This time last year, Facebook CPMs were a bargain.
Well, they’re back to where they were and then some.
The cost of Facebook advertising is up overall by 30% compared with mid-March 2020, according to data from digital agency Aisle Rocket.
Rain the Growth Agency, a DTC-focused performance shop, is seeing Facebook CPMs of between 5% and 10% higher compared to early 2020, with the largest increases coming from campaigns that have a traffic-driving objective.
Facebook ad pricing has been trending up since May after dipping by as much as 50% when the pandemic first hit in Q2 2020.
But Facebook CPMs spiked 38%, based on Aisle Rocket data, with a 30% hike heading into Thanksgiving week and elevated CPMs throughout the December holiday shopping season.
Jen Strojin, SVP of account services at Aisle Rocket, expects Facebook CPMs to keep rising through this year, reverting back to the growth norms of 2019.
“Projections are showing that CPMs will continue to increase – and we are not even in the holiday season yet, where we typically see the highest CPMs on Facebook,” she said.
Although it can vary by industry, Aisle Rocket pegs the cost of prospecting on Facebook currently stands at around $8 per CPM, roughly the same as pre-pandemic 2020. The agency’s models suggest that CPMs might hit $11 by late summer.
So, what’s driving the upswing in Facebook ad prices?
CPMs are a proxy for competition, said Chris Costello, senior director of marketing research at Kenshoo.
Many advertisers halted campaigns last year due to a combo of COVID-19 and the social justice movement, said Costello, noting that early on during the pandemic, “advertisers zoomed out from expensive, targeted campaigns to more broad, largely empathetic messaging.”
Performance-minded gaming advertisers, attracted by the lower cost of user acquisition on Facebook, rushed to fill the void, and were soon followed by ecommerce brands and small businesses promoting ecommerce for the first time.
“Higher prices in the auction indicate new and increasing competition in the marketplace, likely from brands pivoting to ecommerce post-COVID,” said Shuree Jones, director of paid social at Rain the Growth Agency.
“Post-COVID” might be optimistic in terms of moving past the pandemic, but confidence in a semi-imminent return to normality (BRING IT ON) is helping to boost pricing.
“Everybody wants back in the pool, because they want to get in on the pent-up demand and the recovery,” Costello said.
Which is great – except that also means it’s likely gonna be an expensive holiday season on Facebook this year. Aisle Rocket’s models predict CPMs in the mid-teens on Facebook by November and an early start to holiday ad spending, which also happened in 2020.
It’s therefore “imperative that advertisers take a data-driven and efficient approach to their marketing” in Q4, Strojin said, including closely monitoring their campaign results and audience performance on Facebook.
“Advertisers will need to be proactive in developing expectations and benchmarks for their metrics on Facebook, she said, “and understand their thresholds for cost per acquisition, lifetime value [and other related metrics] as they navigate the higher CPMs.”