2023 Q1 US Advertising Benchmark Report Cost and ROI data for three major advertising channels
US Advertising Benchmark Report for Q1 2023 Cost and ROI data for 3 major channels
Overall trend of advertising: Social media advertising spending rebounds, while Amazon and Google slow down slightly.
According to reports, compared to the slowdown in the fourth quarter of last year, there has been a rebound in digital advertising spending on Meta and YouTube in the first quarter of 2023. Amazon sponsored products and Google paid search have slowed down compared to the previous quarter, but still grow faster than YouTube or Meta platforms overall.
Due to economic uncertainty, advertising spending began to slow down in the second half of 2022, with advertising spending mainly focused on channels that can bring direct conversions, such as Google paid search and Amazon sponsored products. This trend is still playing a role from 2023 to now.
In the first quarter, Amazon sponsored product advertising grew by 12%, slightly slower than the 17% in the fourth quarter. Last year, in the third and fourth quarters, Amazon launched events such as Autumn Member Day and Year-end Shopping Season, which also resulted in a significant increase in its advertising spending.
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In the first quarter, Google paid search advertising grew by 9% year-on-year, a decrease of 1% compared to the fourth quarter of last year. Google’s ad clicks increased to 11%, but pricing remains weak, with CPC down 1% year-on-year.
In the third quarter of last year, Google began transitioning from intelligent shopping events to PerformanceMax events, a newer AI-driven model that brought strong results for advertisers. In the first quarter, the average sales per click and cost per click of PMax events were comparable to standard shopping events, and more than 80% of shopping advertisers used PMax events this quarter.
After three consecutive quarters of decline, Meta advertising remained unchanged year-on-year in the first quarter of this year. Instagram advertising spending grew by 15% in the first quarter, but fell by 3% in the fourth quarter of last year. Reels advertising continued to grow, accounting for 10.8% of all Instagram ad impressions in the first quarter, up from 2.5% in the first quarter of 2022.
YouTube advertisers who were very active in both the first quarter of 2022 and the first quarter of 2023 increased their investment in advertising on the platform by 8%, which is higher than the 3% growth in the previous quarter. Although the growth in YouTube’s ad prices remains weak, advertisers see impressions increasing by 42% Y/Y.
The report shows that advertising pricing on many platforms continued to decline this quarter. YouTube, Instagram, and Facebook advertising pricing fell significantly, while Amazon sponsored product advertisement CPC and Google advertising pricing fell slightly, by 2% and 1%, respectively. However, in March, Amazon’s CPC fell by 4%.
On Instagram, CPM decreased by more than 20% compared to the first quarter of 2022, lower than it was two years ago. This is partially due to the growth of Reels impressions, as the CPM for this new format is much lower than that of more mature advertising formats such as feeds.
Paid social advertising: Meta, TikTok advertising spending, and price changes.
The report shows that in the first quarter, after experiencing a continuous three-quarter decline, investment in Meta by advertisers rebounded, with year-on-year growth remaining unchanged. Meta ad impressions skyrocketed by 42% Y/Y, while CPM fell by 30%, which is higher than the 22% decline in the fourth quarter of last year.
In addition, CPM for Android smartphones and iPhones remained unchanged in the entire Meta ad for the second consecutive quarter. In the quarter following the release of the Apple App Tracking Transparency (ATT) prompt, CPM for Android smartphones soared relative to iPhone CPM.
Facebook’s ad impressions doubled in the first quarter, rising from 23% in the fourth quarter of 2022 to 42% in the first quarter of 2023. Ad spending fell by 4%, improving from a 7% decline in the fourth quarter of last year. CPM fell by 32% in the first quarter of this year, the largest decline in the past four years.
Facebook accounts for 72% of Meta’s total advertising volume, which is basically the same as in the fourth quarter of last year. Instagram’s advertising share is also basically unchanged from the fourth quarter of last year, while the Audience Network application, which is most affected by Apple’s App Tracking Transparency (ATT) update, continues to account for only 1% of Meta’s total investment.
In the first quarter, the growth rate of Instagram’s advertising spending increased to 15%, the strongest growth since the second quarter of 2020, and this indicator was down 3% year-on-year in the fourth quarter of last year.
