15 Return on Ad Spend (ROAS) Statistics That Every Marketer Must Know
Diversifying Ad Spend4 MIN READ
Not so long ago, marketers everywhere could depend on PPC and programmatic advertising as a reliable strategy for customer acquisition. Or could they?
In his book Subprime Attention Crisis, Tim Hwang challenged preconceived notions about what digital ads could actually do.
"Even in the best possible case, the cost of these ads may make their overall return negative because they rely on a foundation of shoddy and inaccurate data that fail to have any significant influence on sales." - Tim Hwang
That said, ads do a remarkably good job of converting customers that were already planning to buy in the first place. But before brands could realize the value of their organic promotions and word-of-mouth, they'd already invested in those ads.
Since the rise of COVID-19, consumers flock together online more vibrantly. And these consumer communities gladly recommend their favorite brands. Influencer marketing is an established, dominant marketing approach today due in large part to the rise of community commerce.
As brands pull their ads and diversify resources toward people, the results are staggering. Here are just few return on ad spend statistics that will make you rethink your marketing budget.
15 ROAS Stats You Should Know in 2022
1. More than 90% of consumers trust earned media over paid promotions.
(Source: Nielsen Global Trust in Advertising Report)
Earned media consists of user-generated content, positive reviews, and non-paid mentions outside of your brand.
By contrast, paid advertising forces your brand into the faces of people who may or may not care about the value you offer. The intrusiveness of most advertising initiatives serves to breed frustration and distrust among consumers.
2. Experts estimated that digital ad waste reached more than $100 million between July and December 2021. That waste is predicted to increase by 30% in 2022.
Digital ads are expensive to begin with. Understanding that so many ad spend budgets account for so much marketing waste is a wake-up call for brands in 2022.
3. Nearly 50% of consumers deploy ad blockers because they believe ads to be “irrelevant and annoying.”
(Source: Business Insider)
The statistic above comes from a study in 2017, and experts estimate that consumer attitudes toward advertising has only grown more antagonistic and/or indifferent since the beginning of a global pandemic.
4. 2/3 of U.S. buyers go through hoops to be placed on do not call lists.
In some places, getting put on a "do not call" or "do not contact" list is a bit of a hassle. But people don't care if it means that they can enjoy some peace and quiet from intrusive advertising.
5. The greatest ad spend losses occur in retail industries, where experts estimate that brands will waste as much as $125 million annually.
Retail is one of the largest industries losing money to paid ad spend. It's also the leading industry for influencer marketing as brands learn how much more effective authentic creator endorsements are over traditional advertising.
6. Google's paid ad CTRs have fallen to 1.91% on search and .35% on display.
In marketing, 2% is a common watershed metric for whether or not a particular medium does or doesn't work. Search engine marketing has dropped below that metric while word-of-mouth marketing surges.
7. As PPC and programmatic ROI dies, paid amplification is on the rise.
Is ad spend dead? Not quite. Marketers are learning quickly that high-performing organic posts do exceptionally well as promoted posts on social media. This tactic is known as paid amplification.
8. Less than 10% of Americans feel ads are reliable sources of information.
Do you want your buyers to trust you? Think carefully before you pay for ads. You'll likely earn trust with your audience by first investing in your brand community.
9. $3 billion in digital ad spend reportedly failed to reach brand marketing goals in 2021.
The definition of insanity is "doing the same thing over and over and expecting different results."
10. Over half of ad clicks occur by accident.
It would be great if advertisers refunded you false clicks, but they don't. Brands who pay for ads are often paying for impressions that failed.
11. 86% of buyers mute commercials on TV or click to skip ads.
Your ad spending keeps streaming services and TV channels in business, but it's unlikely that they are helping your brand in kind.
12. Word-of-mouth is 5 times more powerful than paid ads.
(Source: Invesp, New York Times, Review42)
Community Commerce helps your brand know where your word-of-mouth is coming from. Once you uncover your existing brand fans, you can effectively activate them as brand promoters.
13. Uber, Chase, eBay, and P&G cut their paid ad spend by millions and noticed "no change in business outcomes."
Big businesses are fast losing their interest in leveraging paid ads as a reliable always-on strategy. Forbes noted that these brands have already diversified their ad spend radically for better ROI.
14. When small businesses decrease their ad spend, they often see an increase in engagement and sales.
It's not just big business noticing the ineffectiveness of paid advertising. Smaller brands are also able to achieve greater returns by pulling their ad budget and investing that money into organic content, UGC, and brand community initiatives.
15. When a leading Amazon seller stopped promoting their product listings, they saw a major increase in eCommerce ROI.
We are Amazon's #1 drinkware supplier. In 2022 we will sell over 4 million tumblers and water bottles.— Bryan Porter (@jbryanporter) March 25, 2022
Over the past few years, we have spent over $10 million on Amazon ads.
This month our budget went to $0.
A thread about our change of heart with Amazon Advertising:
For the full story on how Simple Modern boosted ROI by eliminating their paid Amazon budget, read our Trends Report here.
The "ROAS crash" is good news for brands. Paid ads are expensive (with costs rising). Customer acquisition doesn't have to be a game only for those with enterprise budgets.
What buyers want today is connectivity and content that resonates with their values and goals. Paid advertising interrupts connectivity more often than aids it.