TikTok Overthrows Meta, In-Store Beats Digital, and the Growth of CTV

In a world full of constantly changing technology and information, this monthly newsletter keeps marketers up-to-date on the latest trends that will impact their business. I hope you enjoy it!

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Q1 has given us a heaping spoonful of reality that previous levels of digital growth are no longer attainable. Inflation, the War in Ukraine, gas prices, and a return to in-store have made it a more challenging start to the year. Many?consumers?have pulled back on spending, and?major brands?warn that consumer tolerance for price increases is at the limit.?

• MasterCard Spending Pulse?says that in-store sales continued to bounce back while eCommerce purchases declined YoY.
• A recent study showed that?living expenses?now ranked as the number 1 financial stressor among U.S. adult consumers. Many consumers have started to reduce the number of products they buy to balance their budgets, with discretionary categories taking the biggest hit.?
• UPS?has reported a decline in parcel volume as e-commerce growth slows.

Brands are now more cautious with their investments, with many shifting strategies focusing on performance. Despite their careful approach, ad spending increased by?13%?during the first three months of 2022, with digital and out-of-home being the two main drivers of this increase.

This reevaluation of spend resulted in modest growth in Q1 for most major digital platforms. After looking at the numbers for the major players, this recent round of earnings has said to me that as long as a platform can be a full-funnel marketing channel and drive not just awareness but actual conversions, there will still be an appetite to spend.

Meta?saw an uptick in daily active users, ad impressions, and ad revenue, with the price per ad falling by around 8%. Slightly better than expected, considering the signal loss Facebook has been dealing with. The other takeaway is they are putting a lot of attention and time behind Reels. The company is focused on re-aligning its video offering around the Reels format, which recently expanded its testing of 90-second reels. Meta reported that Reels now make up more than 20% of people's total time on Instagram.??On the other hand, Brands haven't been as quick to prioritize Reels for the same reason TikTok has yet to get more advertiser budget, which is that it's primarily viewed as an upper-funnel only placement. Considering some of the reduced budgets that brands face, it's clear why they haven't jumped into Reels with such vigor. While not a sales driver, you should still pay attention, especially if this is where the eyeballs are going. With fewer brands investing here, you can get cheaper inventory to build an audience to retarget later.

Google?reported 23% growth in Q1, but their star YouTube only grew by 14%, mostly in direct response ads. Despite disappointing (but still double-digit) growth, a new report by Pixability found that?YouTube?continues to generate greater attention across the demographic spectrum. According to the study, YouTube is the most-watched streaming platform, at 87%, beating out every major streaming competitor in the space.??83% of U.S. adults who watch YouTube do so on their T.V., making it the second most popular device behind mobile (93%). The report also states that both Gen Zand Millenials watch over an hour of YouTube daily. While this report does not break out subscribers vs. just watchers of YouTube (so take all of this with a grain of salt), it's still clear YouTube is still a major player in the digital video space.?

Snapchat?reported increases in users and revenue as the platform continues to lean into its A.R. niche. Snapchat added 13 million more DAUs and said that they have 250 million people engaging with its A.R. tools daily.??TikTok is also?experimenting?with A.R., so it will be interesting to see if Snapchat can remain the leader here. Snapchat saw a 38% YoY increase in revenue, with the highlight being dynamic ads which more than tripled as brands uploaded their product catalogs. Dynamic ads have been a great tool to drive revenue and ROI for brands that are now more concerned than ever about the results of their marketing campaigns. Snapchat also continues to focus on eCommerce giving brands the ability to use the?Dress Up Feature?to power virtual try-ons. One recent loss for Snapchat is it used to be the favorite platform by teens, and that award now goes to?TikTok.?

Amazon?online sales declined by 3% YoY, although total revenues increased by 8%. The decline isn't shocking but expected considering the hyper-growth Amazon saw in the early days of COVID. Despite their modest growth, according to?eMarketer, Amazon is still the largest e-commerce marketplace with an over 72% market share.?? The bright spot is that Amazon's advertising services segment grew revenue by 23% YoY as Amazon has focused on being pay-to-play. The other part that stuck out to me was the increase in costs Amazon reported, including a 23% increase in fulfillment costs. That's partly due to rising costs, including labor, cargo, fuel, and excess capacity in the company's fulfillment and transportation network. However, they are putting their increased investment in fulfillment to good use.??Amazon recently?released?Buy With Prime, where Prime members can now shop on a brand's website and enjoy the benefits of Amazon, including fast and free delivery. Right now, it will only be available for brands that use FBA but will eventually be available to brands that don't sell on Amazon. These sellers will pay service fees, processing fees, and fulfillment/storage fees as Amazon will handle the logistics on behalf of the brand. Amazon launching Buy with Prime is an innovative and ambitious move by Amazon. In addition to bringing in additional revenue, they hope this helps retain and possibly acquire a few more Prime subscribers. We know that those with a Prime membership spend significantly more on Amazon than those without one. For sellers, it will offer quick shipping for a customer buying on a brand's website, which will increase CVR as the speed of shipping is a significant factor in a purchase decision. But the question remains will anyone trust Amazon enough to adopt Buy with Prime especially considering their history of anti-competitive behavior? Is giving Amazon access to even more purchase data worth it? Buy with Prime is just one more step in their master plan to be a real Shopify competitor, with fulfillment being a significant advantage. Amazon is not the only one trying to take on Shopify with WPP?launching?Everymile, which wants to provide end-to-end solutions for brands that need DTC capabilities. These significant players' increased investment into eCommerce should reassure everyone that while eCommerce growth has slowed a bit, it is still the future and should be prioritized.??

