Paid search CPMs drop by 29% in Q2 2023, remains downward path -Skai

The digital advertising landscape has witnessed notable shifts in the past year, with distinct trends emerging in paid search and social media advertising. Over the last four quarters, paid search Cost Per Mille (CPMs) have experienced consistent double-digit year-over-year (YoY) declines. In Q2 2023 alone, CPMs dropped by a substantial 29%, according to the Q2 2023 Quarterly Trends Report from Skai. In contrast, Click-Through Rates (CTRs) in paid search have not followed the same pattern of decline, suggesting that user engagement remains robust.

As user growth on major social media platforms levels off, and advertisers grapple with the challenges of post-AppTrackingTransparency (ATT) measurement, social media platforms have turned to increasing ad loads to boost their revenues.

Pinterest, for instance, ramped up its ad load by 30% in Q2 of the current year, while Meta (formerly Facebook) expanded its ad inventory by an impressive 34%. These heightened ad loads are contributing to the overall growth of social media ad spend.

Despite the boost from increased ad loads, projections for social network ad spend in the United States indicate a relatively modest increase of 3.4% for the current year. This cautious growth could be attributed to advertisers approaching the evolving social media landscape with prudence.

Social media platforms are expected to prioritize lower-funnel ad formats, leveraging Artificial Intelligence (AI) to enhance commerce initiatives. Meta’s Advantage+ Shopping Campaigns (which was announced last month), for instance, exemplifies this trend, as social platforms aim to drive commercial activity through AI-powered strategies. 

More and more companies use AI-powered tools each day. TikTok has introduced a new AI-powered tool for marketers named “Creative Assistant”, promising to revolutionize the campaign creation process. Spotify is also venturing into the realm of AI, introducing a tool known as “Voice Translation” to perform translations while retaining the unique vocal style of the original podcaster.

The digital advertising industry is witnessing a divergence between paid search and social media advertising trends. While paid search CPMs have experienced consistent declines, social media platforms are compensating for slowing user growth with increased ad loads. Advertisers will need to navigate these shifts carefully to make the most of their digital advertising strategies.