Mobile Advertising For Purpose-Driven Brands — How To Prepare For The Inevitable Skyrocketing of Social Media Advertising Prices
The inevitable is coming. Big brands are shrinking their TV budgets and this will only continue. That newly freed up money will go primarily to one place: social media. Social media advertising prices will skyrocket in the coming years.
The “golden age” of underpriced social media ads, as Gary Vaynerchuk puts it, will be over.
Social media advertising has been the cornerstone of paid acquisition and brand awareness for all the new purpose-driven brands that have grown to prominence in recent years.
But what will happen when all of the big brands bid up ad prices to the point where it becomes untenable for smaller purpose-driven brands who don’t have behemoth ad budgets?
Before jumping into some viable next steps, a brief look at how we got here:
There’s a massive consumer transformation underway.
Consumers are no longer buying on price/quality alone. They are becoming more interested in buying from companies that inspire them and have a positive impact on the world. In an increasingly interconnected digital age, consumers are becoming more aware of how their purchasing decisions affect the world at large. They want to buy from companies that help to create a more prosperous future. For many consumers, the company purpose is now the main factor in their decisions.
Among millennials in the U.S., for example, 25% state they solely buy based on a company’s brand values.
- 88% of consumers believe brands must do more than make a profit.
- 80% state they are more loyal to purpose-driven brands.
- 66% are willing to switch to an unknown purpose-driven brand given comparable price and quality.
- 57% are willing to pay more for products from purpose-driven brands.
The macro numbers bear this out across all industries. Take the food and beverage industry in the US as an example. As the Economist points out, the largest 25 companies accounted for only 3% of total growth in the last 5 years. Companies outside the top 100 accounted for more than half of growth. Bain & Company’s recent research found that these smaller purpose-driven brands are 65% more likely than large brands to outgrow their category.
There are two main reasons that explain this consumer transformation:
- People want to make a positive difference in the lives of others and they are increasingly basing their purchasing decisions around what makes the world better.
- As trust of mainstream institutions, including the big established brands, continues to erode, consumers are looking to younger purpose-driven companies as a channel to express their values.
Emerging companies finding success with DTC
Direct-to-consumer has become the name of the game for purpose-driven brands. In doing so, these companies garner a plethora of direct data regarding their product that would otherwise be filtered through from retailer data. Fulfillment through companies like Amazon also has helped many take their growth to the next level. The success on Amazon for small brands is bolstered by the fact that many big brands have been averse to selling on the platform, resulting in lower search rankings for them, and better rankings for the up-and-comers. The point is: purpose-driven brands are going direct-to-consumer, so generating brand awareness that can drive online purchases is paramount.
Social media costs will skyrocket
Of course, advertising on platforms like Facebook and Instagram has been instrumental to purpose-driven brands. The user base and targeting capabilities are immense. The targeting is often too good. There are times where I think about a product or a brand that I’ve never seen an ad for previously, only to wake up the next day to see an ad from that brand right away. Crazy powerful stuff. Too powerful for many, made evident by the greater percentage of users expressing their distrust of digital advertising due to rightful data privacy concerns.
Facebook is slated to do nearly $70B in global digital ad sales in 2019, much of that coming from purpose-driven brands. But as TV continues to dissipate in importance, that TV money ($70B in the US in 2019, almost exclusively allocated by the big brands) will be moved primarily to social media. Facebook is already saturated and Instagram is quickly catching up, so only one thing can happen as demand increases: massive price increases.
Leaving the price issue alone for a minute, the saturation of ads on Facebook and Instagram presents an additional problem: brand recall. As more ads flood these platforms, the effectiveness of each individual ad reduces.
Our brains are quick to adapt. Once we become accustomed to seeing something too frequently, we tune it out. This is what users are doing. In their unlimited scrolling binges of Facebook and Instagram, due to the amount of ads they see, they tune out all the great purpose-driven brands worth discovering and learning more about.
Increasing prices + decreasing brand recall thus presents a double whammy.
So social media prices are only going up (and fast) in mature markets like the U.S. Consumers will still want to buy from purpose-driven brands, but the use of Facebook and Instagram as discoverability channels will no longer be as effective as they once were. The costs will be too prohibitive as the major platforms cater to big brands finally catching on to the whole “digital advertising” thing. What purpose-driven brands will need are other channels that can be leveraged to drive awareness and engagement. One such opportunity comes with in-app advertising traditionally not thought of as a feasible option for brands: advertising in games and apps.
Of course, this channel has the eyeballs, whether it’s a casual mobile game or a food recipe app. These user experiences as they stand today are filled with ads for other games and apps, so even more so, consumers welcome a more insightful and different ad experience. Think of it like this. If a TV show only served ads for other TV shows, they would get boring really fast. That’s how a lot of the in-app advertising market is today. When it comes to in-app advertising from a user perspective, the bar is set so low. Therefore, the effectiveness of quality brand content can deliver massive value to the user experience, translating to more attentive viewers of brand content, and in turn, more conversions.
As with all new verticals, many are slow to adapt. But the brands that proactively adapt to the social media market trends in order to drive more cost effective brand awareness and acquisition will have a big leg up on the rest.
For more thoughts on mobile advertising for purpose-driven brands, check out our latest whitepaper: https://jukko.com/whitepapers/