Shopify?is not blind to Amazon's ambition and has been making moves of its own. They recently acquired Deliverr to create an end-to-end logistics platform and expedite its fulfillment network.??For Shopify merchants, the acquisition could mean more accessible fulfillment options and access to 1-2 day delivery services (watch out, Amazon).??Shopify?also announced Shopify Audiences would be available to its broader customer base. Shopify Audiences lets Shopify Plus brands find more customers likely to purchase their products (using Shopify data) and upload that data to Facebook and Instagram to target those individuals.??Shopify Audiences also signals that Shopify has been aggregating and analyzing the data of all of its retailers. You must have seen that coming, right? Targeting has become more complex, and data sources like Shopify Audiences will be valuable. As?Amazon?tries to go after Shopify with its Buy With Prime offering, it's clear that Shopify is building its own moats and could be getting into the ad business. If you are a Shopify Plus merchant, this is a must-use.?

Let's double back to consumer behavior changes. Because of the higher costs of goods, more than 80% of U.S. consumers are more likely to wait to purchase something until there is a sale or coupon, according to a new survey released by?Shopkick. Many brands are looking for ways to offer more pricing flexibility to consumers and ways to attract a more diverse demographic. A good example is?lululemon?expanded its Like New trade-in and resale program nationwide. The notoriously anti-sale brand allows shoppers to trade in lululemon clothing for a gift card. Lulu will also feature gently used lululemon items online, allowing consumers to buy previously owned lulu attire at a lower cost. With a focus on thrifting and increasing interest in sustainability by a younger audience, this is a great way to reach a new demographic and appeal to a new audience while offering pricing flexibility. eMarketer expects this year to be a banner year for online fashion resale, with year-over-year sales growth of 46.6%, reaching $15.50 billion.?

While consumers are looking for pricing flexibility, many brands have had to increase prices for their products and services due to inflation and other macroeconomic factors. According to a CRC Amazon survey, 64% of brands have passed price increases on Amazon in 2022.??With increasing costs and Amazon announcing their additional 5% surcharge on brands, many sellers have had to decide whether or not to pass on the cost to the consumers or reduce their margins. Of those who have raised prices 10% increased prices 2xs or more. The weighted average of the price increases appears to be in the 7-8% range. If you are one of the brands increasing costs, you are in good company. However, if you are a brand that has been able to keep prices static, do a competitive analysis and see if you can take market share away from a now more expensive competitive product.??

According to IAB's??2021 Video Ad Spend and 2022 Outlook?on the state of the video advertising, digital video advertising grew 21% in 2021 and will grow another 26% in 2022, with CTV leading the charge. CTV ad spending increased 57% in 2021 and will grow another 39% in 2022. Dollars usually follow eyeballs, and while CTV is growing, it's still not caught up to the level of attention it receives from consumers. Roku specifically reported the average active account globally spent 3.8 hours streaming video on Roku's platform, up from 3.5 hours in Q3 2021. Overall, CTV viewing will account for 36% of the total time spent with T.V. (linear and CTV), but only 18% of the total video ad dollars are spent on CTV. There are a few significant reasons why CTV still does not get a more substantial chunk of the market, with a big one being measurement and the challenge of buying created by the fragmented nature of CTV. While CTV and tech companies are trying desperately to figure out the measurement piece, for now, marketers should still not ignore it as the brand lift you get from T.V. can't be matched, even if it's a bit more challenging to measure. Remember, we can't all be Facebook.??

Finally, a new report was released that shows that TikTok captures more monthly hours from users than Facebook and Instagram combined.?This should not come as a surprise given how binge worthy they make the entire experience. I still think TikTok is getting a bit too much hype considering where they are right now with measurement and targeting, but it's clear this could be the future, so everyone should start experimenting.?

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Megan Conahan is a 16-year veteran of the digital marketing industry. Over the last 16 years, she’s consulted with fortune 1000 brands on how to best negotiate the ever-changing digital marketplace demands and create unique solutions to set them apart. Megan is an EVP at Direct Agents, an independent and minority-owned digital marketing agency.??