Tinuiti Digital Ad Spending Report Signals Optimism for 2023’s Second Half

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If Q2 ad spending in paid search, retail media, and across social media is any indication, the U.S. economy just might serve up a Merry Little Christmas, according to Andy Taylor, VP, of Research at Tinuiti.

In disseminating the latest findings of Tinuiti’s recently released Q2 2023 Digital Ads Benchmark Report, Taylor said, “Signs are pointing to kind of a continued rebound. Last year we saw things continue to slow down in the back half of 2022. Folks came into 2023 with a very conservative attitude. But so far, the ‘U.S. consumer’ has remained pretty healthy.”

The report showed higher spending across Google Paid Search, including on YouTube, and on Meta properties for Tinuiti’s clients. Tinuiti has worked with Nautica, Rite Aid, and Whole Foods.

The findings are based on anonymized performance data from advertising programs under Tinuiti’s management with annual digital ad spend totaling more than $3 billion. The trends and figures included are not meant to represent the official performance of any advertising platform or the experiences of every advertiser. Still, Taylor is optimistic.

Three findings in particular surprised him.

The first was the rise of Temu in Google shopping ad auctions. The Chinese-owned retail app enables purchases of items like clothing, appliances, and furniture, and many other items at very low prices. Temu became a major player in the Google Shopping space over the first half of the year and is now competing against 82% of U.S. shopping advertisers, a higher share than Walmart. Taylor observed that such a surge is impressive for a brand that only started advertising through Google Shopping in Q4 2022.

“You don’t often see a brand that a lot of folks aren’t even aware of at this point, become a more prominent advertiser in those auctions than Walmart in the course of just a few months.” Taylor said, calling Temu’s significance as a fast-rising “player” in those ad auctions “unprecedented.”

Advertisers also spent 39% more year-over-year in Q2 on Walmart Sponsored Products while ad pricing declined just 4% in the second quarter compared to a 41% decline in Q1. Walmart’s June 2022 shift to a second-price auction, which reduced the amount paid for ad clicks from the full amount bid to just enough to beat out the bid of the next advertiser in ad auctions also benefitted advertisers over the past year.

Another surprise was the success of ads and spending put behind Facebook Reels. Those small “overlay” ads that appear at the bottom of short-form videos on Facebook and Instagram are overtaking traditional video ads. These ads have been available on Facebook for some time, Taylor said, but were released to Instagram at the end of Q2, but provide a massive opportunity for new ad impressions as the format already accounts for 6% of Facebook ad impressions.

And for the first time, more impressions are coming from those overlay ads than Reels video ads.

The report said Reels ads now account for 11% of Instagram ad impressions, helping to vault Meta ad-impression growth upward.  Advertisers increased investment in Meta properties 9% year over year in Q2, the strongest quarter since Q1 2022. Meta’s Advantage+ shopping campaigns continue to perform well for advertisers, helping to spur increased spend.

“That kind of speaks to how much potential there is on the Instagram side of things,” Taylor explained. “In Q2 11% of our ad impressions on Instagram we’re attributed to reels, but now that they have that overlay format, we could really see that expand pretty rapidly. That really stuck out as an indicator of things to come.” He added, “Right now, Instagram Reels ads have a 13% lower cost per click than feed.”

Advertisers’ adoption of Google’s Performance Max also had a strong showing in the data. More brands were on the hunt for new inventory, new formats, and new audiences across all Google channels. Google Performance Max adoption hit 86% among ecommerce advertisers in Q2, and the number of brands using this AI-powered campaign type continues to grow. Performance Max taps into inventory across a wide array of surfaces and platforms, primarily in display ads in Google Shopping, with only 18% of spend attributed to non-Shopping properties in Q2.

Taylor called Google Performance Max a type of predecessor to smart shopping. “It’s an AI-powered option to allow advertisers to plug in their assets, give it access to the feed, and then Google takes that information and identifies the relevant inventory that you would want to place ads on.”

To Joe Q. Public, streaming subscriptions make companies like Warner Bros./Discovery, Disney, and Netflix may seem like gold mines. But Tinuiti’s Benchmark Report points to the reality is that In Q2 2023, Netflix CPMs were nearly three times as high as the rest of traditional (non-RTB purchased) streaming ad industry, a level roughly in line with Max ads. The streaming giant has commanded strong CPMs since the introduction of its ad-supported model in November 2022, outpacing its competitors.

As CNBC noted back in May, streaming companies are turning their lonely eyes to the ad industry: “After spending years amassing streaming subscribers at great cost, media companies now need to make some profits. And they’re increasingly leaning on advertising as the answer.”

Kathleen Sampey