Digital advertising in 2022 - the problems no one talks about
I've heard & read lots of discussions on how advertising has changed these past 18 months. Mainly about Apple iOS changes is making it harder to track and target And yet no one is addressing the real issue. Thoughts 👇 This tweet by Tobi Lutke, the CEO of Shopify exemplifies it: https://twitter.com/tobi/status/... Simply: Over the past decade, the cost to advertise online and the CAC from digital channels has grown exponentially, to a point where many businesses are being priced out. Digital CAC matters dramatically for anyone selling anything online: a SaaS, an app, D2C brands. It's been driven higher, and we're at the point of saturation for two reasons. 1. Competition for attention 2. Consumerization of B2B/SaaS Competition for attention: Not so long ago there were less apps, SaaS offerings and D2C brands. This meant less subscriptions to pay and more openness to new products. Dollar Shave Club was the 1st one to do it. If they launched today...not so much. Netflix had NO competitors. Today, it has 6-7. There was less competition so we were more likely to download an app and subscribe. This happens natively when ecosystems are less mature. That's no longer the case. The digital economy is reaching a declining growth rate. Reason number two, is, again, competition but in a slightly different way. More $$ competition. The consumerization of IT, SaaS/B2B has led to the price for advertising slots being driven to much higher levels. My b2c app, your D2C brand or micro SaaS that might have a much lower customer LTV competes with companies that sell to enterprise, have much higher LTVs - on the same advertising platforms with the same go to markets. Example: Monday.com buys ads in the same Facebook newsfeed for the same demographic of users as @MasterClass or a local beef jerky brand. Except that Monday.com has a $1843 LTV, while local D2C brand has...$100? So they get priced out. Monday targets the same people in the same way. The competition is fierce. And it's not just Monday, it's Wix, Shopify, ClickUp etc. All enterprise companies that now sell to consumers, but for the enterprise. The 'consumerization of IT' has changed the competition. We're all targeting the same demographic of affluent users who can afford to pay - the knowledge workers above a certain threshold. These are the users of apps like Masterclass, Blinkist, Netflix, Spotify, Monday and ClickUp. So it's no wonder CAC has skyrocketed. There used to be stratification in ad dollars. Big players would buy TV, Radio, large media. SMBs would put up local billboards or newspapers. It's a new phenomena that we all advertise in the same marketing assets: Facebook, IG, Google, YouTube. With an auction model. That's why high digital CAC is here to stay. As long as large SaaS companies have the budget to spend, the high LTV - it's going to be tough and saturated out there. But there is a silver lining! The silver lining is that the same saturated social media platforms that have led to aggregated one stop marketing hubs, have also given us a free advertising platform in a way that wasn't possible before. If you show up and add value, you can build a following, for "free". We can all generate 'earned media' in a way and at scale that wasn't possible before. The following that you can get on these platforms is not easy, the competition is hard. But it's there and didn't exist in earlier eras. And the one tool to lower CAC. To summarize, digital CACs will stay sky high, to the point of pushing many out of the market because of heightened competition: 1. Competition for attention 2. Consumerization of B2B/SaaS Flip side is the audience access that SM enables. You need to get out and build in public, share your journey and create a following.
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