The cost of Facebook ads is on the rise – but advertisers don’t seem to mind because they’re seeing results. At least for now.
According to the most recent Q2 benchmark report from Facebook ad partner Nanigans, the click-through rate (CTR) on Facebook ads was up 146% year over year and rose 47% from the first quarter. Spend on unpublished page posts, mobile app install ads, and domain ads comprised 87% of Facebook spend this quarter.
Of course, there’s also CPM to match, which is at $1.95, an increase of 218% from this time last year. And cost per click is also on the upswing for Facebook. The average CPC for Facebook ads, both desktop and mobile, rose 7% from Q1 to $0.55. For those counting, that’s a 29% YoY increase.
Nanigans’ ecommerce customers, which include Rue La La and eBay, saw CTRs rise 111% since Q2 2013. On the gaming side, Nanigans clients, of which Wooga is one, saw a massive CTR uptick of 579%, a growth related to the general move from desktop to mobile in the gaming space. It’s a shift Facebook has rushed to meet, with its expanding Install Ads program and the mobile ad network, launched at the f8 conference back at the end of April.
Despite, or perhaps because of, plummeting organic reach, Nanigans reports that advertisers shelled out 56% of their Facebook advertising budgets on mobile, trumping desktop’s waning 44%.
“Facebook has become a more mature platform, catalyzing all sides of their ad ecosystem, from offering ad products that perform at scale in meeting a variety of advertiser goals to create an ad experience that end consumers actually engage with,” said Cheryl Morris, director of market development at Nanigans. “Just look at mobile alone: Facebook went from no presence to a $1 billion business in a year’s time – turning the industry on its head in terms of expectations around creative and relevancy.”
Advertisers clearly see a value exchange in their relationship with Facebook, which has more than 1 billion active mobile users. That massive audience, coupled with the potential revenue coming in via mobile all install ads, seems to be proving more potent to advertisers than the steadily rising cost of advertising on Facebook.
It’s mobile for the win, but Morris advises against putting desktop on the back burner.
“In general, ad dollars follow consumer time spent, and right now for our consumers, that’s increasingly on mobile – but that doesn’t mean spend to desktop will be completely eclipsed,” Morris says. “There are plenty of challenges and work to do in marrying data and understanding behavior across devices, from better attribution to storyboarding that generates demand and captures intent.”
But when it comes to Facebook’s effectiveness, the jury isn’t out. Early adopters who went big on Facebook at the beginning have had time to hone their strategies by now, Morris said. They know their KPIs and they’ve had time to develop solid in-house knowledge, which directly correlates to their confidence in the channel and the money they spend there.
“Our customers consider Facebook always, right alongside search (and) we’re not seeing demand slow nor performance dip,” Morris said. “Will it be as large as search? We’re not sure. But Facebook has certainly ushered in a new era of display.”
Facebook’s next earnings call is scheduled for July 23.
Correction 8/10: The original version of this article stated CPIs were at $1.95, when it’s CPMs. The article has been edited to reflect the change.
