Facebook’s declining organic reach has plagued small- and medium-sized businesses (SMBs) since it tweaked its algorithm about eight months ago. A study by analytics platform SumAll, released in October, highlights exactly what that fallout looks like for smaller advertisers on Facebook.
Because Facebook’s algorithm change reduces the reach of Facebook posts, it has made it easier for click farms, or people paid to like pages, to flourish. Unfortunately, click farms reduce the number of potential customers or fans a business can reach with each message.
“And that, in turn, is driving up the cost relative to the effectiveness of using Facebook as a tool for small businesses to publicize and advertise themselves,” said SumAll head of business development Scott Pollack. “This is basically spoiling the pool.”
SumAll embarked on this research when it noticed that cost per action and cost per acquisition on Facebook had steadily increased, Pollack said.
Using data pooled from The Loop Loft’s pages, SumAll found that cost-per-action (which includes likes, comments and conversations) increased 417%, from $0.05 to $0.24. The cost of acquiring a new site user rose 492%, from $0.20 to $1.16. The Loop Loft saw CPMs rise 70.4%.
While The Loop Loft saw a direct correlation between Facebook activity and new users going back to 2012, the correlation began to drop off in 2013, when The Loop Loft noticed it was acquiring more likes, but not more revenue. “We started digging into the data in around September and released the analysis towards the end of October,” said Pollack, “hence the last three months being excluded. Then we just ran a year-over-year comparison versus the same period last year.”