Social media ad spend increases by more than 50 percent

"Brands significantly increased their investment in social media ads in the fourth quarter. At peak, global ad spend increased 50.3 percent compared to the fourth quarter of 2019," said Socialbakers CEO Yuval Ben-Itzhak. "In North America alone, they increased by 92.3 percent at peak. The focus on digital advertising has become the new normal as brands work to build lasting relationships with their customers to drive online revenue."

Increase in social media ads and cost-per-click 

Following a strong performance in the third quarter of 2020, global social media ad spend continued its steep rise in the fourth quarter. The 50.3 percent year-on-year increase in total spend was as high as 56.2 percent in terms of median monthly ad spend. Of particular note was the 92.3 percent increase in North America and 39.6 percent in Western Europe. This growth was seen across all sectors, with e-commerce spending up 24.8 percent from the previous quarter. This corresponds to a doubling compared to the first quarter of 2020.

The developments were accompanied by an increase in global cost-per-click. Over the course of 2020, CPC for brands on Instagram and Facebook increased by 35.6 percent, from $0.104 to $0.14.

Instagram ahead of Facebook in audience size and engagement

Instagram's lead over Facebook continues to grow. While Instagram's audience grew 11.3 percent, Facebook's audience fell 17.6 percent year-over-year in Q4 2020. The audience of the 50 largest brand profiles is now 39 percent larger on Instagram than on Facebook. In addition, Instagram saw 21 times more interactions. Despite this growing gap in audience size and engagement, 61.9 percent of all brand posts were published on Facebook in the fourth quarter.

Another bright spot for Facebook is that advertisers can now reach more people via the platform. Globally, the reach of Facebook ads increased by 23 percent in the fourth quarter of 2020 compared to the same period last year. The largest quarter-on-quarter growth was seen in the luxury food sector (alcohol: up 9.9 percent) and the automotive sector (up 12 percent).

Downward trend of interactions

Overall, user interactions with brands fell slightly in the fourth quarter of 2020 compared to the same quarter last year. Globally, the decline was 5.4 percent on Facebook and 6.3 percent on Instagram, although there were outliers. In North America, Facebook interactions increased to 11 percent, while Instagram interactions decreased 10 percent year-over-year. The e-commerce sector was also up 14.4 percent on Instagram and one percent on Facebook compared to 2019.

Popular video format leads to rising advertising costs

The use of video content on social media channels again enjoyed growing popularity in the fourth quarter. The share of video posts on Twitter increased by 26.7 percent compared to the previous quarter. The share of video posts on Facebook increased by 4.6 percent and on Instagram by 5.9 percent. 17.9 percent of all posts on Instagram and 18.1 percent of all posts on Facebook were videos.

The popularity and competitiveness of the video format also led to a significant increase in video ad costs. In Q4 2020, Facebook Instream Video ad costs increased 216.8 percent in CPC and 247.2 percent in CPM year-over-year. The Facebook Live format saw the highest engagement on the platform by some margin in the fourth quarter of 2020, with 2.8 times more interactions than images and 3.25 times more interactions than regular video content. The growing popularity of live video and the momentum around live shopping experiences demonstrates the importance of social media as a revenue generation tool. Live shopping is already a megatrend among Gen Z in China and is gaining traction with brands and consumers in the West as well.

Influencer posts decrease with #ad 

Despite the steep rise in global ad spend, brands appear to have cut back on the use of Instagram influencers for paid advertising in the fourth quarter: Overall, influencer use of the hashtag #ad dropped 17.6 percent year-over-year. There was still an increase during the Christmas season, but it did not reach the level of the previous year.

"If there's one thing brands have learned from the pandemic, it's the importance of social media. It allows them to reach their audience, engage with them and extend their reach beyond a specific geographic area. Plus, social media gives consumers 24/7 access to the brands they love," Ben-Itzhak explains. "Looking back at 2020, it's clear that digital will continue to be the focus of brands in 2021. Today's consumer is online. Therefore, to future-proof their business and drive brand loyalty and profitability, brands must focus on providing each customer with an outstanding end-to-end experience in the digital world."