One thing many paid media professionals have noticed in recent years is the steady rise in the cost of paid advertising, whether it's Google Ads, Meta Ads, TikTok Ads, etc. Following this idea, some questions arise regarding the topic: what are the reasons for the increase in the cost of ads, and how long will they continue to increase?
Although it's not an organic or free resource, investing in paid advertising can yield extremely significant returns for companies, as it allows for a broader reach of posts, allowing the brand to reach a broader audience, while also segmenting them according to the persona defined by the services or products offered. And for this reason, even with rising prices, investments continue.
The problem, however, is that there has been a clear perception of rising prices in the area in recent years, triggered primarily by the pandemic. After all, with the global spread of COVID-19 in 2020 and 2021, several establishments had to close their doors. In response to this strong impact on the physical market, we consequently saw a significant boost in internet use among the population, which has become a daily participant in the lives of many people who, until previously, had no contact with or interest in the virtual world.
WHO data, as evidence of this, shows that there was an increase from 71% to 83% in the number of households with internet access between 2019 and 2020, corresponding to approximately 61.8 million connected homes. In this scenario, since physical stores would not be able to reopen in a short time, the great idea many entrepreneurs had was to start selling online, where everyone ended up spending long hours.
Furthermore, during the period of social isolation, many professionals became unemployed and needed to find ways to support themselves financially, which also sparked another notable movement during this period: information products. Among these, the popularization of paid traffic management content was notable.
We therefore had three foundations for the event we're analyzing: employers (from stores that closed during the pandemic), professionals whose jobs were terminated, and, finally, the sale of the necessary knowledge for unemployed people to start simple jobs in the field—which led to an overcrowding of both online stores and traffic managers. The result? Several stores in the same segment competing, in the auction system, on advertising platforms for the same keywords.
On a related note, for example, when there's a high demand for a product and the market experiences a shortage, what happens? The price goes up. And that's what's been happening in recent years. There was a lack of customers for all these stores that didn't know how to niche down their e-commerce businesses.
This upward movement in prices was closely followed by markets around the world, even impacting a number of popular food products on Brazilian tables, as demonstrated in an article by O Globo, "In January and February, the cost of food at home rose 2,95%, compared to 1,25% in the IPCA. El Niño affected the harvest. Beans, rice, potatoes, and carrots are already expected to rise by more than 10% in 2024."
Regarding the international economy, we have as an example the data shared in the research "UK inflation rate: How quickly are prices rising?", which found that, although inflation has fallen significantly since reaching 11.1% in October 2022, which was the highest rate in 40 years, this does not mean that prices are falling—just that they are rising less quickly. All of this indicates that not only are advertising prices rising; but the entire cost curve is on an upward trend.
In this general context, the reasons for the increase in paid campaign prices are clear. In short, they are: the general increase in prices across the board (even in developed countries); the overcrowding of advertisers in the same niche, with no differentiating factors; and the devaluation of the Brazilian currency, which ultimately worsens the situation. Given this, the trend for PCP and PPI (pay-per-click and pay-per-impression, respectively) campaign prices is one of continued cost increases, or at least that's the view shared by paid traffic professionals with years of experience in the market.
