Facebook advertising costs rise dramatically

Facebook’s average Cost per Thousand impressions (CPM) has increased by 41% since Q1 in 2011 according to the latest Global Facebook Advertising Report compiled by TBG Digital (TBG) and verified by the University of Cambridge. This is the latest report examining the trends and changes in the performance of Facebook campaigns managed by TBG Digital.

The study, which was based on 372 billion impressions in more than 190 countries for 235 clients from Q1 2011 to Q1 2012, demonstrates that Facebook is earning more from Marketplace ads. Specifically, average CPM has increased by 15% in the last quarter with the US seeing an increase of 11% and the UK seeing an increase of 13% during the same period.

TBG also sees a massive increase in Click Through Rates (CTR) for News Clients. With the huge success of Facebook social readers from the likes of Yahoo! News, The Washington Post and The Guardian, the Company has identified a strong uplift in CTR for those in the News sector since Q4 2011 with an increase of 196%. The category now joins entertainment, beauty & fitness, house & garden, and health at the top of the league with finance remaining at the bottom of the table. Further, this jump in position demonstrates that Twitter no longer dominates as the sole social network for news.

Additional findings from the report include the following:

  • Facebook Cost per Click (CPC) has increased by 23% in the top five territories versus Q4 2011 indicating that while growth in new users may be slowing*, the social network is becoming more attractive to advertisers
  • The US experienced a reduction in average CTR of 8% in this quarter with the top five territories seeing an average decrease of 6% which could be attributed to an increase in the number of ads being placed on users’ pages. CTR is generally a measure of how engaging users find the ad, affected by the quality of the creative and how appropriate the ad’s targeting.
  • Seasonal deviations can contribute to CTR increases and decreases in certain vertical sectors. For example, Fitness is always a focus in a New Year where as Retail drops after its heights in the holiday season.
  • The Retail sector has taken the lead on number of impressions served increasing its share by 10 percentage points to make up 23% of all impressions in Q1
  • The Finance sector leads with the most expensive advertising costs, with 3.5 times higher CPCs than the Food & Drink sector which has the lowest ad costs
  • Top 5 sectors continue to dominate comprising 78% of impressions served of the 18 sectors measured

Cost Per Fan Costs Increase by 43% Over All Territories
On average, Cost per Fan increased 43% in Q1 2012, compared to Q4 2011. The UK saw the greatest jump with 77% followed by the US with 37%. Increased competition and advertising costs means brands will need to work harder in their recruitment of fans with a focus on ‘earned media’.

Fanning Continues to Drive CPC Savings Particularly in the Food & Drink Sector
In Q1 Facebook continued to incentivize advertisers to say within the Facebook environment by offering reduced CPCs of up to 45%.Consequently the Finance Sector which sends 91% of its traffic out of the Facebook environment to sign up for their services (compared to the average of 38%.) saw the most expensive advertising costs. Alternatively the Food & Drink sector, which uses Facebook as a branding tool, only sent 4% of its traffic offsite in Q1 and thus saw the lowest advertising fees.

Simon Mansell, CEO of TBG Digital, commented: “The recent Facebook Advertising Report unearthed some compelling trends as it relates to how brands are using the site to engage customers. One amazing finding is that Facebook has seen an increase in pricing at the same time when it has also grown the number of ads per page, sometimes up to seven, which you would naturally expect to actually deflate prices. Additionally, the rapid increase in CTR for news clients is promising for Facebook as it demonstrates that the platform works well for sharing news as well as gaming and photos, an offering which other social networks, such as Twitter have dominated to date.”

To view TBG’s Q1 Global Facebook Advertising Report please visit: http://clearslide.com/view/mail?iID=2TGN93ZFELA7QZ74ZHU9

*source: eMarketer, March 2012

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