Although rates have been relatively steady over the last few months, the overall digital advertising cost is trending upward. In fact, by 2025, digital ad spending is expected to total 77.5% of media spending. Unfortunately, these rising costs make it extremely expensive to advertise products and services. As a result, companies of all sizes may struggle to manage digital advertising costs and get the most out of their marketing. But it’s especially challenging for small businesses.
Luckily, there’s a light at the end of the tunnel. There are ways to combat these rising costs to minimize ad spending and improve your bottom line. And that’s exactly what we’re going to address in this article.
But before diving in, let’s look at digital advertising prices and explore why they’re on the rise…
What Is the Current Cost of Digital Advertising?
To understand how the cost of digital advertising is changing, we need to look at the current prices. It’s worth noting that this isn’t a complete list. Depending on your business’s strategy, you may run paid ads on other platforms where your target audience spends time. But the five listed below are some of the most popular, and they offer a good view of the digital advertising cost right now.
- Facebook: The average cost per thousand impressions (CPM) for Facebook is $8.48.
- TikTok: The average CPM for TikTok ads is $10.
- Instagram: Instagram’s average CPM is currently $7.95.
- Google: The average CPM for Google search ads is $38.40, and the average for display ads is #3.12.
- Snapchat: Snapchat’s average CPM is $2.95.
As you can imagine, running ads on multiple platforms adds up. And as prices increase, it becomes harder and harder for small businesses to maintain an active presence.
Why Are Digital Advertising Costs Increasing?
So, what has caused the change in digital advertising costs? Why do so many experts forecast an increase in the next couple of years? Ultimately, it’s the result of various factors, including the following:
- Increased Demand
The past few years have led to an increase in e-commerce and digital advertising. The COVID-19 pandemic created a significant shift from in-person shopping to online shopping, which put e-commerce in overdrive. Plus, the rise of digital platforms such as TikTok also saw an increase in stay-at-home orders, especially among Gen Z and Millenials.
Even as stores opened after the pandemic, many customers have stuck with e-commerce. To stay ahead of the competition and remain relevant in this new digitized economy, businesses have no option but to increase their reliance on paid ads. And as demand increases, so does digital advertising cost.
- Apple’s Updated Privacy Policy
Apple’s updated privacy policy inhibits businesses from acquiring personal consumer data they can use to personalize their marketing efforts. The lack of third-party tracking makes it harder and more expensive for companies to target their consumers and generate leads.
For example, previously, a company selling men’s underwear could easily target its male audience using third-party information. However, with the new privacy policy, the same company doesn’t know who is male or female and is forced to advertise to a broader audience to acquire customers. So, they spend more money to advertise to more people, most of whom are not their target audience. This is not only expensive, but the returns are not worthwhile.
- Stiff Competition
The e-commerce landscape is highly competitive. To stay ahead, advertisers have to increase their digital ad budgets to get views, let alone engagement. Platforms like TikTok and Instagram have become popular advertising resources, and the saturation makes businesses spend more than they should to get their products or services in front of customers.
Since digital channels have no established benchmark pricing, these prices may continue to rise as more businesses join the e-commerce landscape.
4 Ways to Combat the Rising Digital Advertising Costs
As mentioned at the beginning, there are ways to combat rising digital advertising prices. And no, you don’t have to give up running paid ads entirely. In some cases, it’s as simple as following PPC best practices to get the best ROI. In others, it means finding ways to improve your organic reach.
Here are four methods of addressing high digital advertising costs worth exploring:
- Optimize & Streamline Your Website
When prospects click on your ads and land on your website, do they take action and shop, or do they abandon their cart? If your answer is the latter, you have a leaky sales funnel that needs to be fixed. Take a look at your website and the steps of your funnel and identify what you can do to enhance the user experience.
For example, you can add auto-fill forms that make the customer onboarding experience easier and simpler. Another technological fix you can try is to make your website fast and mobile-friendly. Slow-loading pages and sites that don’t work on mobile push away potential customers who click on your ads.
The goal is to optimize and streamline your website to make it user-friendly and reliable, guaranteeing consumers take action when they land on your page. This generates conversions, ensuring you get the most out of your ad spend.
- Narrow Your Targeting
A great way to minimize your ad spending is to narrow your targeting to put more focus on your ideal customers. As mentioned earlier, advertising to a wider audience costs your business more for fewer conversions. By only advertising to your ideal customers, you lower your digital ad spending and get more leads and conversions since the audience is interested in your brand.
To narrow your targeting, start by identifying and defining your target audience by age, gender, location, and interests. Then determine what channel they spend most of their time on and develop ads that target them on this channel. For example, if your target audience is Gen Z, they likely spend most of their time on TikTok. However, other advertising channels worth exploring are Instagram and Snapchat.
- Leverage Email Lists & Campaigns
Email marketing is one of the cheapest and most effective forms of digital advertising. It has no advertising costs and no media space or printing costs. With email communications, you can target and personalize your marketing messages to reach new audiences and retain current customers, increasing your ROI. Plus, an email list is an asset you own; you don’t have to rely on a platform to talk directly to customers.
As an added bonus, you can leverage your email list/database for more precise ad targeting. By uploading your list to the ad platform, you can have your ads displayed to those who’ve already shown interest in your offerings. It’s a great way to retarget and sell to your existing leads/customers, as well as improve the overall effectiveness of your ads.
- Put Greater Emphasis on Content & Earned/Owned Media
Instead of spending thousands of dollars for paid media, redirect budgeting toward readily available media to minimize costs. For example, repurpose or reuse earned or owned media when advertising your products/services. This is more cost-efficient and saves your business time and effort to create marketing campaigns from scratch.
Similarly, if you already have existing content, you can update and repurpose it to fit your current market strategy instead of paying for new content.
Takeaway
Although the value of digital advertising is often worth the cost, sometimes you need to be more strategic with your budget. The overall digital advertising cost is expected to increase, so it’s important to learn how to get the most bang for your buck. Moreover, putting effort into more cost-effective marketing methods is critical so you’re not relying entirely on paid ads.
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