Performance Will Encroach on Brand Spend – Where CMOs Least Expect It

Businessman touching target with icon digital marketing on network connection background.

By Ben Jeger, VP EMEA, Moloco

As we head toward 2023, it’s important to not only look to the year ahead but reflect on where we are today. Following industry-wide privacy changes, digital advertising is now contending with economic challenges as it braces for the impending recession.

Over the next year, CMOs will need to work with reduced marketing budgets and so they must be particularly smart about how they manage and allocate their spend. Amid these rising challenges, we can expect to see the use of performance advertising increase, as it comes to further encroach on brand spend.

The successes of the dominant adtech players has already started to make performance advertising a more viable and attractive option for marketing teams but over the next year we will see it being more readily incorporated into brands’ marketing strategies.

Performance may not take centre stage in 2023 but it will increasingly become a supporting act for brand spend.

Following in the steps of ad giants

Despite performance advertising spend outpacing brand in mobile networks for years, less measurable awareness, recall and preference goals have historically predominantly driven marketing budgets and innovation across the retail and streaming media sectors.

However, the successes of Amazon and YouTube as performance platforms have set a precedent in terms of both driving ad spend and delivering measurable business outcomes. This will be particularly the case for those whose audiences are targeted in e-commerce marketplaces, AVOD and other digital spaces that have historically centred on brand priorities.

Performance marketing is particularly valuable for app marketers, as it enables them to allocate ad spend efficiently, focus on specialised audience segments and optimise campaigns. Unlike traditional campaigns in which advertisers pay for impressions, this approach guarantees that advertisers will only pay for conversion points that result in certain desired outcomes.

Rather than purchasing ad space and anticipating engagements, performance enhances marketers’ abilities to generate conversions through various metrics in the form of engagements or actions, such as an ad click, app install or in-app purchase. As a result, performance campaigns generate a higher return on ad spend.

Enhancing performance with digital capabilities

Performance marketing is highly focused and targeted. Thanks to digital capabilities like machine learning, app marketers can target specific audiences and ensure their ads are tailored for different user segments.

Machine learning enables marketers to draw on existing first-party data to automatically determine user characteristics and predicted in-app behaviours. These predictions can thereby inform performance advertising campaigns, enabling marketers to target the right audiences who are most likely to engage with their ads.

This approach represents a real shift in digital advertising. While marketers previously tended to rely on third-party data from other brands, now that privacy restrictions have come to the fore – from the removal of Apple’s IDFA to the phasing out of third-party cookies – this privacy-centric approach to targeting is certainly becoming more widely recognised in the sector.

App marketers can also look to determine the impact of their campaigns through attribution. Attribution is an effective way of enhancing performance advertising, as it provides a better understanding of how specific ads perform. By monitoring interactions with ads, app marketers can gather valuable insights into where users are engaging, the types of content they’re engaging with and more.

These insights provide app marketers with an insight into which ads are resonating best with users and enables them to adapt their ad strategy accordingly – meaning they are best placed to optimise future campaigns.

Marketing budgets will adopt a hybrid strategy

As budgets tighten and as consumer privacy continues to drive decision-making, we should expect to see more marketing budgets adopt a hybrid strategy that incorporates performance.

This will still include brand spend but will also involve scaling spend to prioritise acquisition, conversion and re-engagement campaigns that are directly attributable to top-line revenue and bottom-line return on ad spend.

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