Facebook advertising costs increasing in the US (report)

Since Facebook's user base in the US is starting to plateau, advertising costs are increasing. Thankfully, Facebook is offering incentives for advertisers who stay within the social network.

To counter increasing advertising costs caused by slowed user base growth in the US, Facebook is offering advertisers quite the discount. More specifically, the social network is offering up to 45 percent off Cost per Click (CPC) rates, according to the 10-slide Global Facebook Advertising Report Q4 2011 from TBG Digital.

The report demonstrates how Facebook is wooing marketers to keep their advertising campaigns on the social network. After analyzing 326 billion impressions from 266 clients in 205 countries, TBG published the following findings in its report:

  • Strong incentives for advertisers to stay within Facebook, with potential 45 percent reduction in CPCs.
  • Stabilizing Facebook growth in US sees increase in advertising costs.
  • Facebook earns 23 percent more in ad rates since Q1 2011.
  • Advert performance improves by 18 percent in 2011.
  • Top five Sectors comprise almost 70 percent of total impressions.
  • The financial sector accounts for more than 60 percent of impressions in Offsite campaigns.
  • CPCs increase from Thanksgiving to Saturday 17th December.

TBG also found Facebook's economic model delivers improved value for advertisers, both in effectiveness and in terms of cost. CPC rates were reduced for advertisers running campaigns that recruit fans or require users to install apps. The 45 percent number comes from comparing to advertisers who directed traffic away from Facebook. For example, financial services firms often direct users back to their own websites to complete a quotation or the sign up process. If a banking firm builds a Facebook app that performs the same function, it is offered a reduction in advertising costs.

Cost per Thousand Impressions (CPM, how much Facebook earns every time an ad is shown to a user) rates increased by 8 percent on average over the quarter. This means the total increase for 2011 was 23 percent. Click Through Rates (CTR) also increased, growing by 18 percent during the course of 2011.

TBG's report looked at 18 bellwether industry sectors in terms of volume and effectiveness. The top five sectors ranked by volume, which account for almost 70 percent of the total impressions served on Facebook, are as follows: finance, retail, food and drink, games and entertainment. Internet and telecom are close behind.

"Users are increasingly discerning about what they view on social media networks, so it is in all advertisers' interests to ensure that their content resonates with their target audiences and fits with their usage habits," TBG CEO Simon Mansell said in a statement. "The potential cost savings available by maintaining traffic within the Facebook environment is particularly compelling and demonstrates its effectiveness as an advertising channel and also as a 'destination', with more and more clients investing heavily into their Facebook presence With the reported introduction of mobile adverts early this year, the opportunities for advertisers will continue to grow and Facebook is cementing its position as an increasingly essential part of major brands' advertising strategies."

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