In Q3, Facebook Ad Costs Dropped as Engagement Rose

October 22, 2012

This article is included in these additional categories:

Analytics, Automated & MarTech | Data-driven | Digital | Europe & Middle East | Global & Regional | Mobile Phone | Social Media

Facebook ads got cheaper in Q3, says TBG Digital in its latest Global Advertising Report. In the US, average cost per click (CPC) tumbled by 40% quarter-over-quarter after passing $1 for the first time in Q2. The big drop in the US dragged down the average among the 5 major markets examined: while Canada (-27%) and the UK (-2%) also saw lower CPCs, the reverse was true in Germany (15%) and France (19%). All told, across those 5 markets, average CPC fell by 34%.

The report indicates that last quarter’s high CPCs were due to increased bids by advertisers looking to make sure that their ads would be delivered (Facebook works on an auction bidding model whereby ads are not published if their effective cost-per-thousand isn’t high enough). This past quarter, though, rising engagement led to advertisers not needing to spend as much for Facebook to earn its target CPM.

Indeed, the report finds that click-through rates ballooned in Q3, particularly in the US, which saw 99% quarter-over-quarter growth in ad engagement. Canada (+37%) and Germany (+8%) also enjoyed higher CTRs, though the UK (-4%) and France (-25%) saw lower engagement rates on a quarter-over-quarter basis.

Newsfeed Ads Work For US Advertisers

The TBG report examines ad types in the US during the third quarter, finding that mobile newsfeed ads garnered CTRs 23 times higher than “Desktop Newsfeed + Right Hand Side” ads (1.29% vs. 0.057%). Pairing desktop and mobile newsfeed ads together delivered even better results, with a CTR of almost 1.5%.

On a CPC basis, compared to a baseline of no placement targeting (index: 100%), mobile newsfeed ads were right on average (100.4%), while the desktop and mobile newsfeed combination had a CPC index of just 29%. It’s worth noting that desktop newsfeed ads by themselves also had high CTRs (1.285%)and low CPCs (index: 54.4%).

TBG cautions that while it appears that newsfeed targeting is proving effective, most ads are provided on the right side panel. Also, the cheaper CPC for the desktop and mobile newsfeed ad combination may be owing to a greater amount of inventory (and less competition), and that tarting both desktop and mobile may result in fewer impression on mobile.

Finally, the report warns that high CTRs on the mobile ads may be on account of accidental clicks. According to survey results from Sterne Agee, among respondents who used Facebook’s mobile application, fully 6 in 10 report accidentally clicking on ads in the app at least sometimes.

Page Post Ads Get High Engagement Rates

Meanwhile, looking further into newsfeed ads, the TBG Digital report finds that on a global basis, Page Post Ads deliver high engagement rates – above 2% for mobile newsfeed ads (2.43%) and the desktop and mobile newsfeed combination (2.2%). These higher CTRs have contributed to lower costs for these ads – with mobile newsfeed CPCs about 8% lower than the no-targeting baseline, and the desktop and mobile combination CPCs almost half of the baseline cost.

A June 2012 study from Kenshoo Social and Resolution Media similarly found higher CTRs and lower CPCs for Post Ads.

About the Data: The TBG Digital report is based on 520 billion impressions in more than 190 countries, for 282 clients, from Q1 2011 to Q3 2012. The figures for the 5 major markets are derived from 367 billion impressions served from January 2011 to September 2012 inclusive. The US newsfeed analysis is based on 13.4 billion Fanning and Facebook Application impressions served in the US between July 2012 and September 2012 inclusive. The Page Post analysis is based on 3.4 billion impressions served globally during that 3-month time period.


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