Instagram Reels’ advertising spending continued to grow, accounting for 10.8% of all Instagram ad impressions, up from 8.3% in the fourth quarter of 2022, and it is expected that the share of this model’s advertising will continue to grow. The recently launched “Explore Grid Home” accounted for 3% of ad impressions in the first quarter.
The recent decline in CPM is partly due to the growth of impressions from newer inventory sources, such as Instagram Reels.
In the first quarter of 2023, Facebook CPM was the same as in the first quarter of 2021, and Instagram CPM was 7% lower than the same quarter two years ago. Instagram’s CPM continued to decline for the second consecutive quarter, down 21% year-on-year after a 16% decline in the fourth quarter, partly due to lower prices for Instagram Reels ads.
The CPM of Instagram Reels is about half of that of Feed, although the CPM of Instagram Reels ad impressions is 47% lower than that of Instagram Feed placements, while CPC is 19% lower. The CPM of Stories is 32% lower than Feed, but CPC is almost the same. As more advertisers enter, the CPC of Instagram Reels should be more consistent with Feed placements.
In the first quarter of 2023, advertisers increased their advertising spending on TikTok by 26%. During the holiday season in the fourth quarter of last year, advertisers’ advertising spending on the platform increased by 81% year-on-year, and the platform’s CPM increased by 12%.
Due to the intensified competition during the holiday shopping season in the fourth quarter, TikTok’s CPM for advertising was 61% higher in December than the median in July last year. Ad pricing indicators are also affected by updates to placements and campaign types, so changes in CPM are not entirely the result of more or less competition at any given time, and TikTok continues to roll out new formats to compete for ad dollars.
Google Search Ads: Text, Shopping Ad Spending, and Price Changes
In the first quarter of 2023, US advertisers spent 9% more on paid Google search text and shopping ads compared to the same period last year, which is lower than the 10% growth rate in the same period last year. Clicks increased by 11% year-on-year, higher than the 8% growth rate in the fourth quarter of last year.
However, Google’s CPC growth has slowed down for the seventh consecutive quarter. In the first quarter, Google search ad CPC fell 1% year-on-year, marking the first decline seen by advertisers since the third quarter of 2020. After reaching a peak growth of 36% in 2021, the growth rate of Google search ad CPC has been declining.
In the first quarter, the Google search ad CPC for the retail industry decreased compared to 2022. In the first quarter of 2023, the weekly retail Google search CPC increased by an average of 20% compared to 2019, which is lower than the average growth of 27% a year ago, but in the last full week, the CPC was higher than the level in 2022.
Although the overall Google search ad CPC declined in the first quarter, it is still significantly higher than before the pandemic. Retailers saw the gap between Google search ad CPC and the level in 2022 narrowed at the end of this quarter.
In the first quarter of 2023, the AOV (average order value) of Google search ads increased by only 2% year-on-year. The growth of AOV for Google search ads continues to slow down, consistent with the trend of CPC. This indicator has been slowing down for about a year, with AOV growth soaring to 14% in the second quarter of 2021 and then trending downward.
In addition, almost all categories had weak growth in Google search ad AOV in the first quarter. Among the seven product categories evaluated in the report, only sports and entertainment had a 1% year-on-year increase in AOV in the first quarter, which is better than the 9% decline in the fourth quarter. Clothing was the only category with a year-on-year decline in AOV, which was down 2%.
In the first quarter of 2023, Google’s search text ad spending increased by 9% YoY, remaining flat with the previous quarter. Click-through rate (CTR) increased by 7% YoY, marking the strongest growth since Q1 2021. However, ad cost-per-click (CPC) growth continued to weaken, with only a 2% YoY increase in Q1 2023, following a peak growth of 37% in Q1 2021. This marks the seventh consecutive quarter of slowing growth for Google’s text ad CPC.
Amazon’s presence in Google’s text ads hit a new low. In recent years, Amazon’s impression share in Google’s text ads has been on the rise but hit its lowest level in the past four years this quarter.
In Q1 2023, Google’s shopping ad spending, including inventory purchased through PerformanceMax campaigns, increased by 10% YoY, lower than the 12% growth in the previous quarter. Although Google’s transition from Smart Shopping to PerformanceMax campaigns at the end of 2022 was an important milestone, it has not led to significant changes in the trend of shopping ads.
