Advertisers will spend double what they did last year on Facebook ads. But are they getting their money’s worth?
Webtrends just completed a study that determines how effective Facebook ads are.
All told, advertisers will spend $4 billion on Facebook ads this year, more than double the total from last year. But is it worth the cost?
Web analytics company Webtrends analyzed over 11,000 Facebook campaigns and measured Click Through Rates (CTR), Cost Per Click (CPC), Cost Per Thousand (CPM) and Cost Per Fan (CPF).
The verdict: Costs are up, click through rates are down.
- From 2009 to 2010, Web Trends estimates the CTRs for Facebook ads went down 19%, the CPC increased 81% and the CPM went up 41%.
- The CTR declined from 0.063% in 2009 to 0.051% in 2010.
- Ad rates increased from 17 cents per thousand impressions in 2009 to 25 cents per thousand in 2010.
- By comparison, online display ad costs range from $2 to $8 per thousand on other sites, so Facebook ads are still a good deal comparitively.
Does that mean you shouldn’t advertise on Facebook? Not necessarily.
- Decreasing CTR and increasing CPC rates are a typical pattern for display ad networks, because the audience is becoming more savvy.
- Ads are growing more expensive because many of them are sold through an auction system that’s getting increasing competition as more advertisers turn to Facebook.
- Webtrends believes companies that get a head start by adding millions of fans now are going to end up spending much less money than other brands later.
Acquiring a fan is just the beginning of marketing on Facebook.
“On Facebook, the magic of marketing happens when brands activate their fans in ways that inspire people to share those messages with their friends.”
That’s according to Facebook spokesperson Brandon McCormick who was recently quoted in an article on the subject by the Digits blog of the Wall Street Journal.
The Webtrends study also found that CTRs increased with age and gender.
- Men and women ages 18-24 have the same CTRs, but women 55-64 are 16% more likely to click through than men of the same age.
- The study confirmed earlier research by DDB which found that because people are on Facebook for fun, brands that are more fun to discuss on a social network do better.
- That has translated into higher CTRs and lower CPCs for these more social brands.
- The highest CTR and lowest CPC were registered by tabloids and blogs, media and entertainment brands, ecommerce and travel brands.
Other findings of the research: Cost per fan, click through rates by gender and education, and faster ad burnout rates
- The cost of advertising on Facebook to encourage a user to become a “fan” on the brand’s Facebook page is $1.07.
- Facebook fans without a college education were more likely to click through to an ad as college educated visitors.
- But fans who attended college are twice as likely to click through if a friend liked an ad.
- Ad burnout is much higher on Facebook, with the typical life of an interest-targeted ad being 3-5 days.
- Friend of fan targeting can increase the life of a Facebook ad by 2-3 times.
Have you started advertising on Facebook? If so, what kind of results are you getting? Have you increased or decreased your expenditures as a result?
You can find a copy of the Web Trends study here.