There is a centralization happening in terms of power, sort of like a monetary gravity, that is pulling digital ad budgets into a black hole that is controlled by two players: Facebook and Google. Combined, they account for 90% of digital ad spending world wide. Since Google owns major ad platforms like Search, YouTube, and Gmail, the spend is spread out. Facebook owns Instagram, which accounts for a growing portion of the pie, along with Whatsapp and Messenger, their other billion user platforms.
Their growth – and operating – profits, are still huge by any measure, but when you look at the change year over year, the growth in social media advertising spending is slowing.
The decline in growth is happening for a few reasons. First, companies that did not have a digital budget in 2015 have by now jumped on the wagon. Now that they are on the wagon, they are more managing their budget more conservatively, since in many cases digital has yet to “prove” itself – particularly for offline businesses.
Second, usage of certain platforms like Facebook is on the decline as people are either turned off by the shittiness (scientific metric for the user experience when opening Facebook’s app in 2019) or using different apps like Whatsapp and Instagram instead. Combine that with the fact that there is not a huge portion of businesses who are still virgins to social media advertising, and the growth drops off.
Finally, and this is maybe more theoretical, the return on investment of social platforms has been diluted by the fact that organic posts now need to be boosted in order to be seen, and this budget often has to get wrangled away from media budgets. The blurring between boosting and advertising contributes to the sour taste in C-suite executives’ mouths when they hear digital directors try to justify their budgets.
Sure, social media ad spending (in the US) doubled over the past 4 years, so there is nothing to be worried about if you are running campaigns at a digital ad agency. And Facebook is still by far one of the most efficient places to run ads in terms of click-throughs and reach.
Just look how Facebook dominates:
The other thing that’s pretty easy to notice? Yeah, the other platforms aren’t growing hardly at all!
I mean give it to Pinterest to still be bringing in over a billion dollars in ad revenue, but it’s pretty clear that campaigns there are niche at best compared to the towers of Facebook and Instagram.
Will social media ad spending level off?
The question is not if social media ad spending will level off in the future, it’s when. Just like traditional media like print and TV, social media advertising will one day fall victim to the newest trend in communication technology. Amazon’s ad platform is already eating market share away from Google Search. Ad blockers have driven revenue away from traditional display ads, could a social ad blocker do the same on Facebook or Instagram?
Facebook is also doing its best to muck up its reputation among its users and the public at large (which are pretty much interchangeable at this point). So far it has had absolutely no effect on advertisers who are more desperate to deliver results than to take a moral stand. But that could change. Advertisers always follow eyeballs, as soon as people start fleeing elsewhere, we wont be far behind.