How advertisers are building up their cannabis ad budgets as marijuana regulations loosen

100 dollar bill with a marajuana leaf

This past 4/20, Gbemi Maiyegun was surprised to see just how many mainstream brands were celebrating with cannabis-friendly ads, partnerships and marketing messages.

There were the usual suspects like Jack in the Box and Ben & Jerry’s (whose campaign called for justice regarding long-standing records for cannabis-related convictions), but also newcomers like Red Lobster and BIC, which partnered with Willie Nelson and Martha Stewart for a cannabis-themed campaign. Seemingly, cannabis-friendly brand partnerships and marketing messages are part of a growing trend as cannabis usage becomes more normalized in the U.S, according to Maiyegun, an independent brand strategy professional and co-founder of Weed for Black Women, an online community.

“From the conversations that we are having, it is evident that there are a lot of companies that are being more open,” she said, referring to an uptick in partnership inquiries for Weed for Black Women. “I’m definitely seeing a lot more openness to the collaboration from these brands.” (She declined to name which companies specifically as those deals have yet to solidify.)

Historically, cannabis brands were considered taboo, relegated to advertising via influencers, owned newsletters or on digital platforms with ambiguous copy. The normalization of cannabis usage has been an uphill battle, with restrictions on both a legislative and advertising level. But within recent months, states like Minnesota, Delaware and New York have relaxed cannabis-related restrictions. In all, 38 states, three territories and the District of Columbia allow the medical use of cannabis products, and 22 states, along with Washington, D.C. and Guam, have acted to legalize recreational marijuana. Meanwhile, advertising platforms like Twitter and Google have also relaxed advertising bans.

In light of recently relaxed cannabis, hemp and CBD regulations, cannabis advertisers are experimenting with paid ads on platforms like Google, Pinterest and most notably, Twitter, taking advantage of the recent changes allowing for cannabis ads.

“It’s been an incredible shift in opportunity,” said Lana Van Brunt, co-founder and co-CEO of Sackville & Co. cannabis company, referring to legalization and relaxed ad restrictions. “It has democratized business. And being able to hit your consumer directly, this is CPG-wise, has been monumental.”

Historically, the cannabis brand spent its media dollars on any media channels that it could, whether with direct response ads or ads that focused on education and information, as opposed to product sales, to circumvent platform restrictions. However, murky regulations made for less precision both in terms of targeting and measurement, per the company.

Since last September, in light of loosened restrictions, the five-year-old cannabis brand has had a consistent advertising budget, experimenting with search advertising and social media platforms. (Van Brunt did not offer specific ad spend figures.) Search has been the most important channel to the cannabis brand, which hopes to drive traffic directly to its e-commerce site and gain more insights into shopper data.

“Now we’re able to drive direct to e-comm. Which again, has changed the game because you can actually start getting an understanding of what’s moving, where and to who,” Van Brunt said.

Cannabis spend on fire

Meta allows advertising for hemp products, although restrictions remain in place for THC and CBD. Meanwhile, Pinterest allows informational or brand content on CBD and hemp. But last year, Google updated its policy, allowing ads for CBD and hemp products in some regions, and an increasing number of state regulations have loosened for medical and recreational marijuana. Most notably though, Twitter loosened its rules on cannabis ads, recently allowing cannabis companies to post pictures of their products in ads. 

Last year, medical marijuana dispensaries and recreational marijuana shops (as well as some cannabis-infused products, hospitals and clinics that prescribe or treat with marijuana) spent nearly $16 million on digital media, according to Vivvix. Right now, marketing is “woefully underfunded” with cannabis brands spending about 5 to 8% of their annual operating budget on marketing, according to Amy Deneson, co-founder of the Cannabis Media Council and co-founder of Pheno, a cannabinoid-friendly ad agency. And that’s if they’re spending on marketing at all. In comparison, average marketing spend last year increased from 6.4% to 9.5% of company revenue across almost all industries, according to a report from Gartner.

