2020 brought a wave of challenges and opportunities to businesses across the country. COVID-19 forced many non-essential businesses to temporarily close their storefronts and offices and shift to a virtual model, leading to a drop in sales for many as they attempted to adjust to a new way of working. On the other hand, making the rapid transition to an online model helped marketers find creative ways to engage with their customers and spread awareness about their offerings to a much wider audience than ever before.
Our Q4 2020 Benchmark Report makes it clear that advertising through SEM/PPC and social media proved to have significant conversion rates across the board in 2020 – especially in the second, third, and fourth quarters. This report is unique in that it not only studies data from Q4 2020, but also analyzes marketing trends over the past year – from Q4 2019 through the end of 2020. We specifically studied CPM, CPC, and CTR metrics for Facebook, Instagram, LinkedIn, Amazon, Google, YouTube, and Microsoft. The results are based on data analysis of our clients and industry partners and offer fascinating insights marketers can use to strengthen their advertising strategies in 2021.
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How can marketers continue to increase online engagement in 2021?
There are several impacts and lessons the pandemic has taught us, among them being marketers’ ability to engage with users online in ways like never before. One of the most important takeaways marketers should consider when planning their advertising strategy is that a shift to virtual engagement should never lead to a decrease in customer service. As many businesses made the shift to an online model, some have had to scale their customer service departments down, leading to longer wait times over the phone and frustrated customers. Adopting a chat option, quick email response times, or Facebook Messenger are ways to keep your customers happy, engaged, and connected to your brand.
CTR, CPM, and CPC:
Of the 24 advertising options we analyzed in this report, 10 saw a significant spike in conversions in the third and fourth quarters of 2020. There are several reasons for this, among them, being that marketers scaled back their advertising budgets in the second quarter of 2020 as the world reacted to the news of the COVID-19 outbreak. As stores, restaurants, and other businesses slowly reopened with limited capacities in the third and fourth quarters of 2020, many poured funds into online advertising to educate consumers of their online offerings and redirect customers to their websites. Additionally, the third and fourth quarters were both election and holiday seasons, leading users to spend more time online. By the fourth quarter of 2020, most marketers had fully adjusted to the online model and became more creative in designing engaging ad campaigns, leading to higher click-throughs.
CPM and CPC reached their highest point across the board in the third and fourth quarters of 2020, most likely due to a higher number of online retailers competing for advertising placements online. This in turn led marketers to spend more money to reach their target audience.
SEM/PPC proved to be the highest channel spend in 2020. Specifically, the first quarter of 2020 saw the highest channel spend for SEM/PPC, coming close to $8M, as knowledge surrounding COVID-19 in the U.S. didn’t fully begin until the second quarter of the year. As the impact of the virus became a reality for consumers in the U.S., marketers scaled back their budgets in Q2, bringing SEM/PPC spend to just over $4M. The second and third quarters saw improvements as COVID testing and knowledge on how to control viral spread became more widely available. As a result, the third and fourth quarters were tied for SEM/PPC spend, nearing close to $6M.
What can marketers learn from social media ad trends in 2020?
Facebook offers an advertising option on seemingly every aspect of their platform., from Messenger to Groups to gaming. Of the 13 different Facebook ad options we analyzed in our report, 9 saw a significant spike in CTR in the third and fourth quarters of 2020, indicating those conversions will continue through 2021. Of the ad options analyzed, conversion rates were highest on Messenger Stories, Groups Feed, and Rewarded Video.
Conversions were highest for Instagram Stories, Feed, and Explore advertising in the second quarter of 2020, indicating that users relied on Instagram to guide their purchasing decisions at the beginning of the lockdown. The rise in CPC and CPM and a rapid decline in click-through rates in the third and fourth quarters of 2020 indicates that marketers need to create compelling content to entice users to click through to an advertisement on Instagram.
Marketers can create targeted audiences through LinkedIn, making it easier to reach a select group of individuals through targeted campaigns. Additionally, although LinkedIn is among the more expensive ad options for marketers – with CPM coming close to $50 by the end of 2020 – it is also one of the only platforms that offer unique B2B targeting capabilities, which may make it worth the higher price.
With CPM at $3 by the end of 2020 and CPC at $.92, Amazon offers marketers a cost-effective opportunity to market on a platform that attracts nearly 200 million users around the world. Not surprisingly, the second quarter of 2020 saw the highest conversions for Amazon as the country frantically scrambled to buy items in preparation for the lockdown. With an ever-rising number of customers making Amazon their purchasing preference, eCommerce marketers would be wise to capitalize on lower CPM and CPC options offered through Amazon’s platform.
Advertising through Google Search was not only the most expensive ad option listed in this report, it also had the highest conversions. With CPM for ads in Google Search reaching $215 by the end of the year and CPC coming close to $4, this is certainly an expensive ad option, but seemingly worth the investment with click-throughs soaring over 6% by the end of the year.
Conversions on YouTube took a bit of a dip towards the end of 2020 while CPM and CPC rose to $8 and close to $5 respectively, indicating that marketers are competing for ad space on a platform that doesn’t always lead to a return on conversions. YouTube is home to over two billion users, meaning marketers should utilize the platform to create compelling content that spreads awareness about their brand but shouldn’t create content that relies on click-throughs as advertisements need to be deeply compelling to convince users to click on an ad.
Microsoft Advertising offers ad options on Bing, Yahoo!, AOL, and several Microsoft partner sites. With Yahoo!’s financial reporting capabilities, ads focusing on finance tend to have higher click-through rates than other industries. Although Microsoft’s CPM rose to $86 by the end of the year, it does prove to be a more cost-effective alternative over Google, which had CPM closer to $215.
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With the COVID-19 vaccine well on its way to being distributed throughout the United States, there is a tremendous amount of hope and anticipation as Americans foresee a ‘light at the end of the tunnel.’ Although we anticipate seeing a continual push towards virtual engagement, businesses and offices across the country are continuing to reopen, if at limited capacities, and make the gradual shift towards in-person engagement.