Meta sees 9% YoY decline in avg price per ad in 2023, experts decode why
A classic case of demand and supply, say experts who weigh in on the curious dynamics between Meta's ad impressions and ad prices as seen in its Q4 and annual results
Meta’s Q4 and annual results are out and amidst every other number, digital experts have noticed one percentage stand out. For the full year 2023, ad impressions increased by 28% YoY and the average price per ad decreased by 9% YoY.
In the first quarter of 2023, as seen in Meta's financials, ad impressions delivered across Meta’s Family of Apps increased by 26% year-over-year and the average price per ad decreased by 17% year-over-year. Q2 saw a decline in average price per ad by 16% YoY, while ad impressions were up 34% YoY.
In the third quarter of 2023, ad impressions delivered across its Family of Apps increased by 31% YoY and the average price per ad decreased by 6% YoY. For Q4, however, ad impressions delivered increased by 21% YoY and the average price per ad increased by 2% YoY. Experts attribute the growth in ad impressions and the subsequent decline in average price per ad to the classic economics of demand and supply.
(exchange4media has reached out to Meta for a comment. We have yet to hear back from them.)
As Sajal Gupta, Chief Executive, Kiaos Marketing explains, “The report also shows that the inventory has gone up. As your inventory curve goes up, your supply is increasing but perhaps your demand is not increasing at the same rate. So in an auction, you can possibly see a lower price coming in.”
Similarly, even after the Q2 results, Shradha Agarwal, co-founder and CEO, Grapes pointed out this stance and told exchange4media that Meta’s overall ad inventory has indeed increased. “Because of this, we can see a lot more ads in the overall universe that we are looking at. We have also seen a decline in prices, but not on Facebook but on Instagram,” she further pointed out.
It is important here to note, this trend is not just for any one app but for Meta’s ‘Family of Apps’, which includes the likes of Facebook, Instagram as well as Whatsapp. However, it turns out that Instagram is the key player here driving the inventory game. “Instagram is driving a much larger number of impressions. The average time spent and the number of pages visited on Instagram would be much more than what might be happening on Facebook,” Gupta said.
Agarwal mentioned that the Instagram audience has increased massively, from 100 million to close to 250-300 million today; hence the overall deflection in prices. “A lot of brands are now advertising only on Instagram than on Facebook and Instagram both since they feel that the audience is shifting from Facebook to Instagram,” she added.
Rahul Vengalil further explains that the ability to share an impression depends on the time spent or the engagement that the platform has. “For platforms like Instagram and Facebook, an increase in engagement is the only way in which they will be able to serve more ads. So for the past few years, they have been exploring with the apps and new features to ensure that the engagement goes up,” he mentioned. Consequently, the total number of impressions also goes up.
The world of Meta and Google sees a large number of big advertisers on their platforms. However, Vengalil also pointed out that a large chunk of SMEs and smaller merchants are also a part of this advertisers group.
“Globally there has been an increase in the total number of advertisers in itself. Large enterprises can keep growing their ad spends, but there is a larger chunk of these small advertisers. Now if the ad rates keep going up, these small advertisers will not be able to advertise,” he said. A combination of marginal reduction in ad rates, higher engagement and the steady influx of smaller advertisers is what is leading to better revenue results, according to Vengalil.
Then the big question that arises here is that even though there has been a visible decrease (according to the financial report) in its average price per ad, are the advertisers noticing that saving in spends? According to Gupta, it is not as sharp as the report shows.
“There is definitely not an increase, but we haven't seen much of a drop in the ad rates,” he shared.
