Big tech companies Alphabet, Amazon and Meta all cited performance-oriented and AI-powered advertising products as spurring better than expected revenue growth in the second quarter, with analysts suggesting they may be benefitting from more tightly scrutinised ad spend. <\/p>\n
While marketing spend as a whole is forecast to be lower in 2023 than last year, there are pockets of growth within certain categories. <\/p>\n
A Gartnersurveyof more than 400 CMOs across North America and Europe in February found total marketing budgets as a percentage of revenue would decline from 9.5% in 2022 to 9.1% in 2023. This is down from a COVID-19 peak of 11% in 2020. <\/p>\n
Costs attributed to labor, agencies and services were the areas expected to be cut. The Q2 performance of agency holding companiesIPG,S4 Capital,StagwellandWPPreflect this, with all citing a pullback in marketing services spend from tech clients as dragging on their performance. <\/p>\n
At the same time, CMOs stated in the Gartner survey that they would allocate more budget to paid media. Indeed, GroupM and Magna forecast global ad spend to increase 5.9% and 4.6%, respectively, in 2023slightly lower than last years growth rates. <\/p>\n
In the Gartner survey, CMOs within IT and business services, consumer products and retail planned to allocate the largest share of their budgets to paid media compared to other sectors. <\/p>\n
Across the forecasts, retail media and e-commercea big focus area for tech companieshas been outlined as a key growth category. <\/p>\n
Both Alphabets Google and Meta noted commerce and retail as the largest contributors to their ad revenue growth of 3% and 12%, respectively, in the second quarter. The Q2 performance reversed weak results from the prior three quarters and surpassed analysts expectations. <\/p>\n
Emily Del Greco, partner at McKinsey & Company, said retail media and CTV contributed to the tech firms ad rebound in Q2 and will continue through the end of this year. <\/p>\n
In particular, these advertisers seemingly drove a surge in demand for the tech platforms performance-based advertising products, which use artificial intelligence technology to optimise placements. <\/p>\n
Metasaidit had seen strong adoption of its product, Advantage+, among e-commerce and retail verticals, while it is gaining traction among consumer packaged goods (CPG) and direct-to-consumer brands. <\/p>\n
Google chief business officer Philipp Schindlersaidthe companys Performance Max solution did well with retailers for whom profitability remains a top theme. <\/p>\n
Amazon CEO Andy Jassysaidthe companys performance-based ad offerings continue to be the largest contributor to our growth, with the e-commerce giants ad business growing a sizable 22% year over year in Q2. <\/p>\n
Mike Froggatt, senior director analyst in the Gartner marketing practice, suggests the tech platforms may have benefited from marketers efficiency drives through the economic downturn. <\/p>\n
One of the trends this year that we've identified is that CMOs are under a lot of pressure to develop that efficiency, he said. <\/p>\n
While these tech giants flaunted their innovations when the economy was booming, over the past year they have shifted to talking up how they can maximise impressions and value to advertisers, Froggatt said. <\/p>\n
For so long, they've been playing were tech. They're kind of getting back to basics and doubling down on their media initiatives, he said. <\/p>\n
CJ Bangah, U.S. software and digital platform leader at PwC, echoed that marketers are under considerable, growing pressure to show ROI from marketing spend. <\/p>\n
This is true across industries, and particularly true for those industries where there is added focus on profitability, she said. <\/p>\n
Products like Advantage+ and Performance Max use AI to find pockets of available impressions that maybe people-managed campaigns cant, Froggatt said, in turn driving down the overall cost per acquisition. <\/p>\n
They seem to be especially popular among small- to medium-sized advertisers that have fewer resources to plan cross-platform campaigns. Digital agency Acadia last monthsharedwithCampaign USthat Performance Max accounted for 43% of Google search spend across its mid-sized clients in Q2up from 32% in Q3 2022. <\/p>\n
Brian Wieser, principal of Madison and Wall, said it is plausible that Google and Metas AI-powered ad formats may have helped them capture more share of the ad market in Q2. <\/p>\n
They've got products that satisfy a lot of goals and are perceived to satisfy goals better than alternatives. That's frequently where the money goes, he said. <\/p>\n
But he added other factors could have had even more influence on their growth. For example, Meta said it recorded strong spend from advertisers in China using its platforms to reach customers in other markets in Q2. <\/p>\n
The tech platforms may have also benefited from scooping up a surplus of marketers budgets following a faster than expected recovery from 2022s downturn, Froggatt remarked, since spending on these platforms is easier to ramp up versus media channels with longer payment terms, such as TV. <\/p>\n
I think part of it is that it's easier to spend on these platforms; you can turn it on and off quickly. So when the economy wasn't as bad as potentially forecast at the end of 2022, marketers maybe had some leftover budget, he said. <\/p>\n
<\/p>\n
Read the rest here:<\/p>\n
Tech platforms attribute recent growth spurts to AI-powered ... - Campaign Asia<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" Big tech companies Alphabet, Amazon and Meta all cited performance-oriented and AI-powered advertising products as spurring better than expected revenue growth in the second quarter, with analysts suggesting they may be benefitting from more tightly scrutinised ad spend. While marketing spend as a whole is forecast to be lower in 2023 than last year, there are pockets of growth within certain categories Continue reading