Social media ad spend drops for the first time

The sharp decline in spend in the second half of 2022 coincided with social media companies such as Meta and Snap reporting declining demand from advertisers.

Social mediaAdvertising spend on social media fell off rapidly in the second half of 2022, marking the first time the UK market has seen a decline since measurement by the Advertising Association (AA) and Warc began in 2014.

Advertising spend on social media channels dropped by 13.9% in the last six months of 2022, according to the latest AA/Warc Expenditure Report. This sharp decline followed a period of booming growth during the first half of the year, when ad spend on social channels was up 28.3%.

The growth in the first half of the year is broadly in line with previous periods, with spend on social media particularly strong post-pandemic.

Over the full year, social media spend, which is a sub-category of the online display section in the report, increased by 4.9%. The overall category grew at 10% in 2022 and is projected to grow by 1.7% in 2023. Total ad spend grew 8.8% in 2022.

The report’s authors say they are seeing evidence the downward trend recorded in the second half of last year has continued into the first few months of 2023.

Warc’s director of data, intelligence and forecasting, James McDonald, attributes the decline to the financial pressures facing small businesses.

“Sharp and sustained falls in social media spend – the first time this has been recorded in the UK – are likely to have been instigated by reduced advertising activity among the SMEs who comprise a ‘long tail’ of ad volume on social platforms and whose margins are under incredible stress as inflation bites,” he says.

The decline in the latter half of 2022 also coincides with a period of unrest within the wider social media ad landscape.

These struggles include Elon Musk’s bumpy takeover of Twitter in October. Musk, who once declared he “hates advertising”, has reinstated previously banned accounts on the platform and done away with verification for public figures unless paid for, prompting concerns from some quarters about brand safety on Twitter.

Elon Musk takes over Twitter amid a challenging market for digital advertising

In February, CNN reported on research from marketing analysis company Pathmatics by Sensor Tower which found over half of Twitter’s top 1,000 advertisers were no longer spending on the platform in the first weeks of January.

Before the Musk acquisition, advertisers spent billions of dollars on Twitter each year. In 2021, it generated $4.5bn (£3.9bn) in advertising revenue. Since the takeover these figures have not been publicly reported, as Musk took the company private, meaning it’s hard to know how much brands are now spending on its advertising.

While Twitter’s appeal as a channel for ad spend has been in flux due to a controversial takeover, it is far from the only social media platform that has seen its fortunes decline in recent times.

Meta, the owner of Facebook and Instagram, saw its advertising revenues decline by 1% in 2022, with a drop of more than 4% in the final quarter. It cited “weaker advertiser demand” in its full-year results.

While AA/Warc suggest the trend of lower advertiser spend on social channels has continued into early 2023, Meta did report better-than-expected revenues for the three months to 31 March 2023, with ad revenues up 4% year over year.

However, it still said it is seeing weaker demand from advertisers, with ad prices down. In a call to investors yesterday (26 April) Meta chief financial officer Susan Li said wider economic challenges, such as inflation, meant a lot of uncertainty about the advertising market for 2023.

“It’s hard to have perfect visibility on how those dynamics will impact the broader economy and specifically the advertising markets for Q2 and for the rest of the year,” she said.

Amid difficult market conditions, Meta is also embarking upon a “year of efficiency”, which will amount to around 21,000 redundancies by early summer.

Snap, the owner of Snapchat is due to report its first 2023 results overnight; however, its 2022 results also suggest a faltering advertising market, with the company saying it had seen “rapid deceleration in digital advertising growth”.

As well as economic factors, changes to the digital advertising landscape such as Apple’s introduction of its ATT framework, which makes it more difficult for advertisers on platforms to track users, have also been blamed for the decline in 2022.