Study: 70% of performance marketers testing new ad formats amid diminishing returns on social

A whopping 70% of performance marketers are testing new ad formats as many of them are experiencing diminishing returns on social media ad spend. In fact, returns decline long before budgets are depleted, with nearly 80% of marketers noting that the decline isn't limited to their budget - it starts early. For some, it affects more than half (50%-70%) of their total spend.

This is according to a recent report by Taboola and Qualtrics titled "The pulse of performance advertising: diminishing returns" where it found that scaling paid social has become a challenge. As budgets increase, advertisers are saying that more spend isn't necessarily translating to better results. 

The diminishing returns is likely due to overexposure, said the performance marketers surveyed. Over 60% of respondents believe their ads are losing impact because potential buyers have already been reached or have seen the same creatives too often (49%). This adds to audience saturation (66%) and user fatigue (59%) too. 

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Marketers also attribute the decline to algorithm inefficiencies (47%), rising ad costs (47%) and weaker targeting due to privacy restrictions (36%). 

As a result, performance marketers are going beyond social, with over 50% expanding into additional channels. They are also actively seeking solutions through diversification and experimentation. Nearly 70% are experimenting with new formats and 67% are changing audience targeting strategies. 

Meanwhile, 55% are expanding to new social platforms and 47% shifting budgets between high-performing and low-performing campaigns. A mere 5% reported no satisfactory tactics. 

In all, as social media continues to command a significant share of performance advertising budgets, its effectiveness is showing signs of strain. To stay ahead in an evolving paid social landscape, marketers need to adapt to a more strategic approach, said the report. 

It added that diversifying beyond social media can help reduce reliance on a single channel and open up new opportunities for growth while continuous testing and experimentation are key to identifying what resonates with audiences and optimising performance. In a fast-changing environment, agility is essential where marketers who quickly adapt to shifting trends and platform dynamics will be best positioned for long-term success. 

Social media ad spend is seeing a surge in numerous markets around the world. In Australia, the ad spend has increased 12% year-on-year (YOY) to reach US$4.26 billion, according to the Digital 2025 Australia report from Meltwater and We Are Social. Influencer marketing is also on the rise in the region, with spend up 13% as brands poured US$520 million into creator-led campaigns. 

In Hong Kong, while the overall local ad spending recorded an 8% YOY drop in the first two months of 2025, the city's social media ad spending saw a 20% YOY increase, according to AdmanGo.  In terms of ad spending across various industries, topping the list was the banking and investment services sector, which recorded a 3% YOY decline in the same period.

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