Slow death of performance only marketing as digital brand builders move in

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New analysis of the ecommerce landscape has revealed the demise of traditional performance only marketing, as sophisticated brand building takes centre stage.

Performance only marketing

The report from Nest Commerce reveals that digital brand building described as ‘full funnel performance’ is the needed approach to build awareness and win customers across increasingly video-first platforms including Meta, Tik Tok and Google.

The Readout, is a quarterly trends and learnings report derived from aggregated advertising data from Nest’s portfolio of ecommerce clients. It uses global ad data from 40+ ecommerce brands, managing over £100 million of media spend.

According to Nest data, brands running awareness or traffic campaigns alongside performance campaigns saw a remarkable 31% YoY (Return on Ad Spend (ROAS) boost in Q1 2024, compared to a 32% YoY ROAS decline for brands which only leveraged performance.

While Meta performance on aggregate is higher YoY, the trend differs based on whether brands leverage upper-funnel or not. 9% of Meta spend is now going to upper-funnel Investment in awareness and traffic activity.

This has increased YoY by 356% and 30% respectively, as brands shift budgets towards driving long-term growth and incrementality.

Video-first approach key to establishing a brand

A key driver for awareness building and establishing a brand in this new environment are the video-first platforms, TikTok and Instagram Reels. Tik Tok performed particularly well in Q1, with a 37% higher CVR QoQ.

It performs well for premium audiences as well as younger demographics, and is a particularly powerful platform for discovery.

Meanwhile Reels continues to rise in prominence as younger audiences spend more on the platform and Meta continues to invest, with spend up a remarkable 217% YoY as the channel becomes mainstream.

Will Ashton, Nest

According to Will Ashton, CEO of Nest: “There are some big opportunities out there for more progressive retailers, who take a community-first, full-funnel approach.

“Many brands initially reacted to the slowdown by cutting brand investment. These brands will be paying sorely for this mistake now.

“Unless brands expect prolonged economic stagnation, brand building right now is crucial, and this is a good time to invest while CPMs on Meta and TikTok remain low.”

He continued: “We are hearing feedback from the market that Meta is struggling – but this is not reflected in the data of this report.

“Our thesis is that we are in fact seeing a divergence between brands with the right and wrong approach to paid social, with performance-heavy brands suffering unsustainable acquisition costs.

“If you had a poor Q4, you can still fix things for this year. But you need to act now, waiting until late Q3 is too late.”