Over the past five years, brands and companies have spent $800M billion on social media ads. With two-thirds of Gen Zers and almost half of Milennials making purchasing decisions based on social media ads, it’s no wonder they keep pouring money into this type of advertising. And while the entire market continues grossing more revenue than ever, the average cost-per-mille (CPM) of social media ads, or the amount of money advertisers have to pay to have their ads viewed by a thousand potential customers, has significantly dropped. According to data presented by OnlyAccounts.io, the average cost-per-mille of social media ads has dropped by 30% year-over-year to $5.33 in the second quarter of the year.
CPM Drops while Total Ad Impressions Grow
Social media CPM is usually higher in the final quarters of the year, as the increased demand for advertising space drives a surge in costs, and brands compete to win over prospective clients. However, that wasn’t the case in the past twelve months, with the cost-per-mille of social media ads falling for four straight quarters.
According to Skai Digital Marketing Quarterly Trends Report, the cost-per-mille of advertising on social media amounted to $7.53 in the second quarter of 2022. Three months later, this figure dropped to $6.79. The downsizing trend continued between October and December when CPM was usually the highest. Statistics show CPM of social media ads dropped to $6.66 in Q4 2022, showing an 11% drop in six months. Statistics show that 2023 brought another decline, with CPM falling by more than 20% to $5.32 in the first quarter, and the same cost remained during the next three months.
And while the amount of money advertisers had to pay to view their ads by a thousand potential customers dropped by 30% year-over-year, social media ad impressions have increased. According to Skai’s report, the total volume of social media advertising clicks in the second quarter of 2023 was 35% higher than in the same quarter a year ago, meaning social media users view more and more advertising. Still, according to the survey, this is mainly true for passive ads like videos or stories. On the other hand, clicks and clickthrough rates for traditional forms of social media ads continued to decrease.
Brands will spend nearly $210 billion on social media Ads in 2023
With social media ad impressions rising, it’s no wonder brands continue pouring money into social media ads after already spending hundreds of billions on them. According to a Statista survey, the annual spending on social media ads has tripled over the past five years. In 2018, brands and companies worldwide spent roughly $73 billion on social media advertising. Since then, this figure snowballed to $210 billion in 2023, showing a massive 188% increase.
Over 80% of total ad spending this year, or $170.3 billion, will be generated through mobile, up from $53.5 billion five years ago. Desktop ads will make up the rest with $36.7 billion in total ad spending, almost double the figure seen in 2018. In global comparison, one-third of total ad spending, or $72.3 bilion, will come from the United States. Chinese brands stand close with $71.3 billion in total ad spending this year. United Kingdom, Japan, and Germany follow, with $9.7 billion, $7.7 billion, and $3.8 billion, respectively. Statista expects the entire market to grow by a CAGR of 4.5% in the next four years, resulting in a market volume of $207.1bn in 2027.