The impression recession
#7 of my tech predictions for 2023
Social media has long been a game-changing tool for businesses looking to connect with consumers in a precise manner, and the growth over the last ten years has been dramatic. But lately, the tide has begun to turn. New legislation and regulations are causing a decline in the impressions social media platforms can provide, and this trend will impact marketing significantly.
The driving force behind this shift is Europe, where the Digital Markets Act and Digital Services Act were approved in late 2022 — with the EU Data Act coming up in 2023. These new rules — together with the world’s strictest data protection law (GDPR) and the ePrivacy Directive have forced social media platforms as well as companies to rethink their approach to data privacy. This has already led to a significant decline in the impressions social media can offer advertisers. And the consequences of not obeying the rules are dire: In November 2022, Meta was fined $275 Million for breaking E.U. Data Privacy Law.
For social media platforms like Facebook, Instagram, and Twitter, this has meant a reduction in the amount of data they can collect on users and their interests. Hence a decrease in the targeting options available to advertisers. Which, again has meant a decline in the effectiveness of social media advertising and a jump in CPM prices, causing many businesses to reevaluate their use of these platforms.
For B2C companies, the decline in social media impressions has significant implications. Many of these companies rely on social media to connect with consumers and drive sales, and the loss of impressions has made it more difficult for them to reach their target audience and a way higher price to do it. So naturally, we see a shift in focus towards collecting first-party data and permissions as companies look for new ways to connect with consumers and build relationships with them.
The birth of Retail media
Prominent e-commerce players like Walmart and Zalando have learned a lesson from Amazon, where 5% of Amazon’s revenue stems from advertising on their own platform. As a result, more and more online e-tailers are building their own media businesses in a closed environment. They control first-party retail data and permissions, reselling it to partners and suppliers as targeted advertising. But even non-retailers like Doordash, Uber, and Meituan are building their media offerings. In Denmark, companies like Matas and Boozt are among the successful leaders in Retail Media. And retail media is about to explode: A recent report by WPP’s GroupM said that retail media already represents almost 11% of global ad spending, and forecasts that this figure will grow 60% by 2027.
To succeed in this new environment, businesses must build trust with consumers and be transparent about their data practices. This will involve being upfront about the data collected and how it will be used, allowing consumers to opt out of certain data collection practices. Growing the company’s pool of first-party data will very well be more valuable as a long-term asset than the immediate returns from ad spend.
Companies will however, need to focus on creating high-quality content for their websites to make them relevant, inspirational, and engaging for consumers. This involves investing in content creation and marketing strategies tailored to specific target audiences and designed to build trust and drive conversions. And video seems to be the most successful content form for this to work.
Conclusion
Overall, the decline in social media impressions is a significant challenge for businesses. Still, it also presents an opportunity for companies to rethink their data privacy approach and refocus on building stronger direct relationships with consumers. By focusing on first-party data & permissions and creating high-quality video content, businesses can position themselves for success in the new reality of social media.
