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What social media advertising tells us about inflation

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Social media companies' quarterly reports may fill us in on the supply chain and inflation issues the industry is dealing with. Andrew Caballero-Reynolds/AFP via Getty Images

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Social media companies’ earnings reports are coming out this week, including those from Twitter and Facebook, and advertising accounts for a big piece of their business.

But when Snap Inc. reported earnings last week, the company flagged problems that could hurt demand for ads. The issues are familiar — supply chain snags and inflation.

Most people who work in advertising will tell you that ad spending is a good measure of where companies think the economy is headed. Mark Singer at Deloitte Digital said if brands are worried about a potential recession, marketing is put on the chopping block.

“Marketing is the first to go, and it’s the leading indicator when the economy is returning because it’s the first to come back. We are not recommending to our clients to do that,” Singer said.

Now is actually the time to keep investing in marketing, he said, or even invest more to drum up brand loyalty. And digital is where they should put their ad dollars, especially during a pandemic that’s kept people online more than ever.

“We are seeing influencers growing leaps and bounds,” Singer said.

According to Tina Moffett, a principal analyst at Forrester, social media is enjoying the biggest growth in advertising in general. That’s not just because it’s where consumers’ eyes are, it also gives brands the most bang for their buck. Campaign effectiveness is easy to measure, and ads can be targeted to consumers in specific geographic markets.

Moffett said that’s really helpful if your product is readily available in New York, but would take too long to get to New Mexico.

“Because they weren’t going to spend media dollars in an area to promote a product where they didn’t have it,” she said.

As for inflation? According to Barbara Kahn, a professor of marketing at Wharton, addressing that is about tone, “trying to make the consumer understand we’re in this together,” she said. “We’re trying to do the right thing. We’re a partner with you. We are trying to create value.”

Because at a time when so much of how people shop comes down to price, explaining why it’s going up builds loyalty, hopefully, and a more honest relationship with a customer.

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