Deutsche Bank: Digital Ad Spend Stronger Than Expected

Two review calls conducted by Deutsche Bank with advertising agencies concluded that digital ad spending in the third quarter was stronger than expected, and is on track to beat initial fourth-quarter estimates, driven by AI-powered improvements in targeting, click-through rates, and conversion rates, even as cost per thousand impressions (CPM) rose.

Meta received the strongest commentary in the review, as two-year growth for one agency came in roughly 200 basis points higher than estimates, and its CPM growth accelerated by about 350 basis points compared to the previous quarter.

In contrast, spending on Google Search slowed by about 300 basis points, while Amazon beat expectations by roughly 100 basis points, and Reddit, Pinterest, and Snap ended the period performing better than planned.

Stock markets closely track ad spending numbers as an early indicator of the performance of listed tech companies, since advertising accounts for the bulk of revenue for many of them. The improvement in Q3 spending indicates that demand for digital advertising has not faltered despite rising costs, which is reflected in the revenue expectations for companies like Meta, Google, and Amazon.

What do these terms mean?

Cost Per Mille (CPM): The amount an advertiser pays for every one thousand impressions of their ad.

Basis Point: One hundredth of a percentage point, used to measure small changes in rates and percentages.

Targeting: Selecting the most appropriate audience to see the ad based on their interests and behavior.

Conversion Rate: The percentage of visitors who take a desired action, such as making a purchase or signing up.