- Paid social media ads will account for 25.5% of digital ad spending in 2023.
- Ad spending growth has slowed, as most US adults now use social media regularly.
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After years of social media being one of the most powerful engines of digital ad spending growth, 2022 saw the first meaningful decline in social’s share of digital ad spending since Insider Intelligence began tracking it in 2008. This was, in part, due to the rise of retail media and connected TV (CTV), plus a radical slowdown in growth caused by ATT.
Now, with little room left for user penetration, a recession looming, and ongoing market challenges, US social network ad spending growth in 2023 will be less than half what it’s been for most of the past decade, and it will remain that way through at least 2024.
Still, amid these setbacks, there is opportunity for advertisers to get ahead of these shifts and meet their customer base on the platforms where they’re spending their time.
What is paid advertising on social media?
Paid social media is a form of digital advertising that requires a budget to promote content, products, or services on social media platforms. Businesses of all sizes can pay to reach social media users based on targeting parameters—including interests, behaviors, demographics, and more—as an effective way to achieve business goals, whether that’s generating awareness, traffic, leads, or conversions.
All of the major social media platforms offer paid social media ads, incorporating photos, videos, and links in different formats and ranging in price depending on the campaign objective.
Forms of social media advertising, such as sponsored posts and boosted links, are opposite to organic content, which is free and not targeted. Social media users can only engage with this marketing content by following the account or actively searching for it.
Types of social media ads
Although social media ads will vary by platform, placement, and KPI, they are generally content-driven, relying on standout photos and videos to capture the user’s attention on an otherwise noisy screen. These types include:
- Static-image ads
- Video ads
- Carousel ads
- Direct-message ads
- Lead-generating ads
- Shoppable ads
- Interactive ads
- Sponsored hashtag ads
Benefits of paid ads on social media
- Targeting capabilities: Even with user growth slowing, social networks have amassed some of the largest audiences available to ad buyers. With access to a vast number of active users who spend significant time on social media, advertisers are able to get hyper granular when it comes to targeting parameters, reaching individuals who are most likely to engage with your ad.
- Cost effective: Compared to more traditional advertising, paid social media is likely to be more cost efficient. By setting a budget and paying only for the KPIs that align with your business goals (i.e. clicks, impressions, or leads), you can maximize ROI.
- Access to success metrics: Social media advertising allows you to track your campaign performance in real-time, measuring success with analytics and insights that are important to your business.
- Experimentation with placements: With social media advertising, you A/B test between different platforms as well as ad placements. Native placements, for example, are designed to blend in with organic content and be less intrusive to the user experience, leading to higher engagement rates.
How much is spent on social media paid ads?
The decade of consecutive, double-digit annual increases in social network ad spending came to an end in 2022, when spending reached $65.31 billion—only 3.6% over the 2021 figure. While growth will pick up in the next two years—led mostly by an ascendant TikTok and a surge in social video advertising—the $79.28 billion we expect in 2024 will be more than $20 billion below what we had forecast in March 2022.
We also previously expected $33.98 billion in social network video ad spending by 2022, and that figure has now been slashed to $29.82 billion—a difference of more than $4 billion.
These staggering reductions are the result of a perfect storm starting in 2021—with Apple’s rollout of its AppTrackingTransparency framework, followed by a downturn in the global economy due to persistent inflation, soaring interest rates, supply chain disruptions, and the Russia-Ukraine war.
Cost of paid ads on social media
The cost of paid advertisements on social media platforms can vary widely depending on several factors, including the social media platform, the type of ad, the target audience, and the bidding strategy. Advertisers can be charged based on the campaign objective, too, from impressions (CPM), acquisition (CPA), or clicks (CPC).
2022 data from marketing agency VaynerMedia and reported by FT showed that TikTok is providing less expensive ad rates than competing platforms, with a CPM from video advertising almost half that of Instagram Reels, a third less than Twitter, and 62% less than Snapchat.
If TikTok can continue to keep its CPM prices low, allowing advertisers to reach more consumers (not to mention deliver high levels of engagement in the process) more ad spending will continue to shift away from companies like Meta, Snap, and Twitter—and toward TikTok.
Influencer marketing: how to get paid for advertising on social media
In addition to paying for a social media ad, businesses can also pay an influencer (also referred to as a creator for those who develop content that sways purchasing decisions) to promote products, services, or messaging. This can result in a more authentic, less polished means of advertising, which has its advantages: the content is less noticeable as an ad, which can increase engagement. Plus, influencers have a direct line to their audiences and are able to set trends that those audiences follow.
In fact, US consumers spend more time on influencer video than brand video on social media. Videos by influencers accounted for 76% of the nearly 2 trillion minutes US consumers spent watching social video in Q4 2021, per data from Tubular.
Influencer marketing is now a $6.16 billion industry in the US, too, bolstered by the early days of the pandemic when many studios were closed and ad production was severely limited. That forced marketers to find ways to cut costs, and influencer content—usually shot and edited directly from a smartphone—stepped in.
Social media advertising trends
Social media ad spending is in constant shift, with some platforms excelling as others lose out.
TikTok, for example, has reshaped the digital ad market, having profound effects on other social platforms’ balance sheets—and it will continue steering the space toward video in 2023. This year, TikTok will generate more US digital ad revenues than Twitter, Snapchat, and Reddit combined, per Insider Intelligence estimates. What may hinder the viral-charged app is the possibility of US government intervention. While it’s hard to predict what will happen, multiple government agencies and lawmakers are set on either banning TikTok or radically altering its business in the US.
Facebook, on the other hand, despite being the biggest platform in the world, is continuing to lose users in the US, and those who remain are spending less time on it. With user growth and time spent both declining for Facebook, Meta’s response was to raise ad loads. In Q4 2022, it increased the number of ad impressions delivered across its Family of Apps by 23% YoY, per its earnings release.
As for Twitter, advertiser exodus has been quicker and more widespread than anyone could have predicted in the wake of Elon Musk’s takeover. Concerns over brand safety and content moderation already saw Q4 2022 ad revenues fall 35% year-over-year, and will continue to be volatile in 2023.
Now, with a heightened embrace of short-form video across platforms, the social media industry is evolving to focus more on viewing and less on posting. To stay competitive, advertisers not only need to meet their customers where they’re spending their time, but developing content that reflects what they want to see.
To learn more about the evolving state of the social media market, trends, and advertising strategies, preview Insider Intelligence’s Paid Social Forecasts and Trends report.