Similar to Google’s text ads, the growth of shopping ad CPC has slowed for the seventh consecutive quarter in Q1, albeit slightly. Shopping ad CTR increased by 14% YoY in Q1, lower than the 16% in Q4.
As of the end of Q1 2023, 82% of brands purchasing shopping ads through PerformanceMax or standard shopping campaigns conducted PMax campaigns. In Q4 2022, the adoption rate of PerformanceMax averaged 78%.
In Q1, Amazon’s impression share in Google’s shopping ads increased by 20% YoY, contrary to the trend in text ads. For most of 2022, Amazon’s impression share in Google’s shopping ads remained relatively stable compared to 2021, with a decline in Q4. However, in the latter half of Q1, Amazon’s impression share in Google’s shopping ads increased by 20% YoY.
On the other hand, Walmart’s share of impressions in Google Shopping ads has declined, dropping 5% year-on-year in the first quarter. Target’s share of Google Shopping ad impressions fluctuated less than Walmart’s, increasing by an average of only 1% year-on-year.
Retail media advertising: Amazon and Walmart ad spending, price changes
In the first quarter, Amazon’s sponsored product ad spending in the United States increased by 12% year-on-year, slowing down from 17% in the fourth quarter of last year. Click-through rates increased by 14% year-on-year, significantly slowing down from 27% in the fourth quarter. The CPC for advertising has decreased for a second consecutive quarter, but the decrease has narrowed.
In the first quarter, Amazon’s sponsored brand ad spending decreased by 8% year-on-year, with click-through rates and CPC both decreasing by 4% year-on-year. Since the second quarter of 2021, the CPC for Amazon’s sponsored brand advertising has slowed down every quarter.
In the first quarter, Amazon’s sponsored display ad spending decreased by 7% year-on-year, improving compared to the 16% decrease in the fourth quarter of last year. Click-through rates increased by 15% year-on-year, reversing the trend of decline in the fourth quarter of last year. CPC decreased by 19% year-on-year, and growth has slowed down for the fourth consecutive quarter.
In the first quarter of 2023, sponsored product ads accounted for 80% of Amazon’s total ad spending, higher than the 78% in the fourth quarter of last year. Its growth in the first quarter far exceeded that of sponsored brand and sponsored display ads. Most advertisers still believe that sponsored product advertising is the most effective tool.
The CPC growth for sponsored brand and sponsored product advertising is significant. In the first quarter, the CPC growth for sponsored products rebounded from a 14% decrease in December last year to a 1% decrease in January this year, while the CPC growth for sponsored brands decreased from a 4% decline in December last year to a 3% increase in January this year.
However, in March, the CPC for sponsored products decreased by 4% year-on-year, and the CPC for sponsored brands decreased by 13% year-on-year. Since the end of 2021, the fluctuations in the advertising prices for sponsored products have largely been consistent with the changes in sales revenue per click.
In the fourth quarter of last year, only two categories of sponsored products saw an increase in CPC, but in the first quarter of this year, it increased to five categories. Among them, pet products had the highest growth rate at 15%, while the CPC for grocery stores and food saw the largest decline, down 15%.
In the first quarter, Walmart’s advertising expenditure for sponsored products increased by 19% year-on-year, while the click-through rate increased by 101% year-on-year, and the CPC continued to decrease, down 41% year-on-year in the first quarter. The decrease in CPC was mainly due to Walmart changing its ad auction from a first-price to a second-price in the second quarter of 2022, which means that advertisers no longer need to pay the full cost of their bid.
Walmart’s advertisers continue to see strong growth in ROAS. Compared to 2022, the ROAS for Walmart’s sponsored product ads increased 2.5 times year-on-year in every month of the first quarter of 2023.
In the first quarter, sponsored brand ads accounted for 11% of Walmart’s total search advertising expenditure, the same as in the previous two quarters. Sponsored products continue to account for the majority of Walmart’s search advertising investment, accounting for 89% of total expenditure.
In the first quarter, the number of clicks from applications in Walmart’s search advertising surged, accounting for more than 70% of all clicks. As early as the third quarter of 2021, Walmart’s applications only accounted for 48% of all clicks in Walmart’s search advertising, but this share has steadily increased in the past few quarters, reaching 72% in the first quarter of 2023, although the PC side still has the highest conversion rate.
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