Facebook Ad Click Through Rate Up 18%, Cost Per Click Down 10% Says TBG Digital

Facebook ads are getting cheaper and users are clicking them more, says a new report from Facebook Ads API partner TBG Digital. From the second to the third quarter of 2011, click-through rates increased 18.5% while the cost per click decreased 10.8%. Brands are also allocating more of the spending on these ads to send users to Pages and applications versus driving traffic to their websites.

TBG Digital’s 2011 Q3 Facebook Global Advertising Report is based on analysis of 255 billion ad impression from 216 clients across 192 countries. Most of the results we discuss look at five major markets: the United States, United Kingdom, France, Germany, and Canada.

The methodology has been approved by the University of Cambridge Psychometrics Centre, indicating that the results should be accurate. We have omitted any findings we believe might be significantly biased due to the types of clients TBG Digital has recently signed. In the past, the popular Ads API tool provider has released reports showing the high efficiency of Facebook’s Sponsored Stories ad units and ads that target existing fans.

Click Through Rate Increased 18.5%

The increase in Facebook ad click-through rates is likely related to a simultaneous increase in Page Like and application install campaigns. Users may be more inclined to click these ads than those pointing offsite because Pages can be instantly Liked from these ads, and app installs don’t require users to leave the social experience of Facebook.

The CTR went up the most in the United States and Germany, while prevalence of campaigns linking offsite in UK may have stunted CTR growth in the region. Advertisers looking to boost their CTRs should consider pointing their ads within Facebook rather than to external websites.

Cost Per Click Decreased 10.8%

CPC fell in all major markets except the UK for an average decrease of 10.8%. The increase in CPC may be related to the fact that 87% of campaigns run in the UK point offsite, which TBG says “can yield higher CPC prices”.

However, now Facebook ads pointing offsite can include social context — the names or faces of friends who’ve Liked that website. This could reduce CPC next quarter for offsite-pointing ads. With ads getting cheaper, more advertisers may be willing to shift spend from offline or other online channels to Facebook.

Brands Spend More Advertising for Pages and Apps, Less for Websites

Back in 2010, most Facebook ad spend by brands went to promoting external websites. Since then, brands have significantly increased their spend while allocating more of it towards their on-Facebook presences. 53.7% of spend is now on gaining fans for a brand’s Page, up from 47% in the previous quarter. Meanwhile, less of brand spend is going to advertising their websites.

This shows that brands have caught on to the value of owned marketing through distributing updates via the news feed, and are willing to spend to get users to Like their Page and thereby subscribe to these updates. A single visit to a Page can lead to a Like that generates long-term value for a brand, while websites generally have much weaker retention mechanics.

The proportion of spend allocated to promoting branded applications has also grown, up to 6% of brand spend from 4% last quarter. Brands are looking to start a viral marketing loop by pushing users to their Page tab applications from which they can share content with friends. This draws new potential fans to the brand’s Page and can also seed Sponsored Stories.

Overall, the trend in Facebook advertising is for brands to use paid marketing through Facebook ads to jump-start earned marketing through Pages. Facebook has created a valuable way for brands to stay in touch with potential customers that in some ways is replacing email. Brands are willing to pay to grow the fan counts, knowing they then won’t have to pay to reach those users in the future.

The whole system benefits Facebook, as Page ad clicks keep users onsite and seeing more of its ads. More Likes of Pages also means more updates that can be filtered through the news feed to provide users with compelling content every time they log on.

To learn how to create integrated Facebook marketing campaigns that combine ads, Page posts, applications, and Sponsored Stories visit the Facebook Marketing Bible, Inside Network’s comprehensive guide to marketing and advertising on Facebook.