Global ad spend is predicted to grow 14% to $657bn in 2021, following a 2.5% contraction last year. Around $419bn (64%) of that spend is expected to go towards digital advertising, where only two formats, social media and paid search, retained positive growth rates last year. But with this resurgence on the horizon, Airbnb became the latest brand to join an elite group, alongside P&G, Uber and eBay, that are moving away (or have stepped away completely) from performance marketing. Are they leading the way for other brands to cut costs but retain sales? Unfortunately, it’s not that simple.
According to Forbes, When P&G diverted $200 million away from digital ad spending, it saw no change in business outcomes. When Uber turned off $120 million ad spend in place to drive app installations, it saw no change in the rate of app installs. And as early as 2012, when eBay turned off its paid search ad spend, it saw no change in sales from those sources. Although Airbnb only made the move relatively recently, early insights show traffic levels remain in line with 2019, pre-pandemic, figures. There’s no denying the results have been positive for these brands, and such a bold move has to be respected, but that’s not to say that it will work for the majority of companies navigating this new landscape. Instead, it’s about striking a balance.
Position of privilege
When Airbnb co-founder and CEO, Brian Chesky, announced the news that it was cutting its performance marketing spend by more than four times it was cutting its brand marketing spend, he said: “Our brand is inherently strong. It’s a noun and a verb in pop culture. And so we don’t intend to ever again spend the amount of money as a percentage of revenue on marketing in the future as we did in 2019.”
What Airbnb has in common with the other companies that have stepped away from performance marketing is that they have incredibly strong brands and placement in the market, putting them in a position of privilege in customers’ minds and creating less urgency for nurturing as they are already highly likely to convert. Although this may be the ambition of many brands, the likelihood of them achieving it is slim.
Driving sustainable growth
It is unknown whether Airbnb would’ve made this move without the pandemic as a driver, which forced many companies to reconsider the equilibrium of their strategies to reach a sustainable balance between spend and return.
A key challenge for all marketers is finding the right ratio of activities to encourage sales in the short term and build the brand in the long term. This ratio has to continually flex in response to customer needs, demand, and many other external factors; the pandemic being a perfect example of how brands needed to adapt their marketing strategies in response to major societal change.
Even pre-pandemic, adidas had spoken about its efforts to achieve the perfect balance, having noticed that a previous focus on short-term campaigns had led to poorer brand health in certain markets. It switched tact to prioritise longer term, brand building activities to strengthen the brand image, but like many others it weighted back to performance marketing in light of COVID-19 to maintain sales while stores were closed.
Speaking at Campaign Connect, adidas’ Media Director for Europe, Andy Pilkington, said: “The pandemic led to a focus on performance as you can more clearly see a link. You can go to the board and ask for X million Euros and show you’ll get X amount back. Whereas it can be much harder to ask for those millions and say what you might gain in brand equity. We’ve pivoted back now the immediate crisis is over, as if we don’t have a strong brand in a few years time, the performance marketing results won’t be sustainable.”
Full funnel focus
While Airbnb proves that an inherently strong brand may be able to deliver results without performance marketing, the same cannot be said for a weaker brand that focuses solely on it. Performance marketing is about creating a digital shop window, and while digital ads may boost conversions, brands need a complementary focus on building organic connections with customers; but the two don’t have to exist as separate entities.
Marketing functions have historically been split into two distinct groups, traditional brand building and performance/digital. While many legacy brands have excelled at the traditional (largely offline) tactics, newer challenger brands gained an edge through performance marketing. Over time, the lines between the two have continued to blur thanks to a raft of marketing technology innovations and shifts in consumer trends.
We’re now in a new era where brands are combining the best of these approaches within full funnel strategies, combining the power of both through linked teams, tracking and KPIs to better understand the connections between TV ads, social media and online conversions, for example, to develop a stronger understanding of marketing effectiveness and continue to become more relevant to customers. Having already built a sound lower-funnel marketing foundation, gaming manufacturer SteelSeries partnered with DEPT® to focus on the brand’s long-term growth with the implementation of an effective full funnel marketing strategy. We helped SteelSeries understand that the consumer path is a journey where the first step isn’t a purchase, leveraging data and optimising ads across channels to achieve a 127% increase in return on ad spend.
