2024 Q1 Report Highlights
- Advertising CPM in Q4 2023 was 23% lower than a year ago, the smallest year-over-year decline since Q2 2023. We particularly noticed an unusual 7% uptick of CPM from November to December, signaling advertisers were getting more optimistic toward the end of last year.
- The U.S. economic data released in the beginning of 2024 showed a rapidly improving U.S. economy. The January U.S. consumer sentiment index also reached its highest level in two and a half years.
- Advertising spend is expected to grow significantly in 2024. Insider Intelligence predicts advertising spend growth in 2024 will be the second highest since 2011, and our AdRoll customer survey indicates 40% of marketers plan to increase their advertising spend in 2024.
- According to our survey, the average brand uses six advertising channels. Search, display and Meta’s channels are the top choices for advertisers.
- In order to optimize campaign performance across multiple channels, marketers need to understand the customer journey and use a cross-channel attribution tool to accurately measure the performance of their campaigns.
- It’s important for marketers to invest in both present and future revenue growth. By taking a full funnel approach to advertising, marketers can build a revenue pipeline for sustainable growth.
What does the CPM trend reveal?
Advertising CPM, similar to the cost of any goods, is determined by supply and demand. In the world of digital advertising, publishers serve as the suppliers; the websites or mobile apps that host and deliver ads to advertisers’ target audiences.
The selling and buying of digital ads is typically conducted in an auction format that can be handled programmatically by two types of platforms - the Supply Side Platform (SSP), representing the publishers, and the Demand Side Platform (DSP), representing the advertisers. Since the amount of advertising space offered by the publishers doesn't typically fluctuate, changes in CPM are mostly driven by advertisers’ demand for ads.
2023 CPM Trend Summary
The cost of advertising, as measured by average CPM, was down 23% in the fourth quarter of 2023 compared to the year before. While it was still lower than 2022, the gap has been narrowing from the second and third quarter of last year.
The 7% uptick of CPM from November to December is in contrast to the trends of the previous 2 years. It indicates advertisers were getting good results from their campaigns this past December and were willing to increase ad spend toward the end of the year.
Note: CPM varies by industries, geographies, and channels. CPM of specific campaigns may experience different patterns.
2024 Projection - the year of rebound?
The macro economy - rapidly improving
The U.S. Inflation Rate has stabilized at between 3% to 4% for more than six months now. While they didn’t specify the exact timing, the Fed recently indicated that an interest rate cut is on the horizon.
Following a surprisingly strong U.S. GDP growth in the third quarter of 2023, the U.S. GDP in the fourth quarter again exceeded expectations.
After slowing down in October and November last year, U.S. job growth in December 2023 and January 2024 picked up again, exceeding 300 thousand in two consecutive months.
The U.S. consumer sentiment index rose sharply in January 2024, reaching its highest point in 2.5 years.
2024 digital advertising outlook - higher spend and more challenges
- According to a survey conducted with AdRoll customers at the end of January 2024, about 40% of the respondents plan to increase their advertising budgets in 2024, while 30% will maintain budgets similar to 2023. Our survey result echoes Insider Intelligence’s projection that 2024 ad spend growth will accelerate by nearly 10%, the second highest growth on record since 2011.
- The average company uses six advertising channels. However, ad channels aren’t created equal. Among advertising channels, our survey shows search, display, and the Meta channels (Facebook & Instagram) will benefit most from the overall increase in advertising spend, followed by other social networks, including TikTok, Pinterest and LinkedIn.
- Insufficient budget or resources, ineffective audience segmentation and targeting, and steep learning curves on new channels or tools are the top three challenges that will prevent marketers from achieving their 2024 goals, according to our survey respondents.
3 Tips to Optimize Your Multi-channel Advertising Strategy in 2024
1. Understand the Metrics from Individual Channels
All advertising channels provide marketers with performance readouts for their individual campaigns. In general, there are two types of metrics - cost metrics and conversion metrics.
Cost metrics, such as CPM or CPC, are standard metrics that can be compared directly across channels. In fact, understanding the dynamics of advertising cost across different channels is an essential step for building a successful multi-channel advertising strategy.
Take Meta, TikTok and Pinterest as examples. Meta, on average, had the highest CPM in 2023. However, TikTok’s CPM was the most sensitive to seasonality and spiked sharply around Black Friday. Pinterest, on the other hand, had the lowest and more stable CPM throughout the year. Marketers who can effectively tap into less popular channels to reach relevant target audiences while still keeping advertising costs low will be rewarded with stronger ROI.
At the same time, marketers should avoid apples to oranges comparisons of conversion metrics across each channel, as each has its own attribution model and lookback window setting to assign credits to its campaigns.For example, Google and Meta use entirely different attribution methods. Google uses a data-driven attribution model with a 30-day lookback window while Meta uses a simple view or click based attribution model with a 1-day or 7-day lookback window. While these two sets of conversion metrics may seem identical, the ways they’re calculated makes them vastly different in reality.
2. Use a Cross-channel Attribution Tool
To properly measure conversions and effectiveness across each advertising channel, marketers should turn to a cross-channel attribution tool. These tools are designed to measure performance for each channel in use, taking into account the varying ways these metrics are calculated, and provide a cohesive read out of how each channel is contributing to overall advertising performance.
For marketers who are familiar with Google Analytics 4 (GA4), its attribution reports are good places to start. The Conversion Path report is particularly useful for understanding the customer journey across multiple channels.
For marketers who want to have more choices on the attribution models than GA4 offers, AdRoll’s cross-channel attribution dashboard is an excellent alternative.
3. Adopt a Full Funnel Advertising Strategy
While the bottom of funnel campaigns, such as retargeting ads, help drive more immediate conversions, they do little to help a brand bring in new customers and secure the future revenue pipeline. A comprehensive advertising strategy needs to address all parts of the funnel, from awareness, consideration, to conversion.
Marketers can start planning a full funnel strategy by analyzing the conversion paths from the cross-channel attribution software. If the tool shows conversion paths that primarily consist of single touch points,that’s a sign that you may be too focused on the bottom-of-funnel, short-term growth campaigns. Instead, start targeting audiences in the upper parts of the funnel and set the appropriate KPIs for your brand awareness and prospecting campaigns. Then, use your cross-channel attribution tool to keep track of the customer journey and optimize the touch points across the entire customer journey.