AdRoll, a leading marketing and advertising platform that helps business-to-consumer brands grow, released the Q2 2025 edition of its State of Digital Advertising Report. Drawing on data from over 20,000 online businesses, the report highlights emerging trends in ad pricing, economic sentiment, and platform innovation influencing digital marketing strategies and budget decisions.

Display prospecting ad costs dropped 27% year-over-year in Q1, highlighting a broader shift away from upper-funnel campaigns as economic uncertainty grows. In contrast, the retargeting cost per mille (CPM) fell just 8%, signaling that brands are doubling down on high-intent audiences and prioritizing performance-driven strategies.

The drop in CPMs coincides with deteriorating consumer confidence. According to the report, the U.S. consumer sentiment index declined by more than 20 points in the first five months of 2025, reaching its lowest point in nearly three years, while the 12-month inflation expectation rose to a record 6.6%.

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“As brands tighten budgets, lower-funnel campaigns remain a lifeline for performance,” said Courtney Herb, senior director of brand marketing and public relations at AdRoll. “While retargeting offers immediate return on investment, marketers shouldn’t ignore the long game. Capitalizing on lower CPMs to maintain brand visibility now will pay off when consumers return to spending.”

Platform dynamics are shifting as TikTok’s ad prices rebound and Google pauses its privacy overhaul. TikTok’s CPMs began climbing in March and reached their 2025 high in April (just 6% below last year’s levels) despite continued uncertainty around its U.S. presence. At the same time, Google has officially stepped back from its original plan to phase out third-party cookies, providing advertisers with short-term relief. However, experts caution against a renewed reliance on legacy targeting methods, as privacy-first alternatives continue to gain traction.

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Google’s AI-powered search is upending how consumers discover brands and how marketers reach them. The rollout of AI Mode, a new conversational search experience with ad placements in AI Overviews, marks a fundamental shift in search behavior. Early data shows that these AI-driven results have already reduced click-through rates on traditional listings by more than 30%, prompting brands to rethink their organic strategies and explore emerging ad formats.

Search is no longer static. With AI Overviews and AI Mode, we’re seeing a fundamental shift in how people discover and engage with content. “To stay competitive, marketers need to diversify beyond traditional channels and embrace cross-platform strategies that span the full funnel,” said George Castrissiades, general manager of connected TV at AdRoll. “Channels like connected TV are especially powerful in this environment. Research shows that when CTV is integrated with other tactics, it can drive an 11% lift in purchase intent.”