Big Tech got crushed by falling ad prices, and the damage could last well into 2023. Here’s exactly how much ads cost on Google, Meta, Amazon, YouTube, TikTok and Snap.
Meta, Google, and Snap reported declines in ad sales, or flat ad revenue, during the fourth quarter.
Ad prices have largely fallen recently, after soaring during the pandemic.
Insider compiled data to show the swings in ad prices.
The declining advertising market is catching up with Big Tech.
Out of the four big ad-supported tech companies — Google, Meta, Amazon, and Snap — only Amazon reported that its ad business grew year-over-year in the fourth quarter. This is typically a buoyant period for tech platforms as advertisers ramp up holiday ad spending. It didn't happen this time.
The broad decline is noteworthy because tech platforms saw their ad businesses boom during the pandemic. That growth has stalled as marketers reign in budgets due to economic concerns.
Industry observers largely expect the headwinds to last through at least the first half of 2023. Advertisers are also moving budgets from big brand-oriented campaigns that aim to increase awareness to performance campaigns that more directly drive sales.
"Brands are feeling the pressure to prioritize shorter customer journeys with more immediate return on investment," said Austin Harrison, cofounder and CEO of ad measurement startup Northbeam.
Insider pulled data from four adtech firms and ad agencies that track pricing changes. The data uses the common pricing mechanisms of cost per mille (CPM), how much advertisers pay to reach 1,000 people. For ads designed to get people to take more immediate action, like Amazon's and Google's search ads, we looked at cost per click (CPC).
Below is a breakdown of ad prices by platform.
CPC prices: $1.58 for sponsored product ads in the fourth quarter, down 8% year-over-year, according to a joint report from e-commerce firms Pacvue and Helium 10.
Unlike Meta and Snap that reported negative or flat ad revenue during the fourth quarter, Amazon reported 23% year-over-year growth in the period. That can partly be attributed to holding a second Prime Day in the fourth quarter, while in 2021 the company ran only one Prime Day — in June of that year. Prime Day typically attracts advertisers to promote products around the big sale.
However, Amazon's ad prices have declined as consumers worry more about inflation and some advertisers pull back spending, according to data from Pacvue and Helium 10. The cost-per-click for Amazon's popular sponsored product ads that appear in search results dropped 15% year-over-year during the fourth quarter, according to the report. CPCs were flat during the fourth quarter compared to the third quarter, an indication that advertisers were cautious during the key holiday shopping period.
Similarly, click-through rates on sponsored product ads decreased 8.8% year-over-year in the fourth quarter, according to Pacvue and Helium 10.
Pacvue attributed the decreases to consumers' inflation concerns, which could make ads less effective if people click on ads but don't buy products.
CPC prices (search): $1.25 during the fourth quarter, down 1.8% year-over-year, according to Northbeam.
CPM prices (YouTube): $6.45 during the fourth quarter, down 59% year-over-year.
Google parent Alphabet reported its fourth consecutive profit decline during the fourth quarter as advertisers spent less. The company disclosed a 1% decrease in CPCs during 2022, according to a recent regulatory filing.
Revenue for Google's search ads decreased 2% while YouTube ad revenue was nearly 8% down year-over-year.
Alphabet blamed the losses to a slowdown in spending by both brand and direct-response advertisers. Google is also facing competition from TikTok. YouTube's short-form video product Shorts has more than 50 million daily views, according to Alphabet.
Separate data from digital marketing agency Blue Wheel Media found that Google search CPCs increased nearly 18% year-over-year in 2022 for its e-commerce clients. Blue Wheel Media CEO Eitan Reshef said the increase speaks to the volatility of digital advertising prices over the past few years.
"We're seeing everyone trying to figure out how to drive conversions through advertising across every channel, and costs have generally just gone up tremendously," he said.
CPM prices: $13.35 in the fourth quarter, down 15.8% from the same period a year earlier, but up 7.2% from the third quarter, according to Northbeam.
Meta beat Wall Street's expectations, but reported a third consecutive revenue decline during the fourth quarter. The company disclosed that the average price per ad slumped 22% in 2022.
Meta's ad prices have declined as the company rebuilds its ad business with artificial intelligence after getting hit by Apple's app-tracking privacy crackdown. There are early indications now that it's getting easier for advertisers to reach people and measure campaigns through the company's platform.
While CPMs fell year-over-year during the fourth quarter, ad prices were 7.2% higher in the fourth quarter compared to the third quarter, according to Northbeam. That's usually what happens when ad budgets ramp up in the holiday shopping period, but Meta has had such a torrid time in the past year, the improvement is noteworthy.
Separate data from measurement firm Measured found that return on ad spending with Meta, which measures how many sales come from each ad dollar, is increasing. This means Meta is becoming a more efficient platform for advertisers. The average return on Meta ad spend during the fourth quarter was $1.96, up from $1.30 in the first quarter of 2022.
CPM prices: $7.23 in the fourth quarter, up 30% year-over-year, according to Northbeam
Snap reported flat quarter-over-quarter revenue during the fourth quarter and warned investors that its advertising challenges will continue throughout the first quarter.
Snap's ad prices are an anomaly, according to Northbeam. Among Snap, Google, Meta, and TikTok, Snap is the only platform where CPM increased in 2022, according to the firm's data.
The data indicates that although Snap has a smaller advertiser base than Google and Meta, it's increasingly getting more expensive for advertisers to reach people on the platform.
Similar to Meta, Snap's ad business was hit significantly by Apple's app privacy changes. During the fourth quarter earnings call, CEO Evan Spiegel suggested that advertisers' budget tightening has stopped. "From our recent conversations with our partners, it seems like advertising demand hasn't really improved, but it hasn't gotten significantly worse, either," he said.
Separate data from Measured shows that Snap is becoming a more efficient ad platform for its core direct-response advertisers. The average return on Snap ad spending during the fourth quarter was $1.46, up from 92 cents during the first quarter of 2022, according to Measured.
CPM prices: $7.43 in the fourth quarter, down 31% year-over-year and 17% quarter-over-quarter, according to Northbeam.
TikTok is aggressively pursuing Gen Z advertisers with low ad prices.
Pricing plays a critical role in TikTok's pitch in grabbing Snap ad budgets. Measured data shows that the average CPM for TikTok ads during the first quarter of 2022 was $5.50 and grew to $7 in the fourth quarter. Meanwhile, the average Snap CPM was $5.70 in the first quarter and $6.85 in the fourth quarter. TikTok is also pitching Shopping Ads that use AI to target people most likely to buy a product.