It’s highly encouraging to see marketers take a closer look at their digital ad spending and ask harder questions. Many of them paused digital marketing in 2020 due to the pandemic and are being more thoughtful and careful about what they turn back on in 2021, especially in anticipation of tighter budgets going forward and also closer scrutiny from CEOs, CFO’s and compliance officers.
Airbnb cut $800 million in ad spending in 2020. Brian Chesky, CEO, said on their most recent quarterly earnings call “What the pandemic showed is we can take marketing down to zero and still have 95% of the same traffic as the year before. So we’re not going to forget that lesson. The previous KPI was just about how do you buy cheaper media” [1]. “In Q4, more than 90% of our traffic was direct or unpaid. Accordingly, performance marketing spend in 2021 will be substantially less than in 2019… and [there will be] a permanent shift to brand [advertising]” [2]. See: Airbnb slashes spend in permanent shift from performance marketing to brand
Adidas came to the same conclusion. They were so focused on short-term digital “performance” metrics that they underinvested in long-term brand building. “The problem … is not the metrics per se but a focus on the wrong metrics. Digital technology offers a wealth of short-term measurements, often in real time, which has resulted in marketing investment being misdirected. Brand [and category] is driving 65% of our sales across wholesale, retail and e-commerce, and yet [at 55% of investment] it has an under investment. We [were] overly focused on digital attribution and digital sales but we are improving,” said the sports brand’s global media director, Simon Peel [3].
There are a few key lessons, reinforced by the two examples above. It’s not that you should turn off digital ad spending permanently, but that you can spend it better and get more outcomes than before. The key lesson from Airbnb is that they were previously focused on the wrong KPIs, ones that ultimately drove them to just keep buying cheaper and cheaper digital media, ironically disguised as “performance.” The second lesson is performance vs brand. In digital, there may appear to be performance — e.g. more clicks — but often there are few to no incremental sales or key business outcomes. Some of this is due to clicks coming from bots and not humans; some of it is due to marketers losing half their dollar to adtech middlemen before even showing any ads. See: How Much Of Your Dollar Goes To Working Media In Digital?
In recent years, marketers shifted most of their digital budgets to…
