7 Tactics to Navigate the Cost-of-Advertising Crisis and Stretch your Ad Budget
Advice on mitigating rising ad rates to stretch your advertising budget and even cut ad costs by 30%
A crisis has been quietly unfolding in the advertising industry, putting significant pressure on media costs. Much like the cost-of-living crisis impacts so many aspects of household budgeting, this rise in advertising prices must be considered by brands when evaluating their advertising budgets, to maintain visibility and sales performance.
Considering the extent of inflation across various advertising channels, some advertisers will quite urgently need to make strategic adjustments to stretch their advertising budgets.
Advertisers are not powerless in the face of these inflationary pressures, but strategic planning and efficient resource utilisation are more critical than ever.
The Inflationary Landscape
The media market has experienced varying inflation rates across different channels from 2022 to 2024. In Australia, television advertising saw inflation rates of 12.3% in 2022, dropping to 7.3% in 2023, and an estimated 5.0% in 2024. Globally, TV CPMs (cost per thousand) have increased 31.2% since 2019. TV network audiences have stabilised rather than increased, yet their cost base keeps going up which drives up advertising rates. It ends up costing advertisers more year on year to get to the same audience.
Out-of-home (OOH) media in Australia followed a similar inflationary trend, starting at 14% in 2022 and projected to stabilise at 5.0% in 2024. Digital advertising costs, meanwhile, experienced a 6.2% increase in 2022, 3.3% in 2023, and an estimated rise of 4.0% in 2024.
By How Much Would Advertising Budgets Need to Increase?
To simply maintain the status quo of brand and sales performance amidst these changes, advertisers on average would have had to increase their budgets substantially from 2022 to 2024.
Considering the overall media market inflation, with total inflation rates moving from 7.3% in 2022 to 3.6% in 2023 and an estimated 4.0% in 2024, advertisers would need to cumulatively adjust their budgets by approximately 15.4% over this period to maintain the same level of advertising efficacy and reach.
Yes, that means that if advertising budgets have remained static year over year, that actually represents a decrease in advertising investment. Much like your grocery budget, the ad budget that was spent last year won’t go as far this year.
Stretching your Advertising Budget in an Inflationary Market
The thing is, spending more may not be an option. Even if it is, instead of simply increasing ad investment, we recommend a multi-faceted approach to maximising ad budgets.
Advertisers have to flex all their strategic muscles, including having conversations with agency partners, to make sure they are understanding this inflationary landscape and doing everything possible to optimise and stretch that ad budget.
Take all of the following measures, for best success:
- Identify and Benchmark Costs: It is crucial to both understand and benchmark costs across key metrics such as rate and CPM. By overlaying purchases with pooled data from other advertisers, one can monitor market performance. In digital media, where bidding occurs in live auctions, comparing various ad objectives and CPM benchmarks is essential. You have to start out by knowing what the ad inventory is actually worth, so you know what you are bidding for.
- Track Inflation and Set Negotiation Goals: Incorporate inflation tracking into negotiation goals. Audience Group uses a mix of real-time data, benchmarked rates, and supply path optimisation to ensure that clients are not overpaying. By pairing this intel with forecasted inflation, advertisers can negotiate more effectively and stay aligned with market trends.
- Leverage Discounts and Incentives: When you’ve done number 1 and 2, you’ll be in a good place to negotiate. Rate discussions can then focus on added value elements at the campaign level. Early input from Media Mix Modelling and performance management data can guide negotiations. Shoot for discounts and incentives that are incremental, not just add-ons. Compare benchmark rates against wider market baselines to identify negotiation opportunities.
- Think Beyond Price: While securing competitive rates is crucial, it’s equally important to gain access to creative and emerging advertising opportunities that allow for testing, learning, and growth. Engaging in alpha/beta projects with global and local media partners for example, can provide invaluable insights and innovations. Clearly defining and prioritising these opportunities, along with incorporating first right of refusal exclusivity clauses in contracts, can offer significant strategic advantages, enabling advertisers to stay ahead of the curve and continuously improve their campaigns.
- Book Early: One of the simplest yet most overlooked strategies is early booking or booking ad space well in advance. Media networks manage inventory like airlines, and early bookings can yield significant savings.
- Utilise First-Party Data: Leveraging first-party data not only improves advertising performance but also reduces costs. Up to 30% of CPM costs can be wasted on low-quality third-party data. Accurate first-party data can cut advertising costs by a third, making it a valuable resource in cost management.
- Optimise the Supply Path: In addition to removing worthless third-party fees, placements on Made for Advertising (MFA) sites and YouTube Partner buys are some examples of extraneous costs that are not adding value to your buys.
By understanding costs, leveraging data, and negotiating effectively, advertisers can navigate the challenges posed by rising media prices and continue to achieve their objectives without compromising on quality or reach.
