Breaking: data shows B2B marketing budgets are being frozen across industries - many will miss out on low CPM prices

Over 54% of sampled B2B marketing teams have frozen spending on Facebook ads, leading a trend that is set to continue across ad networks.

This week, Dreamdata conducted an analysis to assess the impact a worsening economic climate is having on B2B marketing spend. The trend is clear: marketing budgets are on the chopping block.

Yet at the same time, the data is showing a rapid dip in Cost-per-mille (CPM). Offering golden opportunities for companies to cheaply grow their market share and begging the question: is now really the time to cut your marketing spend?

In this post, we’re looking at what the data shows, what academic research tells us about ad spend during economic crunches, and how you can make the most of the climate.

B2B ad spend on the chopping block

As economic storm clouds gather, jitters across marketing teams have become increasingly apparent in our data.

That’s why we decided to run a study on a sample of 222 active Dreamdata users. And the findings are exactly what you’d expect - the obvious caveats on sample size apply.

Since July 2021, 54% of our sampled accounts have stopped active spending on Facebook ads, 42% stopped spending on LinkedIn ads, and 16% have even paused spend on their Google ads.

Apart from signalling the freezing of ad spend across the board, the data suggests that B2Bs are divesting in particular from brand-focused Facebook ads and demand-gen LinkedIn ads.

CPM prices are going down down down

Every cloud has a silver lining… if companies are willing to see it.

As companies have slashed their spend, the cost of ads have started to drop - ads are, after all, auction marketplaces; the lower the demand, the lower the price.

So it’s little surprise that our data on these same 222 accounts is showing a rapid drop in CPM.

Even when accounting for seasonality, we see that CPM is now on a rapid downward trajectory. And it’s particularly pronounced for LinkedIn Ads.

The CPM of LinkedIn ads has dropped by 35% between March and June 2022; echoing the anecdotal account shared by Myles Madden recently.

Even Google Ads appears to be experiencing a faster-than-expected drop in CPM. That is, despite Google Ads being the safe haven for B2B marketers - preferring demand capture to the less tangible demand gen of LinkedIn - the unseasonal drop in CPM signals widespread budget cuts here too. 

Curiously, our data shows that Facebook has bucked the trend with an increase in CPM.

This however could be explained by two factors:

1) Facebook ads for B2Bs are considerably cheaper than the other two ad networks, which means we see greater seasonality variance in percentage terms.

2) Because the sample size of Facebook Ads has shrunk by almost 55% (see Graph 1. above) the CPM is representative of less data, which might be skewed by some larger spending customers.

Nevertheless, and although it is still relatively early days before being able to measure the full impact of universal cuts to ad spend on CPM, the hallmarks of a protracted dip are all there.

All this data speaks to the established empirical theory which argues that economic slowdowns are a golden opportunity for building market share. 

The data fits the theory: use economic slowdowns to build market share

“Those advertisers that maintained or grew their ad spending, increased sales and market share during the recession and afterwards.” Forbes 2019.

This observation is now an established truism, with research dating as far back as the late 70s offering plenty of empirical backing. (See here, or here)

The idea is that as companies slash their marketing budgets, the cost of advertising decreases, and with it, competition decreases. This in turn creates the opportunity to grow market share.

James Schroer gave an incisive analysis on how “followers” can (only) overtake market leaders when these reduce their spending in this 1990 HBR article.

It suggests that in normal circumstances, any attempt by follower brands to overtake market leaders will result in wasteful spending wars. 

It is only when the market leader is underspending (for various reasons, including economic dips) that the opportunity arises for follower brands to overtake.

Applied to spending on ad networks, reduced spending by a market leader, coupled with lower cost rates, create a buyer’s market for follower brands.

And this buyer’s market is as important for Demand Capture ads like Google as for Demand Gen ads like LinkedIn. As it means:

• It’s easier to keep your brand “top-of-mind” to prospective customers

• You can more easily break through the noise in your category

• You can run A/B testing at discounted costs to tweak your messaging

• Breathing space to focus on optimising what currently works

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Now is the time - if your company has the cash flow to do so - to capitalize on the lower CPM and cheap reach, and build brand awareness and future demand for half of what it would have cost you 3-4 months ago.

In the words of formula 1 champion Ayrton Senna ‘You can’t pass 15 cars in sunny weather - but you can when it’s raining’

And it’s certainly raining out there at the moment.

- Jacob Holst Mouritzen

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The bottom line is that turbulence in the economy is one of the best opportunities for B2B companies to take a chunk of the market share.

What should you do about it?

This opportunity, however, doesn’t mean that you should just bid blindly on any and every possibility.

In fact, the reason why, despite decades worth of empirical research, we still see marketing budgets slashed is that there is very likely less budget to go around.

Or at the very least, there might be a strategic shift from growth-at-all-cost to profitability and so less room for willy-nilly experimentation.

This means that the ‘buy-the-dip’ opportunity needs to be grasped wisely.

To do this, you need two primary ingredients: knowledge of what has actually been working (in terms of pipeline and revenue), and, support from the leadership to keep the budget you need.

Let’s take a deeper look at each.

Know what’s actually generating revenue and double down

As a B2B marketer, there are three scenarios you can find yourself in when entering a period of economic contraction.

1. You’re unaffected and have a steadily increasing budget, as per normal.

2. Your budget is frozen and must do as much as you can with what you’ve got.

3. Or, your budget is cut.

In all cases, to make the most of the dip, you need to have a clear picture of where you’re actually able to generate revenue.

Even in scenario 1, you want to make sure you can park the cash where there’s the highest chance of actually growing market share and growing your (likely shrinking) customer base.

For scenarios 2 and 3, knowing which activities actually generate revenue is even more pressing. It is only with this knowledge that you’ll be able to take advantage of a lower CPM in revenue-generating campaigns, with a frozen or shrunk budget.

Think of it like this, if you only had the budget for a handful of campaigns, which would those be?

Or inversely, if you had to cut a handful of campaigns, which would they be?

You might also be interested in: How to reduce your CAC wisely and How to cut cost with Dreamdata

Get leadership on board

Which of the three scenarios set out above you end up in isn’t necessarily a fait accompli.

You will be competing with other parts of the organisation for a (shrinking) slice of the budget. This means that you can still have some say in what shape your budget takes.

To make the most of the ‘don’t cut ad spend during economic crunches’ theory you need to be able to make the case for keeping as much of the budget as possible.

Here are three ways to do this:

1. Point to the theory, that doing so has been proven - over decades - to work

2. Showing that you can drive actual revenue with data (previous section above)

3. Showing you can slash cost (wisely)
   

A final word about marketing spend during economic 

Our data is showing how B2Bs marketing teams are quickly shutting down spending across ad networks, in particular Facebook and LinkedIn ads. At the same time, we’re seeing a drop in CPM - itself the result of widespread cuts in ad spend.

This gives rise to a well-researched theory that makes the case for not cutting spend when the economy weakens. This includes:

• The opportunity to grow market share at a lower cost (thanks to low CPM)

• The chance to overtake market leaders in your category

• The capacity to maintain brand-presence and active voice and build demand for the post-crunch world.

But to do this you need to be able to put your money into the campaigns and channels that actually generate the most revenue - and cut waste.

This will not only help you actually achieve the desired goal of growing market share, but also prove to the leadership that you need the budget to do so.