Over the past 10 years there has been a steady rise in ad costs for all major channels. Estimates are that Facebook ad costs rose 9.6x from 2012 to 2017, as the number of advertisers exploded. During a similar time period, Google ad costs rose 4.0x. 

The crowding effect - where many more brands are competing for audience attention - is a similar, if not larger, problem when it comes to measuring the full cost of advertising through major channels.

Ad cost inflation between 2020 and 2021 was epic. Data from MediaPost showed CPM costs inflation between July 2020 and 2021, as follows; Google/Youtube (up 108%), Facebook (up 89%), TikTok (up 92%).

With the pandemic boom behind us, ad inflation should drop significantly in 2022 and 2023. However, its a very concentrated industry (big players have serious pricing power). Google, Facebook and Amazon collectively hold a 65% share of US digital advertising spend.

Any significant economic downturn should reduce pressure on ad cost inflation from major channels, as overall demand for ad space drops. Ad volume onto Facebook and Google is already declining, as brands start to pull budgets back heading into a tighter market for 2022/23.

It would in fact be smart for Facebook and Google to get ahead of this downward trend by dropping ad costs significantly ahead of time. So, there may be some cost relief for brands on those channels.

DTC brands started prior to 2015-16 (when the number of Facebook advertisers jumped from 2-to-5 million), had a good, long run, with low costs of acquisition. The runway for growth was long and cost effective. Younger DTC brands (especially those started in the past couple of years) have hit a serious wall of costs, making it very difficult to scale up.