As if the year-end online advertising/fundraising season isn’t busy enough with holiday shopping, Giving Tuesday, and nonprofits’ year-end pushes, this year is extra busy with the midterm elections and candidates Hoovering up much of the available ad buys. On top of that, the online advertising ecosystem is changing fast, so let’s review the potential impacts on fundraising efforts through year end.
Less Bang for Your buck:
Due to a number of changes in the advertising landscape, advertisers across the board are experiencing a rise in costs across all major platforms. And changes to data policies and regulations have impacted advertisers’ ability to use certain data points.
This means we get:
- Less precise targeting on social and display advertising.
- Higher impression costs across platforms.
- Reduced efficacy of advertising, particularly on social platforms.
Yes, we’re paying more and getting less—we know returns won’t be the same, so we must be more strategic.
While general impression costs (CPM, cost per 1000 impressions) on social ads have decreased from late-2021 highs, when costs were up about 300% year over year—impression costs remain significantly elevated. As of mid-2022, Meta’s CPMs for all sectors averaged $17.60, an increase of more than 60% year over year. And we anticipate that CPMs will increase again heading into calendar Q4—as we saw in 2021 with the back-to-school and year-end shopping seasons.
CPM is inversely proportional to audience size, so when targeting custom lists of constituents (active donors, lapsed donors, on-file nondonors, etc.), advertisers continue to see even more elevated costs. Within the nonprofit sector, Meta’s CPMs are ranging from the high teens to $30, and in some cases even higher.
Prospecting costs have also increased, due to less-precise algorithmic targeting, which requires a greater number of signals to optimize. Following the release of Apple’s iOS 14.5, Meta projects that it lost approximately 60%, if not more, of available signals and data points. Meta’s algorithm, which historically could optimize based off signals of audiences of 5,000 or more, now requires audiences in the hundreds of thousands to achieve similar results. Additionally, Meta’s decision to remove social issue targeting from the platform has adversely and disproportionately impacted the nonprofit sector.
CCAH is working closely with our clients and can help your team in the lead-up to, and during, year-end fundraising to ensure an appropriate media mix and targeting strategy, to balance revenue with new donor acquisition.
As advertisers see diminishing returns on social media ads, they’re allocating higher percentages of their budgets to Search Engine Marketing (SEM), leading to increased competition in the search space.
While search still remains one of the stronger paid sources for revenue generation, return on ad spend (ROAS) has dropped year over year due to rising impression costs and, subsequently, costs per click. Within the nonprofit sector, CCAH has seen ROAS drop over the last 12 months from 200-300% on average (varying by a number of factors, including nonprofit vertical, name recognition, and competition from peer organizations) to 100-150%. While paid search remains breakeven to revenue positive, we do anticipate a softer calendar year-end 2022 compared to 2021, so be prepared!
Programmatic & Display:
CPMs in the programmatic space have also increased approximately 75% year over year, which means fewer impressions delivered with available budgets. So we’re focused on efficiently using available dollars to maximize display ad performance—actively testing a number of new data solutions in the programmatic space to refine ad targeting and optimize for the likeliest prospective donors, while also testing new creative and ad types including native, streaming audio and video, and interactive ad units.
The Bottom Line:
To really know the full impact on year-end fundraising, we need more data on performance trends closer to year-end. And so we’re continuing to gather data and closely monitor these signals and more, but we can now project that advertising budgets will not stretch as far as they did last year.
With increased impression and click costs, fewer constituents will see your ads, which will likely result in a reduction of direct gifts from ad channels. Additional competition from political fundraising in the lead-up to the midterm elections, as well as evolving economic issues, will further impact results.
Average gift value during the last major recession (2008) dropped about 7%. Although gas prices are moving down and consumer confidence is rising, we’re monitoring across channels and tactics to see whether the perception of a recession remains, which could affect average gifts.
And if you find some extra money in your budget leading up to year-end, we recommend reallocating some of it to ad budgets to help mitigate the general reduction of ad efficiencies as we move through EOY, past the busy holiday shopping season and Election Day and into the new year!
Online advertising remains a key component of any multichannel fundraising program, despite the crowded space, changing regulations, and rising costs.
We are dedicated to monitoring, testing, and advising our clients on how to navigate these situations as they arise, and helping to determine the best strategies for ads success.
We’d be happy to help you, too! Please reach out if you’re interested in talking to our incredible Ads Team to help you maximize your ads buy!