However, she said, those figures could increase in light of relaxed regulations as cannabis advertisers look to spend on these channels, targeting audiences, spurring growth and ultimately sales. 

“We really need to increase [media spend] if we’re going to grow up to be the industries that we aspire to be, which is following the good lead of retail and CPG,” Deneson said. 

Some cannabis-related brands like Kiva, Cann and Brēz drink brand have already upped investments. Kiva has quadrupled its digital marketing budget since last year. Cannabis social-friendly advertising agency Lucyd is spending $1.5 million of client ad dollars monthly, on average, on Meta advertising. Last year, 10% of Cann’s marketing dollars were spent on digital advertising. But with the loosened restrictions, that figure is close to 30 to 40%, according to Jake Bullock, CEO and co-founder of Cann. 

“The digital ecosystem — that is our pathway to let people know that these products exist,” he said. “For us, it’s really important that we have the ability to do this type of advertising to get the category and the brand and the products out to consumers.”

‘Elon wants people’s money’

Perhaps the most important change in cannabis advertising has been Twitter. Seemingly, the social media company is making a play to regain its share of ad dollars after some of Twitter’s biggest advertisers paused or reduced spend on the platform following Elon Musk’s takeover. (Find out where those ad dollars are going here.)

To Deneson, Twitter’s push is vying for ad dollars during a time when advertisers are shirking the platform, expressing concerns about brand safety, opening advertising to cannabis advertisers who are “desperate to find more channels to connect with people,” she said.

Cannabis advertisers say they’re concerned about Twitter’s inability to help scale their business or push sales — something the platform has struggled with in comparison to Meta or Google. There are also concerns about Twitter’s capabilities, rise in bots, hate speech and other brand safety things that would muddy engagement and other KPIs.

“Twitter is being a little bit loose because Elon wants people’s money,” said Kassia Graham, director of community and strategy at Cannaclusive, a collective focused on inclusive marketing, community, and advocacy. “This might also be a concern because Twitter is bleeding money.”

That’s not to say cannabis advertisers aren’t hopeful about the platform. For some, testing of paid ads has already started. For example, Deneson said House of Puff cannabis boutique launched a paid ad campaign on the platform, looking for downloads and drives to purchase with a discount code. The results were promising enough, she added. Kiva too tested, spending less than six figures to do so, and now has plans to scale and continue advertising on the platform, according to Vilay Matuska, vp of marketing at Kiva. (Matuska declined to offer exact spend figures.)

‘We’re constantly toeing the line’

Still, federal regulations cast a shadow on the future of cannabis advertising as marijuana is classified at the federal level as a Schedule 1 drug under the Controlled Substances Act. Meaning, the space is still tricky for cannabis advertisers to navigate from state and county regulations to vendors, like Shopify, which prohibit payment processing for hemp or CBD products.

“We’re constantly toeing the line,” said Kiana Anvaripour, CEO at N° 9, a cannabis-friendly agency, referring to guerilla marketing tactics and advertising workarounds, via influencers and non-direct cannabis ads that center information and education over sales. “You get as close to the fire as possible without getting burnt.”

Cannabis advertisers have been stung before, facing rejected ads and banned accounts for the mere mention of cannabis. Between that and federal regulations, advertisers say they’re hesitant to go all in on digital advertising.

“With the federal illegality, even if you’re able to do this for a while, eventually, there’ll probably be a crackdown. We don’t necessarily know what that can look like,” Graham said. “People should exhibit caution. Because once they take down your account, if you can’t get it back, that’s it.”

True enough, there are roadblocks on the way to legalization and thus, cannabis advertising. But advertisers retain a positive outlook, encouraged by recent changes. Hopeful about the future, Ashhok Umashankar, co-founder at Guru cannabis, said the brand is setting aside $1,000 a month to test Twitter advertising soon.

“The train has left the station. I feel like it’s coming one way or another. I think it’s a matter of how you set yourself up for when it happens,” Umashankar said.

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