacy changes became saddled with pandemic and economic uncertainty. In the third quarter, marketers were just looking to maintain, calling Q4 a wash and hoping for a better 2023.

At this point, in a semi-post pandemic society, performance-driven tactics don’t offer the return on investment they once did to justify costs, McElvain said. “The industry has evolved to the point where some of the attribution reasons for doing that are no longer there.”

That said, digital advertisers say they’re leaving 2022 on a higher note than it started, with a better understanding of the landscape, navigating scrutiny within big tech, scrambled targeting, new measurement systems and of course, economic uncertainty.

“Out of this chaos, there will be new winners and losers,” said Kargman. 

https://digiday.com/?p=480901

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