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Illustration: Sarah Grillo/Axios

Digital ad prices are soaring, forcing businesses to rethink their entire marketing strategies.

Why it matters: At the same time digital ads are getting more expensive, they're also getting harder to target, creating big barriers to entry for startup digital-native brands trying to find their first customers.

By the numbers: The cost to advertise on Facebook is 33% higher than it was in Q3 2019 (before the pandemic), as measured by CPM, or cost per thousand impressions.

  • Instagram CPM is up 23% over the same period, and Google's cost per click (CPC) is also up 23%, according to proprietary data provided by performance marketing firm Tinuiti.

What happened: It’s another example of how the pandemic has changed how we do business, and how we live our lives.

  • Advertisers pulled back at the beginning of the pandemic, but then lockdown life turbo-charged the transition to all things digital — so as the economy reopened this year, the ad dollars naturally gravitated there in greater force.
  • Competition for ad space is now driving prices sky-high.

What they’re saying: “The [digital advertising platforms] are a lot more competitive than they used to be,” Andy Taylor, VP of research at Tinuiti, tells Axios. "For most advertisers, pricing is the highest it's ever been."

  • One VP of e-commerce at a direct-to-consumer beauty brand tells Axios that the company's digital ads are now at least 50% more costly than they were in January, on a per click or per impression basis.

The intrigue: As ad costs have shot up, the power of consumer targeting on social media has suffered — thanks to Apple's recent iOS updates prioritizing data privacy.

  • "Facebook and Instagram CPM is just going through the roof — and their targeting is a lot weaker than it has historically been," the e-commerce exec says.

The impact: Given the escalating prices and declining return on investment, some brands have recently begun moving more of their ad budgets to other venues, like streaming TV, traditional TV, and even direct mailings.

  • The costs of those options has crept up as well, but at growth rates more in line with historical levels, the executive says.

What to watch: If prices stay high, the impact on startups that need to acquire their first round of customers could be significant. The era of ease for digital-native consumer facing companies, like Warby Parker and Allbirds, may be over.

  • "For a startup, this is a really tough time. A lot of them have historically depended quite a bit on the social platforms to track their business. They usually have lean marketing budgets, and you need returns on those investments," the e-commerce exec says.

Go deeper

Retailers take another page from Amazon's playbook

Illustration: Sarah Grillo/Axios

Amazon's competitors are multiplying. Traditional retailers are trying to replicate the e-commerce giant's playbook.

Driving the news: Macy’s is set to launch a third-party sellers marketplace next year, the company said today, becoming the latest legacy retailer to enter an arena dominated by Amazon.

Small business holds key to tech's antitrust fate

Illustration: Annelise Capossela/Axios

Big Tech giants and their adversaries are both trying to enlist a powerful constituency in their battle over looming antitrust legislation: small businesses.

Why it matters: Small businesses can have outsize sway with Washington lawmakers, and the fight for their support will shape the fate of Congress' crusade to limit tech power.

Rupert Murdoch criticizes Trump for staying "focused on the past"

Media mogul Rupert Murdoch. Photo: Drew Angerer/Getty Images

Rupert Murdoch took a dig at former President Trump Wednesday, telling investors that conservatives can't move forward while Trump stays focused on the past.

Why it matters: Murdoch and Trump's relationship soured after the media titan, best known for his ownership of conservative-leaning outlets like Fox News and the Wall Street Journal, reportedly made the final call to give his team the go-ahead on calling Arizona for President Biden on election night last year.