Margins in Media: What’s Fuelling the Surge?

In the last few years, media costs have climbed higher and higher, pushing brands to rethink and recalibrate their advertising budgets. Whether it’s digital or traditional, media prices have surged, driven by a complex set of factors from increased competition to shifts in consumer behavior. But why are these costs rising, and what can brands do to maximize their return on investment?

Understanding the Surge in Media Costs

Media costs aren’t just inching up—they’re skyrocketing. For many, this trend started around the pandemic, as brands moved to digital channels en masse, hoping to capture audiences spending more time online. Since then, the increase has been driven by a few key factors:

1. Increased Competition: With more brands competing for the same online ad space, the cost per click (CPC) and cost per thousand impressions (CPM) have steadily risen. The competition isn’t just coming from traditional brands either. Startups, small businesses, and even influencers have joined the mix, all vying for visibility.
2. Privacy and Tracking Changes: Privacy updates, such as Apple’s iOS 14.5 changes and third-party cookie deprecation, have shifted the way digital ads are targeted. With less precise targeting, brands often have to increase budgets to reach the same audience effectively, driving up the costs.
3. The Push Toward Premium: As media platforms continue to grow, they’re also segmenting their offerings into premium spaces with exclusive inventory, particularly on Connected TV (CTV) and over-the-top (OTT) services. These premium placements come with premium prices, which can be hard to avoid as audiences shift to streaming.
4. Seasonality and Event-Driven Surges: The natural ebbs and flows of marketing budgets around peak seasons—holidays, sporting events, election cycles—amplify demand, increasing media costs for advertisers across the board. With global events happening almost year-round, these spikes are no longer occasional—they’re constant.
5. Inflation’s Role in Rising Media Costs: Media costs aren’t immune to inflation. As inflation rises, so do the operational costs of running ad platforms, from technology upgrades to employee wages. This increased expense often trickles down to advertisers in the form of higher ad prices.

The Impact on Brand Budgets

The cumulative impact of these cost increases can’t be ignored. Brands find themselves having to pay more to achieve the same reach and frequency they once did for less, which has led to tough choices:

• Scaling Back on Channels: Some brands are reducing the number of channels they advertise on, focusing their budgets on only the most efficient platforms.
• Seeking Better Attribution Models: Rising costs have made it more critical for brands to understand exactly where their dollars are going and which platforms are generating real value. Effective attribution helps make better decisions on ad spend, leading to higher ROIs.

Strategies for Brands to Adapt

While it’s true that media costs are rising, there are ways for brands to adjust and keep campaigns profitable. Here are a few strategies to help weather the storm:

1. Diversify Channels Thoughtfully: To reduce reliance on costly platforms, brands can explore newer, less saturated channels where competition is lower and CPMs are still affordable. Niche social media sites, podcast ads, and direct partnerships with smaller publishers can be viable options.
2. Invest in Organic Content: While it’s tempting to allocate every dollar to paid ads, organic content—such as social media engagement, SEO, and blogs—can offer a high return over time. A strong organic presence can lessen the reliance on paid ads, especially during times of peak competition.
3. Embrace Contextual Targeting: With privacy shifts making precise targeting harder, contextual ads offer a viable alternative. By placing ads in relevant environments (e.g., an outdoor gear ad on a travel site), brands can still reach high-value audiences without the costs associated with behavioral targeting.
4. Leverage Programmatic for Efficiency: Programmatic buying allows for a more efficient use of ad spend, often reducing costs through automation. Plus, programmatic platforms allow for real-time adjustments to bid rates, helping brands maintain control over rising costs.
5. Maximize Customer Retention: Acquiring new customers in this high-cost environment is challenging. Focusing on retention strategies—such as personalized email campaigns and loyalty programs—can help reduce customer churn and increase lifetime value, which offsets the rising cost of customer acquisition.

The Future of Media Margins

As digital media evolves, media costs may continue to rise, but so will the tools and techniques for optimizing spend. While brands might feel the pressure of rising margins today, those who are agile in their approach and committed to innovation will find ways to adapt. Brands that are smart with their budgets, open to exploring new platforms, and focused on efficiency will not only survive but thrive in this ever-evolving landscape.

Adapting to rising media costs isn’t easy, but with the right strategies, brands can maintain a competitive edge and continue reaching their audiences effectively. Whether it’s a pivot in channel selection, investing in organic reach, or using data for precision, proactive approaches will be essential in this challenging media environment.