Ads on Facebook cost more but got fewer click-throughs in 2010 compared to 2009, and performed about half as well as traditional banner ads, according to a new survey.
A study conducted by Webtrends looked at more than 11,000 campaigns on Facebook to try to establish benchmarks for brands looking to advertise on the platform.
According to Webtrends, the average click-through rate (CTR) for Facebook ads in 2009 was 0.063% and 0.051% in 2010 — half as much as industry standard of .1%. The cost per click (CPC) was also $0.27 and $0.49 for those periods, respectively.
Webtrends also detailed the cost-per-thousand (CPM) and cost per fan (CPF):
According to the study, not all visitors to Facebook interact with ads the same way. “The older we get, the more we click,” the survey notes, adding that there’s a falloff, however, after age 65. Women and men click at pretty much the same rate.
Similarly, there are few geographic variations, except for Hawaii, whose residents click through at almost half the average and North Dakota and Wyoming, whose residents click at double and triple the average rate.
Not surprisingly, users are also more apt to click on an ad for a category they consider fun, like media and entertainment or blogs, categories that trounce laggards like health care and software.
As the report notes, Facebook is projected to post $4 billion in advertising this year. Part of the appeal, aside from the network’s huge base of users, is the ability to get friends of targeted consumers to give their thumbs up. That apparently combats ad burnout. According to the study, ads targeting friends of fans last three times longer than standard ads because new fans keep coming on board, adding more friends and thus more potential ad targets.
The takeaway? Facebook ads may not get a lot of click-throughs, but for the moment, friends’ recommendations make them last longer.
COMMENTARY: Webtrends compiled the data for its survey by amassing a large database of Facebook advertising campaign results. Here are a few stats on the volume of data analyzed for their report:
- 4.5 billion impressions
- 2.2 million clicks
- 11.2 thousand ads
- 1.5 thousand campaigns
The WebTrends report claims that social ad click through rates experience significant decay over time. If you’re used to buying search ads, you know that successful ads can be run for months without any changes. Out of the ads they measured, they found that interest targeted ads began to burn out after three to five days. Eventually the declines in clickthrough rates leads to Facebook deactivating the ad and it’s back to the drawing board. Search ads don’t have this problem because the ads are served to new people that search for the terms. Social ads, however, target people which eventually leads to ad blindness. This is the typical pattern.
According to AdWeek, Facebook’s CPMs are still relatively cheap when you consider that video ads on Hulu can sometimes fetch $50 CPMs. And while many advertisers turn to Facebook to drive traffic or sell products, many traditional brands use the site for its social value, not its propensity to drive clicks.
Facebook's less than stellar performance is nothing new. In an All Facebook article dated November 17, 2007 titled "Is Facebook Advertising Effective", was very critical of Facebook's high CPMs and low CTRs. Here's a quote:
"Facebook has continuously produced less than stellar results for advertisers. With historically high CPMs and historically low click-thrus, Facebook is facing a challenge. Their new ad system has significantly reduced the CPM for those that opt for the cost-per-click (CPC) model. The only problem is that there are no clicks. While the targeting is phenomenal, Facebook users are more engaged by the content within the site rather than the advertisements. Perhaps Facebook is a little too engaging.
This is going to be a significant problem for Facebook over the next few months. With a valuation of $15 billion thanks to Microsoft’s investment, Facebook will have to start producing numbers that validates its astronomical valuation. The only solution I see for Facebook is to extend their advertising platform outside of Facebook as I previously suggested they would soon start to do. Aside from that, I’m not sure what else Facebook can do to improve the performance of their ads."
The above article is so prophetic (notice what they say about the valuation), yet advertiser's continue to flock to Facebook because of the social giant's huge 500 million+ audience and high impressions. Nobody else other than Google can match this. The main reason is because many marketer's don't view Facebook as a revenue generator, but a tool for fan engagement. This is a way for them to increase their fan base, and if this results in higher CTRs, it's icing on the cake.
The World Times prepared an excellent article that presents arguments for bidding on Facebook ad impressions on a cost-per-thousand (CPM) or cost-per-click (CPC) and well worth reading.
Courtesy of an article dated January 31, 2011 appearing in Mashable, a special whitepaper dated January 31, 2011 by WebTrends and an article dated January 31, 2011 appearing in AdWeek
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