Home Ad Exchange News Legacy Brands Flex Their Pricing Power; Platform Ad Prices Skyrocket

Legacy Brands Flex Their Pricing Power; Platform Ad Prices Skyrocket

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Priced Out

Big brands and retailers are raising prices, partly due to pandemic-related costs – but also because the drumbeat of inflation and supply-chain news provides air cover. Many companies are raising prices to expand profit, not to sustain it. (H/t Lindsay Owens for the spot.)

But what is a “brand” anyway? In most cases, it’s the difference in price between a well-known name and the generic alternative. How much more will someone pay for Frosted Flakes if it’s sitting next to Frosted Flakes look-alikes? This has been put to the test by retailers launching white-label lines. 

On the other end of the spectrum, brands are fighting to fend off ecommerce natives and DTC brands throttling them on price, especially on Amazon.

These twin dynamics have long kept prices low. But now, thanks to general inflation, well-known brands are flexing price as a muscle.

What’s the lesson here? Perhaps better-known brands didn’t need to fight so hard on pricing after all.

Big department stores, fashion and consumer technology sellers all pursued a similar strategy during the holidays, ditching deep Black Friday sales and focusing more on stats like “Average Unit Retail,” which rewards stores that sell at higher prices even if they sell fewer items. 

The Rate Of Change

Platform ad prices have soared due to several competing factors: the pandemic, cord-cutting, privacy policies, regulations and good ol’-fashioned demand. 

Meta was hit by Apple’s privacy changes, which made in-app targeting and analytics less efficient. Now Meta must serve more ads to reach the same number of attributed sales – but its average CPM is still going up. Last year, it reached $15.30, up from $9.50, Insider reports, based on data from the attribution company Measured.

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Over on Amazon, cost-per-click prices were up 14% YoY for sponsored products, based on data from Amazon ad tech firm Perpetua.

Google Search prices, meanwhile, were also relatively stable, although YouTube’s average CPM grew by more than half in 2021 to an average of $11.60. Google’s programmatic display rates increased by 75%, but it’s important to note that the high percentage is a sign of a low base, with CPMs rising from 80 cents to $1.40. 

Google Search ads were measured on a CPC basis, not by CPM. Capturing intent near a purchase or conversion is valuable, because campaigns can charge by results instead of impressions.

TikTok rates almost tripled last year from $2.60 to $7.40. TikTok also leapt ahead of Snap, which had an average CPM of $3.40. 

Don’t Call It A Comeback

As the ad industry (and the world) continues its COVID-19 recovery, advertising holding companies are reporting double-digit organic growth.

Interpublic Group, Omnicom and Publicis all cited a healthy rebound from 2020 in their Q4 2021 earnings reports, as detailed by The Wall Street Journal. And the hold cos see room to grow in 2022 thanks to industrywide interest in first-party data, performance media and direct-to-consumer commerce.

IPG’s organic revenue was up 11.9% in 2021 compared to 2020 (and up 6.5% from 2019). Omnicom’s organic revenue grew by 10.2% in 2021 compared to 2020. And Publicis reported organic revenue growth of 10%.

All three agencies cited DTC ecommerce as drivers of those growth rates. Omnicom in particular saw its precision marketing business grow 19% in 2021, but IPG CEO Philippe Krakowsky summed it up well: “The focus is clearly on deepening relationships with consumers.”

The outlook for 2022 remains strong thanks to the same tailwinds. Both IPG and Publicis are targeting a 5% organic growth rate for this year.

But Wait, There’s More!

What a $6.5 million Super Bowl ad can buy in digital media at average rates. [Digiday]

Dance, I said, dance! And leave the package on the porch. [NYT]

Ecommerce software solutions provider Shopware raises $100 million from PayPal and Carlyle. [release]

Facebook, Spotify and other media companies struggle to balance ad-based and subscription revenue. [Bloomberg]

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