The demise of paid search and social

Here at Buyapowa, we’ve long been predicting the need for brands to quit their addiction to paid search and paid social, and stop pouring cash into the coffers of Facebook (Meta), Google (Alphabet), Twitter and Tik Tok.

We’ve also shone the spotlight on successful brands that have either turned their backs on performance marketing in favour of Organic Discovery, or invested in brand marketing and used referrals and rewards as a means to harvest that demand. We are confident that word-of-mouth marketing is more effective, more ethical and delivers better clients at a fraction of the cost.

We’ve been banging this drum for a few years, but we firmly believe that our prediction will become a reality. Paid search and paid social have had their day, and there is a marketing revolution ahead. Here’s why…

Pressure on Budgets

When brands are under financial pressure, every cent in the marketing budget comes under scrutiny. Marketers simply can’t justify increasing bids for Google or Facebook ads or paying more for mentions from influencers and TikTokers. The threat of reduced budgets will force marketers to be creative – and that means exploring alternatives that deliver better customers at a lower cost.

Turbulent economic times aside, escalating investment in performance marketing is just not sustainable. As prices per click or action keep rising, the return on investment becomes ever more illusory, due to a combination of the cost, the prevalence of fake accounts, fake followers, click fraud and poor targeting technologies. Some commentators even suggest that much digital marketing may not even work, and let’s not forget the brands that tried turn off experiments and saw no negative effect.

Consider the case study of Airbnb. When faced with the COVID-19 crisis, it cut its marketing spend by 28%, primarily by slashing its spend on performance marketing. Instead the travel giant doubled down on brand marketing and what it called Organic Discovery. In other words, it created the ideal conditions for word-of-mouth to spread and captured this, in part, by its referral program. The result? Shortly before its IPO in 2020, Airbnb announced that it got 91% of all its traffic from unpaid channels, a situation that continues today. Only a few months after the pandemic decimated the travel industry, the business was stronger than ever and this continues today as revealed by Airbnb’s co-founder and CEO, Brian Chesky revealed in 2024 that the brand still gets “the majority, 90% of our traffic is coming to us through direct or unpaid traffic.”

Gousto is another great example. After hitting a ceiling in performance marketing, the leading UK meal kit retailer switched its focus to brand marketing. The outcome? In 2018, 80% of customers came via performance marketing, but by 2021, an incredible 82% of all new customer acquisition came organically or through referrals. Like Airbnb, this innovative brand reacted to a challenging situation by implementing more effective marketing, with lower costs.

Ethics

Let’s not forget the alleged unethical behaviour of these search and social media giants. It’s clear that they don’t always work in your best interests or the best interests of your customers, as the long list of fines and penalties listed below shows, not to mention the eye-opening revelations of whistleblowers. For a long time, many marketers felt there was no other option than to keep feeding these giants, but the success of brands who turned their backs on performance marketing show that this is no longer the case.

Here is just some of the hot water these guys have found themselves in back in 2023 when we first wrote this article (in fact there were so many of these examples that we got bored keeping up with them!)…

Meta

1. Meta’s Instagram was fined €405m (£349m) in Ireland, for an alleged failure to protect childrens’ data. Children aged 13-17 were able to set up business accounts on the platform, which showed their phone numbers and email addresses.
2. In addition, EU antitrust enforcers were reportedly set to escalate an investigation into the firm’s classified ads business. At the time of updating this article, it still seems to be rumbling on.

Alphabet

1. Google failed to overturn a record €4bn fine, for using the android platform to cement its search engine’s dominance. In total, the EU’s competition commission imposed a whopping €8.25bn in antitrust fines on the giant over the past decade, and the search giant now faces a potential €25bn (£21.6bn) lawsuit in the UK and EU for abusing its power in the ad tech market.
2. India’s antitrust watchdog also hit the firm with a $113 million fine for abusing the dominant position of its Google Play Store. The move follows hot on the heels of a $162million fine, for anticompetitive practices related to its Android operating system.

Twitter

1. If the non-stop drama around Elon Musk’s Twitter takeover and subsequent attacks on advertisers didn’t keep you entertained, you have to wonder why he bought the company in the first place. A few short months ago he claimed that fake or spam users make up around 20% of the accounts. No wonder so few people ever got Twitter ads to work!

Tik Tok

1. The video platform could face a £27m fine in the UK, for potentially processing the data of children under 13 without parental consent.

When reading through this charge sheet, you could be forgiven for wishing you could spend your ad dollars somewhere else, perhaps somewhere a little more aligned with you and your customer’s own interests. Well the good news is that there is: it’s called word-of-mouth marketing. It’s where your happy customers tell their friends and family about you and your product or service. Better still, you can supercharge the system by applying a holistic word-of-mouth marketing strategy, using referrals and rewards to incentivise that sharing.

Effectiveness

The business case for rewards and referral marketing is undeniable. It played a major role in creating the behemoths that are Uber, Slack, Tesla, Dropbox and Airbnb, plus it remains a key marketing strategy for many leading businesses across telecommunications, utilities, gaming, insurance, banking and retail. It consistently drives more and better customers at a lower cost than any other channel.

Wharton University famously found that referral marketing can deliver customers that:

1. Are 25% more profitable.
2. Churn at a rate 18% lower.
3. Have a 16% higher LTCV over six years.
4. Can drive at least a 60% ROI over six years.

Recently, research from Rachel Gershon of UC San Diego and Zhenling Jiang of the University of Pennsylvania looked at anonymized data of 41.2 million customers of a large US mobile brand over a ten year period and found that referred-in customers were 32% more valuable. However, by failing to take into account that referred-in customers are themselves more likely to refer in new customers, we risk underestimating their value by a third.

Buyapowa’s own Referral Revolution research found that 95% of people have referred a friend in the past year, and our Referral Codebreakers research found eight out of ten people reported that they expected to be able to refer their favorite brands. And our Referral Myth Debunked research found that most respondents hadn’t heard of a brand before it was referred to them.

Still not convinced? Referrals have been reported at various times to have been responsible for driving…

1. 95% of new Uber riders.
2. 97% of Slack’s new customers.
3. A 42X ROI for Tesla.
4. 35% of all Dropbox sign-ups.
5. A 25% uplift in bookings for Airbnb.
6. 80% of all Nu Bank’s customers in Brazil.
7. 50% of all Giffgaff’s new customers.
8. 40% of all new customers for a leading global meal-kit delivery service.
9. 25-30% of all new subscribers for two leading UK mobile telecoms brands.

What’s going to happen next?

Widespread discontent often bubbles up to create a revolution, and the elements are coming together to create a powerful change in marketing strategies. Why not follow the lead set by the businesses mentioned above, and ditch your addiction to paid search and paid social. You won’t look back.

Rewards and referrals can drive a huge percentage of customer acquisition, at a lower cost. They can also drive higher value customers than performance marketing, without any ethical concerns. What’s stopping you?

We’d love to talk more.