The budget crunch: Why marketing costs are rising across B2B SaaS
From ad platforms to sponsorships, B2B SaaS marketing is much more expensive these days.
CACs across both B2B and B2C are rising due to a number of macroeconomic factors and changes in buyer behavior over the last five to ten years. Before the COVID-19 pandemic, there was a 60%–75% increase in CACs for both B2C and B2B businesses from 2014 to 2019, according to a Profitwell study of 700 subscription companies. The pandemic accelerated the issue: advertising costs on Facebook have increased 33% from Q3 2019 to Q3 2021, and Google CPCs have increased 23% in the same time period.
One reason is that ads are simply more expensive now, due to competition and crowding.
But the rest of the story is more complicated than that. Several macro trends are making ad campaigns less efficient, forcing marketers to put in more budget to get out the same results. These issues include a decreased ability to target and personalize, as well as a shift in the way buyers interact with ads and social platforms (hint: they click on ads less, want more privacy, and are moving to dark social).
We sat down with Sidney Waterfall, General Manager at Refine Labs, for a deep dive into these forces that are driving up costs — and to learn why marketers need to update their GTM playbooks going forward, if they want to do more with less.
Supply and demand
The first piece of the puzzle is a simple and unfortunate reality: supply-demand issues. In paid media, there are more advertisers than ever jostling for a finite amount of digital ad inventory.
Low interest rates since 2008 and recent cash injections into tech and B2B have resulted in a much higher number of companies competing with one another for attention and ad impressions.
For example, the number of martech companies alone has grown by 24% from 2020 to 2022, with nearly 10,000 solutions. Even more mind-boggling is that martech has seen 6,521% growth since 2011, when there were only 150 companies on the map.
That’s just martech! What about all the other B2B categories?
And what about the recent boom in B2C/D2C advertisers?
Many B2C brands moved online during the COVID-19 pandemic. Sidney reminds B2B marketers that we often get stuck in our industry bubble, but it’s important to notice bigger trends that include B2C in order to understand what we’re up against.
“Everyone’s trying to market to people,” Sidney says. “I get ads for martech because I work in demand gen, but I also get ads for dog accessories because I’m a dog mom. These companies are competing for that same impression, whether they’re B2B or B2C.”
Online privacy is locking down, which makes targeting difficult
Targeting is one of the best levers to help marketers lower costs because it allows marketers to reach people who will convert, without wasting ad budget on people who are unlikely to convert.
But targeting is getting more difficult due to rising online privacy regulations.
There’s GDPR, Apple app tracking transparency, and the deprecation of cookies. Consumers are switching to privacy-oriented browsers, and Apple is coming for email next.
This drives up costs because marketers need to cast a wider net across more people and platforms in order to generate the same conversions. In other words, they need to pay more to get the same customers.
Most social ad platforms don’t have great B2B targeting to begin with. As privacy regulations increase, Sidney has been seeing marketers pull spend away from the platforms where they have the least confidence in their targeting abilities. Unfortunately, these are often dark social platforms, which their prospects are gravitating to (we’ll touch on that trend in a minute). This may mean that marketers are taking ad budget away from where customers are actually hanging out, which can further hurt performance of a paid ads program.
Privacy regulations also raise advertising costs by making it difficult to personalize. If you’re not able to identify and target a specific sub-segment within your audience, you can’t design a message just for them, which means that your ads will resonate less with your buyers. This decreases conversion rates. Again, spend more money to achieve the same results as you used to.
At Clearbit, we’re prepared for the decline in platform tracking capabilities thanks to our Data Activation Platform, where we combine our first-party data and third-party firmographic and employee data to do our own targeting. We plug in our criteria and create custom audiences to send to ad platforms. We also use solutions like cookieless tracking to get around the loss of third-party cookies.
Buyer research behavior is changing
Next, there have been significant changes in the way people browse and purchase B2B products online.
Ten years ago, people learned about products through gated content, analyst reports, and tradeshows.
These days, people prefer to remain anonymous while they research. The old model, “fill out this form with your email and we’ll send you a whitepaper,” is less attractive than it used to be. Buyers also want to learn from their peers.
This is why a lot of today’s B2B research happens on dark social, including difficult-to-track platforms like Discord, Slack, Reddit, and YouTube, as well as one-on-one conversations like texting, email, and DMing on LinkedIn.
“These platforms have become popular for sharing information and finding out a product’s pricing and packaging — before a person comes to the website and becomes a known user,” Sidney explains. “You really need to recognize that this has changed, and update your marketing strategy to align with it.”
Dark social platforms make it difficult to run cost-efficient ad campaigns because of a lack of transparency and data for targeting. And, in general, “secret research” drives up costs by putting the brakes on personalization.
Take intent-based personalization, for example — a powerful way to increase paid ad performance is to target ads based on a buyer’s readiness. At Clearbit, we use intent signals to detect where a prospect is on the buyer’s journey, and then usher them down the funnel with stage-appropriate ads. But when people research in the dark, it’s difficult to pick up on their interest and meet them accordingly.
Lurking, scrolling, and reduced engagement
Marketers who rely on paid ads may have also noticed that in general, engagement on paid platforms is trending down. Think about your own behavior: if you’re on Facebook or Instagram, we’re willing to bet that you scroll and lurk more than you used to, and you post, click, and share less.
Consumers are increasingly reluctant to click on ads, wary of being virtually “followed around” or “listened to.”
These shifts in preferences mean that the demand gen “canon” is less effective today, and old tricks don’t provide the same results they used to. “People are more protective and aware of their privacy now, compared to five to seven years ago, when they were filling out lead forms with their mobile number,” Sidney points out. “Today, you can hurt your brand if you don’t balance that.”
Even though engagement is trending down, there are more platform players than ever today, pulling people’s attention to less-trackable spaces (e.g., users moving from Facebook to Reddit and Discord). More platforms and worse targeting means, again, that marketers need to cast a wider net and therefore spend more money for the same results they used to see.
A new era needs a new marketing playbook
With these macro forces at play, marketers are quickly putting their old playbooks out of business. They can no longer count on low ad costs, engaged users, and the targeting methods they’ve used in the past to generate pipeline, and ultimately, revenue..
“If you don’t change the strategy,” says Sidney, “You’re not going to win. If you do the same thing for 10 years, it's no surprise your CAC is going to go up.”
Time for a change, don’t you think?