Amid economic headwinds, even large corporations are rethinking their ad strategies, and the impacts are being felt across the tech sector. Meta reported its second straight quarterly revenue decline in the third quarter and forecasts another drop in the fourth quarter. Meta recognizes that it is losing users to TikTok, which only compounds the feeling of small and midsize businesses (SMBs) that they should look elsewhere for new customers.
But TikTok isn’t immune to the iOS changes, either. Earlier this month, TikTok’s parent company ByteDance lowered its target for 2022 ad revenue from $12 billion to $10 billion.
“Overall, investment is down primarily because Facebook investment is down, and Google is relatively flat or slightly up,” said Maurice Rahmey, co-CEO and co-founder of Disruptive Digital, a digital marketing agency started by two former Facebook employees. “Ads just are not as effective after the Apple update.”
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Rahmey said Disruptive Digital’s clients at the beginning of the year were spending zero dollars on TikTok, but now it is around 5% to 10% of budgets. Of course, that still pales in comparison to the 70% of client ad dollars going to Facebook, and as much as 25% going to Google.
After seeing success from viral TikToks last year, Elijah Morey, CEO and co-founder of hot sauce company Elijah’s Xtreme, was able to pull back ad spend from Facebook and Instagram.
“We were spending $30,000 to $40,000 per month on Facebook and Instagram ads in late 2021,” Morey said. “But it didn’t have a linear scale. When I looked at weekly analytics, things were not adding up—the attribution was off, making it look better than it was. I was spending weeks on creative ads, but now I can make a packaging order video on TikTok and reach way more people.”
Morey found that around half of his marketing costs on Meta platforms were generating just 8% of sales. He now spends a minimum on Facebook and Instagram and does few paid ads on TikTok, but mostly relies on influencer gifting and organic reach. He says that TikTok has led to 19% of sales for the year to date starting in May 2022.
Even larger brands have been happy with TikTok’s results. Peace Out Skincare, a direct-to-consumer skincare brand that also sells its products at beauty retailer Sephora, recently redirected almost all its Facebook advertising budget toward the brand’s TikTok marketing endeavors, according to Chief Marketing Officer Junior Pence Smith. The brand was seeing little return despite its heavy investment in Facebook ads.
The brand began gradually upping its TikTok budget earlier this year and saw its sales via Sephora increase. Peace Out Skincare now devotes 80% of its social media budget to TikTok, but declined to share exact figures. The brand splits its remaining budget between Instagram and Google, Smith said. With an upcoming product launch ahead of the holidays, Smith plans to maintain the ratio for its social media budget for promoting the product, leaning on TikTok for influencer partnerships and both organic and paid video content.