It’s no secret that paid digital marketing channels have started to see a decline in return on investment (ROI), especially within the last couple of years. What does this mean for advertisers? Let’s take a deep dive into the different factors causing this ROI deviation, how leaning into a certain pay-per-performance channel can help boost brands’ returns, and tips for optimizing your affiliate channel to catch the high-intent conversions you might be losing out on with your paid marketing channels.
Why CPCs are increasing and ROI is declining for paid marketing
Most paid digital marketing channels—such as Facebook and Google—operate on a pay-per-click model. This makes these types of channels more top-of-funnel, with actions only tracked within the platform. Often times, the revenue being tracked in the platform isn’t being attributed to your source of truth, which is your backend analytics suite which tracks all your channel’s performance. There are several different reasons ROI from paid marketing channels has dropped significantly due to the rise in CPCs. One reason is simply the level of competitiveness within these channels, especially now that most brands are leveraging a paid marketing strategy. As increasingly more brands invest in
advertising goliaths—such as Facebook, Amazon and Google—the demand for these services has begun to exceed supply. This imbalance of supply and demand has led to higher prices and slimmer profit margins for the brands that invest in these platforms. In other words, brands are flooding the marketplace in input-based channels such as paid search and
paid social, triggering a sharp increase in prices as a result. However, brands aren’t seeing their customer acquisition return rise at anywhere close to the same rate. Another factor contributing to the decline in ROI are the tracking issues around mobile advertising, due to the new
iOS14.5 update that has made tracking app installs, performance, and in-app conversions more difficult to analyze. In particular, this has largely impacted paid social, as most users access social platforms on their phones. The overall revenue from paid social that’s attributed to brands’ source of truth is showing up as smaller (or even negative in some cases) than what they’re seeing in Facebook Ads, Pinterest and other paid social platforms. When that number is lower, it becomes harder for brands to justify pouring marketing budget into paid social channels that are showing minimal ROI. In the graph below, from Bliss Point Media & Tinuiti, we can see that even though CPMs have decreased since last quarter, they are still increasing YoY:
