• Big Tech missed Wall Street’s earnings expectations, partly from a drop in advertising revenue.
  • Ad prices on Meta, Amazon, and Google skyrocketed during the pandemic but are now declining.
  • Insider compiled data to show the swings in ad prices over the past year.

Digital ad prices have been skyrocketing since 2020.

But as the economy nears a recession, advertisers have reigned in spend. Meta and Google both suffered declines in their ad businesses and missed earnings expectations. While Amazon’s ad revenue grew 30% year-over-year, it warned of weaker-than-expected holiday sales, suggesting that advertisers may cut back if consumers spend less.

Digital ad prices are declining due to a number of factors:

  • Advertisers are pulling back on spend on Meta and Google.
  • Amazon’s ads aren’t driving as many sales as consumers spend less.
  • People aren’t spending as much time at home surfing the internet as they did at the beginning of the pandemic.

Ad prices are typically low during the third quarter as marketers prepare to spend during the fourth quarter. And platforms typically jack up prices in the fourth quarter to capitalize on that demand.

Ad buyers usually anticipate a 15% to 20% increase in ad prices during the fourth quarter, said Vic Drabicky, founder and CEO of ad agency January Digital. But this fourth quarter, he expects prices to shoot up 50% to 75% — similar to the increases during that period in 2021. 

"The prices have gotten to be so astronomically high over the course of the last 18 months. Digital used to be this place where if you had extra dollars, you would just dump it into digital," he said. "That doesn't exist as much, so now advertisers are looking to diversify their spend."

This spike could be particularly tough for retailers to stomach, which are already pushing out big holiday promotions to entice recession-wary consumers to shop this year, he said.

Insider pulled data from four adtech firms and ad agencies that track ad pricing changes.

The data uses the common pricing mechanisms of cost per mille (CPM), the cost advertisers pay to reach 1,000 people. For ads designed to get people to take more immediate action, like Amazon's and Google's shopping and search ads, we looked at cost per click (CPC).

Below is a breakdown of ad prices by platform.

Amazon

Foto: Patrick Fallon/AFP

CPC prices: $1 in the third quarter, down 3% year-over-year, according to e-commerce adtech firm Pacvue.

After quarters of rising rates, Amazon ad prices declined in the third quarter. While there was an increase in advertisers in July promoting products tied to Prime Day, consumers were concerned about inflation and mainly bought value and everyday items, according to Pacvue's findings. The firm also noted that ad spend in August and September was flat.

Separate data from adtech firm Perpetua showed significant decreases in several of Amazon's most prominent ad formats in Europe during the same time period. Prices for Amazon's core Sponsored Product ads dropped 5% sequentially during the third quarter. Prices for Sponsored Brands ads — a format that appears at the top of search results with a picture of advertisers' product — decreased 10% sequentially during the third quarter. 

Perpetua attributed the drop to the ads not being effective at driving sales. Conversions for sponsored search ads dropped 6% sequentially during the third quarter, signaling that consumers aren't buying the products advertised to them because of economic concerns.

Meta

Foto: Getty Images

CPM prices: $14 in the third quarter, up 3% year-over-year, according to measurement firm Measured. 

Meta's ad prices have spiked over the past couple of years, but they didn't shoot up as much during the third quarter as they had in previous quarters. 

And luxury marketing agency Belardi Wong said that Meta's third quarter CPMs were only up 2% year-over-year, down from 20% year-over-year increases during the second quarter. 

Average CPMs over the entire year have decreased 4.5% compared to last year, said media buying firm Anagram. The agency said that it is already seeing a 23% decrease year-over-year in fourth quarter prices.

Meta's ad business has taken a significant hit from Apple's privacy-tracking feature, posting two successive quarters of revenue decline. 

As it gets harder for advertisers to target and measure ads on the platform, advertisers have to buy more ads to get the performance they're accustomed to. Advertisers are now spending less on the platform, resulting in decreased prices, according to Belardi Wong.

Google

Foto: Rafael Henrique/SOPA Images/LightRocket via Getty Images

CPC prices: CPCs for search ads cost 97 cents in the third quarter, a 23% year-over-year decrease, according to Measured.

Google search CPCs fluctuated wildly depending on the type of advertiser buying in.

Anagram saw an even greater price decline, with third quarter CPCs down 49% year-over-year.

However, some types of advertisers saw prices go up. The luxury brands that Belardi Wong represents saw Google CPCs increase between 10% to 25% year-over-year in the third quarter, with apparel advertisers seeing the biggest spike.

Separately, YouTube's CPMs declined about 50% year-over-year in the third quarter, according to Measured. The average CPM during the third quarter was $12.50 compared to $19 during the same time period last year.

Alphabet blamed its ad revenue losses because marketers in insurance, loans, mortgages, and cryptocurrencies had reduced spend. 

TikTok

Foto: Rafael Henrique/SOPA Images/LightRocket via Getty Images

CPM prices: Up 27% year-over-year in the third quarter, according to Measured.

The average CPM in the third quarter was $8, up year-over-year from $6, Measured said.

That momentum seems to be continuing. Anagram reported that CPMs in the fourth quarter so far this year are 13% higher year-over-year.

TikTok's nascent ad business is already stealing share from Meta and Snap, advertisers have said.

As TikTok continues to build out its technology and relationships with advertisers, ad prices continue to rise. 

Snap

Foto: Richard Drew/AP

CPM prices: Up 30% year-over-year to $6 in the third quarter, according to Measured, compared to $4 this time last year.

However, fewer advertisers are buying Snap ads, and the company experienced its slowest quarterly growth in the third quarter this year.

Like Meta, Snap's ad business has also been hit by Apple's privacy tracking feature that makes it harder for advertisers to track and measure ads. Immediately following earnings, shares of Snap traded at the company's lowest since 2019.