Over the past six years, brands and companies worldwide have spent nearly one trillion dollars on social media ads, turning it into the second-largest revenue stream in the digital advertising industry.
With 75% of Gen Zers and almost half of Millennials making purchasing decisions influenced by social media ads, it`s no wonder brands and companies continue pouring money into this type of advertising.
Although the total spending on social media ads is expected to hit an all-time high of $220 billion this year, the annual growth rate is far from what it used to be.
According to data presented by OnlyAccounts.io, global social media ad spending is expected to grow by 6% in 2024, or six times less than at the market peak three years ago.
Social Media Ads Facing Five Years of Spending Slowdown
Social media ads have an enormous impact on purchasing decisions among younger generations. Last year, more than 75% of Gen Zers and 50% of Millennials decided to buy a product or a service after seeing it on social media platforms. Although companies and brands continue pouring hundreds of millions of dollars into this type of advertising, the entire market seems to have lost quite a bit of momentum from previous years.
According to Statista Market Insights, in 2020, when companies and brands switched to digital advertising due to COVID-19 lockdowns, total ad spending in the social media space amounted to $132.8 billion, or 36% more than a year before. A year later, at the market's peak, brands and companies spent $181 billion on social media ads, or 37% more than in 2020.
However, after years of double-digit growth, 2022 brought the first slowdown. While the total ad spending increased to $190 billion that year, the annual ad spending growth rate dropped seven times to 4.7%. Although this figure slightly recovered to 9.3% last year, Statista expects 2024 to bring another slowdown which will continue in the next five years.
Statistics show brands and companies will spend nearly $220 billion on social media ads in 2024, or 6.1% more than last year. By 2028, the annual growth rate will drop to only 3.4%, or one-tenth of the growth rates seen at the market peak.
Ad Spending Slowdown Hits Entire Digital Advertising Industry
The Statista survey also showed that the ad spending slowdown in the social media space only reflects a trend that has caught up with the entire digital advertising industry. Although brands and companies are expected to spend a whopping $740 billion on digital ads in 2024, the highest annual figure so far, all market segments will see a considerable ad spending slowdown.
For example, total ad spending in the search advertising segment will grow by 9.8% to $306 billion in 2024, down from an 11% growth rate reported last year. By 2028, the annual growth rate in this segment of the digital advertising market will drop to 7.1%.
The banner advertising market's annual ad spending growth rate will fall from 7.8% to 5.1% in this period. However, statistics show that video and audio advertising segments will see the biggest decline, with their growth rates falling from 8.3% to 5.3% and 9.8% to 3% in the next four years, respectively.
