Google and Facebook Ads Effected by Economic Downturn

Social Strategy, General Marketing

Most businesses are suffering because of the COVID-19 outbreak, and small businesses are finding it especially hard to weather the storm. The effects of reduced marketing budgets and more cautious spending have trickled up to advertising giants like Google and Facebook, too. Millions of small businesses that regularly advertise on both Google Ads and Facebook Ads Manager have decreased or suspended their spending. As a result, both platforms are missing out on a good deal of revenue.

Google and Facebook Ad Prices Drop as Businesses Stall

In the first quarter of 2020, Facebook and Google both generated much less ad revenue than expected. While both platforms did experience year over year revenue growth, their growth simply isn’t what it could have been. As a result, buying ads on Google and Facebook has become less competitive, and marketers who have stuck with their plans are paying less per placement. The average ad prices on Facebook, for example, dropped more than 15% in the first quarter.

When Will Small Businesses Start Advertising Again?

animated desk with to do list about marketing and sales
For many small businesses, the marketing budget was one of the first things to get cut.

Facebook and Google are more than large enough to survive the economic downturn, unlike many of the small businesses that normally advertise with them. In the long run, pay per click advertising platforms are actually likely to benefit from the global behavioral changes occurring now. People are staying at home, spending more time online, and shopping through screens even more than before. The accelerated rise of online shopping will likely encourage savvy brands to drive sales with Google PPC ads and sponsored Facebook posts.

That doesn’t necessarily mean that digital advertising platforms will come roaring back in the near future. In March, Pivotal Research Group estimated that Google’s revenue could fall by 15-20% in 2021, while Facebook’s could decrease by 20-25%. The equity research company has specialties in fields like mobile advertising, programmatic advertising, and ad-tech. It’s hard to tell how the world will respond to COVID-19 in the next year or so, but warnings from firms like this might lead one to think the current state of things will persist for some time.

Are Facebook and Google Ads Still Working?

chalkboard showing that sales divided by clicks equals conversions
Conversion ratios are dropping, which means businesses need more clicks to generate the same amount of sales.

Even as the cost of Facebook ads falls, there’s a flip side of the coin for digital advertisers. Tinuiti, a digital marketing agency, has seen conversions dip from 14% to 4% on Facebook and Instagram in recent months. Google conversions have dipped from 8% to 6%. In other words, ads are also becoming less effective as they become less expensive. As companies decide whether digital advertising campaigns are still worth it, they’ll need to account for new norms and adjust their strategies.

How to Advertise on Facebook and Google During COVID-19

It’s a mixed bag. Conversions are lower than normal right now, but so are ad prices. If you still need to advertise your small business on Facebook, it’s important to optimize campaigns for conversions. Impressions already come more naturally than ever because people are spending so much time online, but the ratio of sales to clicks is falling. This makes it critical to drive sales with strong calls to action and target PPC ads especially carefully.

The economy will bounce back at some point, and people will resume spending in a way that resembles “business as usual.” The habit of shopping online is more likely to stick, though. Health psychology researcher Phillippa Lally estimates that it takes an average of 66 days to create a habit. People have had more than enough time to get in the habit of making most of their purchasing decisions online.

Whether or not a company has an eCommerce marketplace, the sales funnel has to pull people from the internet now. Let’s talk about adjusting your digital marketing strategy to account for current events. Reach out today to schedule a free consultation.

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