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Meta Versus TikTok: Where are Short Video Ad Spenders Heading?

Short video ad spenders are hogging the limelight in the fast-changing digital video advertising landscape. In 2021, video ad spending rose by 49%, and is slated to further increase by another 26% in 2022, raking in $49.2 billion in ad sales revenues for the year. Short-form video advertisement spending is gaining lot of interest among traditional digital advertisers looking for expanded opportunities beyond the usual web, mobile app, linear/ CTV and social media platforms. This is where platforms like Meta and TikTok are fighting it out to take a lion’s share in advertiser’s short video ad spending budgets for 2022-2023. According to a recent report, short form video ad spend surged in Q3 2022. During this period, the overall CPM rose significantly, closing the conversion gap with static ads. In the modern era, video ad formats are steadily picking pace with their competition with static ad formats. Produced by Nest Commerce, the report revealed conversion rates for video ads were only 9% lower than static ads in Q3. These numbers show the popularity of short-form video continues to boom, even as poplar e-commerce brands look at unlocking the short video ad format to deliver better results for their digital advertising campaigns.

According to Nest Commerce CEO Will Ashton:

Will Ashton

“Driven by TikTok’s huge impact, Meta continues to invest in short form video and brands are developing more sophisticated strategies. As audience behavior changes, we are now seeing conversion rates on Facebook and Instagram approaching parity with static ads. While engagement rates on Reels are lower than other formats, Meta is investing heavily in the format, so this is likely to improve over time.”

Will continued: “In a privacy-first environment, creative remains the best tool advertisers have for optimising performance. Investments in ad spend efficiency here will quickly pay off in higher return on investment. As we approach peak season, brands should test different creatives to stand out from the pack, with a focus on quality messaging in a tougher economic climate.”

Here’s what the report found:

Reels Spending versus Engagement Rates

The format witnessing the largest growth was Reels as Meta takes on TikTok. Spend increased by an astonishing 750% between Q2 and Q3, while Cost per Thousand (CPM) increased by 31%. Meta continue to push impressions to this channel and auction competition is intensifying.

Reels ads remain cheaper than non-Reels – however, the two year old format is proving more difficult to drive engagement through. Click-through rates (CTR) are significantly higher across other placements, with average CTR being 387% lower for Reels and Cost per Click (CPC) 71% higher.

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‘Quality’ messaging delivers highest ROAS

The report also reveals the type of messaging delivering results in the current climate. ‘Quality’ messaging delivered the highest Return On Ad Spend (ROAS) and Average Order Value (AOV) in Q3. There was a 65% uplift for ‘quality’ versus other messaging. It highlights that in the current landscape, consumers are willing to spend more for purchases that last.

Meanwhile as we approach Black Friday, ‘Sale’ messaging also delivered much higher ROAS. ‘Sustainability’ messaging remains important, delivering the highest conversion rates with eco-friendly brands seeing positive results.

Brands back broad audiences and discovery commerce

More than a year since iOS 14, the report also highlights the success of strategies for reaching audiences in a more privacy-focused landscape. Investment in demo-based audiences has grown significantly, with spend increasing 56% YoY and 16% QoQ.

The result of this is better engagement and higher efficiency, with a 72% and 125% lower CPC compared to ‘interest’ and ‘lookalike’ audiences respectively. These were mainstays of the third party tracking era.

Meanwhile discovery commerce continues to deliver results. Catalog ads are now the most effective strategy in driving engagement and conversion. Dynamic ads for broad audiences and dynamic product ads drive much more efficient performance than average, with a 44% higher CTR and 9% higher Conversion Rates (CVR) than standard ads.

Nest Commerce is a paid social performance and creative agency that brings a bold perspective to brands such as Decathlon, Ted Baker, ME+EM and Crew Clothing. With the Nest Index of over 40 e-commerce brands behind us, we show you the bigger picture.

[To share your insights with us, please write to us at sghosh@martechseries.com]

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