AdRoll’s latest State of Digital Advertising Report for Q2 2025 has put a spotlight on one thing: display prospecting ads are getting cheaper—and fast. Costs dropped 27% year-over-year in Q1. That’s not just a blip. It reflects a growing hesitation among marketers to invest in top-of-funnel campaigns during a period of economic uncertainty.
The steep decline in display prospecting CPMs (cost per thousand impressions) contrasts with a much smaller 8% drop in retargeting CPMs. Brands appear to be doubling down on audiences already expressing interest, opting for marketing tactics with shorter return cycles. It’s a shift driven by caution—and numbers.
What the Data Shows
AdRoll pulled this data from over 20,000 businesses using its platform. Their findings highlight one thing: performance matters more than presence right now.
Courtney Herb, AdRoll’s senior director of brand marketing, summed it up: “Retargeting gives you immediate ROI. But if you ignore brand-building now, you’ll be invisible when people are ready to spend again.”
Consumer Sentiment Hits a Three-Year Low
Marketers aren’t being paranoid—they’re reacting to measurable change. The U.S. consumer sentiment index fell by over 20 points in the first five months of 2025, reaching its lowest point since 2022. Inflation expectations, meanwhile, hit 6.6%, their highest recorded level.
Though inflation has eased in actual numbers—down to 2.3% in April—the concern is that this drop might reflect weaker demand rather than positive momentum.
TikTok’s Rebound and the $10 Billion Warning Sign
Social platforms aren’t immune to this economic climate. TikTok’s ad rates started rebounding in March, reaching near 2024 levels in April. But the recovery is fragile. Ongoing uncertainty about its status in the U.S. has marketers wary, especially with another ban deadline looming in June.
Meanwhile, eMarketer projects that tariff-related slowdowns could slice up to $10 billion from social ad budgets in 2025. If your business is leaning on social for upper-funnel impact, it may be time to rethink that mix.
What’s Going On With Google?
In a surprising twist, Google has delayed its phase-out of third-party cookies in Chrome. For now, marketers can keep using their existing cookie-based targeting. But no one’s pretending this is a permanent stay of execution. Safari and Firefox already limit cookies, and privacy expectations aren’t shrinking.
AdRoll recommends building campaigns that mix cookies with zero-party data (what users share directly), first-party data (what brands collect themselves), and contextual targeting. That mix is likely to stay relevant longer than any single platform policy.
AI Is Changing Search—And Fast
If your traffic depends on organic search, there’s another storm on the horizon: AI Mode.
Google rolled out this feature nationwide in May. It changes how users interact with search results—transforming them into conversational summaries that answer questions directly without requiring clicks. According to Ahrefs, early tests show click-through rates on organic results dropped more than 30%.
The new format also includes ad placements, meaning advertisers may have to fight harder—and pay more—to stay visible. Organic tactics alone may no longer carry the same weight. Paid visibility within AI-powered experiences is becoming more necessary by the week.
Search is No Longer a List—It’s a Conversation
AI Mode and AI Overviews change the structure of how people find and process information. Brands that once relied on keyword rankings are watching their web traffic drop. The advice from AdRoll is clear: diversify. Use a mix of platforms. Explore Connected TV. Build campaigns that reach people across multiple channels at once.
Connected TV: The Quiet Workhorse
AdRoll’s report calls out Connected TV (CTV) as a high-impact tool right now. When integrated with other media, CTV can lift purchase intent by 11%. It’s one of the few areas showing promise across the entire funnel, from awareness to conversion.
George Castrissiades, general manager of CTV at AdRoll, emphasized the need to break out of platform silos: “To keep up, marketers need integrated strategies that work across paid and organic, mobile and desktop, upper funnel and lower funnel.”
What Marketers Should Do Heading Into Q3
If you’re planning campaigns for the back half of 2025, here’s what matters:
- Focus on lower-funnel efficiency. Retargeting still performs.
- Take advantage of falling prospecting CPMs to keep your brand in the conversation.
- Start adapting to AI-influenced search formats now, not later.
- Use both cookie-based and privacy-centric targeting methods while you can.
- Expand outside of walled gardens like Google and Meta. The open web, mobile, and CTV are vital growth areas.
Staying Visible When Attention Is Scarce
AdRoll’s Q2 data offers a clear takeaway: the brands that win in 2025 will be the ones balancing short-term results with long-term visibility. Chasing quick wins without maintaining a presence is a short-sighted bet. But ignoring performance during a downturn? That’s just as risky.
In a time when every ad dollar matters, the smartest marketers are not spending more—they’re spending smarter.