Social Media Ads are Slowing Down, Forcing Retailers to Create New Channels to Find Customers

By Yelena Mandenberg Yelena Mandenberg has been verified by Muck Rack's editorial team
Published on July 18, 2019

Retailers have started to spend less on social media ads than ever before. The average growth rate has been cut by 20 percent, causing it to drop to 26.2 percent, compared to the 52 percent last year.

According to Mobile Marketer, “Advertising revenue growth rate among key social and messaging companies dropped in Q1 this year to an annual rate of 26.2%, compared to 52% in Q1 2018 as user growth stalled in key regions like North America and Europe.”

Only 13 percent of the 200 advertising retailers on YouTube have increased spending on ads this year.

CEO of MediaRadar, Todd Krizelman, said in an interview that the retail industry’s cuts in spending are a bad sign – over 7,000 retail stores will be closing this year. Although it will take time for retail to find its footing within the digital world, store closures and company bankruptcies are making this industry unstable at the moment. YouTube continues to attract big brands, such as Geico, Disney, Walmart, and Samsung, but the platform’s safety and censorship issues have caused advertisers to pull out. This might have an impact on advertising forever.

There is also competition with Amazon and more direct-to-consumer physical brands. Retailers have many more options when it comes to digital advertising. About 70 percent of marketers had used social media ads, like on Instagram for advertising last year, and use its popularity as an advantage for selling appealing products.

A report from Juniper Research determined that Google’s digital ad spend will drop by 1% over the next four years because of competitors like Amazon and Baidu. Amazon, in particular, has used as much digital ad spend as possible. According to Juniper’s study, Amazon’s digital ad spending will grow from 3 percent to 8 percent by 2023.

Amazon has even started to appeal to retailers, with newer research showing that around 70 to 90 percent of Amazon ads impact non-Amazon sellers. A lot of buyers look for products on Amazon first, which makes it easier for retailers, unlike YouTube’s system for retail sales, which isn’t as smooth and precise. Juniper reported that Google will lower their spending on social media ads by one percent in the next year, mostly because of competition with Amazon.

YouTube’s system does benefit the tech, media, and entertainment industries, according to MediaRadar’s report. Samsung’s “/make” series is coming out in an attempt to dethrone Apple by advertising the Galaxy. The new series ad targets gen Z kids by showing them how easily they can film and edit videos. “They used YouTube not just to get the influence, but become the influencers,” says Kevin Lilly, a strategy director at ad agency Leo Burnett. The series uses help from well-known influencers to give viewers a fun and hip look into the world of video creation – demonstrating how to use different tools and techniques from trusted influencers.

This is exceptionally beneficial to Samsung, since smartphone sales are now starting to decline. Last year, in 2018, smartphone shipments fell around 4.1 percent to $1.4 billion, making it the worst year ever for smartphone retailers.

By Yelena Mandenberg Yelena Mandenberg has been verified by Muck Rack's editorial team

Journalist verified by Muck Rack verified

Yelena Mandenberg is the Ideas Editor at Grit Daily with a passion for news of all sorts. Finishing Brooklyn College with a degree in Print Media Journalism as the industry died out, she began working as a freelancer.After spending some time working in the retail industry, Yelena started BK Riot Writing, a marketing company that caters to small and local businesses, creating content that helps them compete. From her South Brooklyn apartment where she lives with her cat & tortoise, Yelena is always seeking something new and interesting to cover.

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