Budget Battleground: Ad Spend Strategies for Rising Media Costs

With rising media costs, evolving consumer behaviors, and increased competition, you really have to go big or go home. So, the next time you're told your marketing budget is being cut, counter with facts and ask for more. Here’s why.

What’s Behind the Surge in Media Costs

Marketing expenses are projected to grow by 4.7% this year, a significant jump from the 2.5% growth seen last year. A key driver of this increase is the anticipated growth in social media spending, expected to rise from 11% to 12.2% this year and to 16.3% over the next five years.

With this logic and understanding, brand marketing is imperative; this is case one for why budgets should increase, or at a minimum, stay where they are. 

Three Key Objectives for Rethinking Budget Allocations

Increased marketing budgets are likely to be funneled into several key areas:

• Digital advertising and marketing: 10.3%
• Brand building and awareness: 7.9%
• AI and automation: 7%

Source: The CMO Survey

A Look Ahead at Escalating Media Costs and Competition

Media costs through 2024, are expected to surge across various advertising platforms. Digital ad spending in particular, according to eMarketer’s April Report, is projected to hit $302 billion, marking a 7% increase from previous estimates.

In 2025, this "media inflation" will challenge advertisers even further since they will be simultaneously tasked with finding ways to keep pace with evolving consumer behavior.

Consumer Behavior

Advertisers are increasingly required to adapt to changing consumer behaviors by leveraging multiple channels and sophisticated advertising strategies. Delivering the right message at the right time and place has become more complex, necessitating higher levels of spending to maintain effective communication with target audiences.

Premium Ad Placements

Premium ad placements are also contributing to increased costs. High-impact ad units and premium environments, such as large-format video ads or interactive digital out-of-home (DOOH) displays, command significantly higher CPMs compared to standard units. These placements are favored by advertisers looking to stand out in a crowded market but come at a premium price.

The competition for advertising space has never been fiercer. Forbes reports substantial CPM increases across major platforms, with Facebook seeing an 89% rise, TikTok 92%, and Snapchat 64%. TikTok, in particular, has experienced a year-over-year revenue increase of 26%, underscoring its growing dominance in the digital ad space.

Data Privacy Changes

Changes in data privacy, specifically Apple's App Tracking Transparency (ATT) feature, have also impacted advertising effectiveness. With ATT limiting data collection on iPhone users, marketers now face the challenge of reaching their audiences with less precise targeting, requiring additional spending to maintain campaign effectiveness.

Programmatic Channel-Specific Cost Trends

As digital advertising evolves, different programmatic channels are experiencing varied cost trends. Understanding these trends is crucial for optimizing your media budget and ensuring efficient allocation of resources. Here's a breakdown of current cost trends across key programmatic channels:

• CTV/OTT: Connected TV (CTV) and Over-the-Top (OTT) platforms are seeing increased demand, leading to higher CPMs. Advertisers are drawn to the targeted capabilities and premium inventory available on these platforms.
• Streaming Audio: Platforms like Spotify and Pandora offer programmatic audio ads, with costs varying based on targeting options and listener engagement.
• Native Advertising: Programmatic native ads blend seamlessly into content, often resulting in higher engagement rates. Costs can fluctuate based on the quality and context of the placements.
• Video Advertising: Programmatic video ads, especially in-stream formats, command premium prices due to their high engagement potential.
• Display Advertising: Standard display ads remain a staple, but their CPMs vary widely based on factors such as viewability and placement quality.
• DOOH: Digital Out-of-Home (DOOH) advertising CPMs vary widely, from $5-$25, based on location and format. The ability to target audiences in specific physical locations can justify higher costs.

Six Strategies to Optimize Increased Media Budgets

With rising media costs and evolving consumer behavior, optimizing your media budget is more important than ever. Implementing effective strategies can help you maximize your investment and ensure your marketing efforts yield the best possible results. Here are key strategies to consider:

1. Advocate for Budget Increases:
   • Analyze channel-specific inflation rates and adjust budgets accordingly. Present a clear business case for budget increases to maintain or grow share of voice (SOV).
2. Develop a Tiered Budget Strategy:
   • Create a flexible, tiered approach to budget increases:
     • Tier 1 (Essential): Match media inflation rates across core channels.
     • Tier 2 (Growth): Allocate additional budget for high-performing channels.
     • Tier 3 (Innovation): Reserve funds for testing emerging channels and ad formats.
3. Factor in Production Costs:
   • Allocate additional funds for high-impact ad units and creative variations tailored to specific channels.
4. Prioritize High-Impact, Premium Ad Units:
   • Invest in premium video ads, podcast sponsorships, rich media native placements, and high-visibility display units.
5. Invest in Emerging Programmatic Channels:
   • Set aside 10-15% of the increased budget for testing new programmatic channels and ad formats.
6. Balance Premium and Efficient Placements:
   • Find the right mix of high-value premium activations and efficient programmatic buys that align with audience and business objectives.

By implementing these strategies, you can better manage your increased media budget, ensuring that your spending is aligned with both current market conditions and future growth opportunities. This approach not only maximizes the efficiency of your budget but also enhances your overall marketing effectiveness.

Keys to Maximizing Your Investment

Focus on data-driven decision-making, target audience segmentation, and channel optimization. Invest in sophisticated CRM systems, data analysis tools, and customer journey mapping to enhance personalization and improve customer experiences. This will help ensure your marketing spend is both effective and efficient, driving better results in a competitive market.

In an era of rising media costs and shifting consumer behavior, maintaining or increasing your marketing budget is not just a strategy—it's a necessity. The market is evolving rapidly, with new challenges and opportunities arising across various programmatic channels. By understanding cost trends, adapting to global media inflation, and implementing targeted budget optimization strategies, you can ensure that your marketing efforts remain effective and competitive. Investing wisely in both established and emerging channels will not only maximize your return on investment but also position your brand for sustained growth and success in the constantly changing digital advertising environment. Embracing these strategies will help brands stay ahead of the curve because in the budget battleground, scaling up is the only path forward.

Sources: Clearbit, 2022; Forbes, 2022; eMarketer 2023; CMO Survey; eMarketer2; Hubspot, 2024