Facebook Advertising Rates Skyrocket, CPM Up 41%

Rising demand for advertising has enabled Facebook to raise prices across categories, which makes sponsored stories more cost effective than ever, along with sending clickthrough traffic to brand pages instead of offsite.

Rising demand for advertising has enabled Facebook to raise prices 41 percent over a one-year period, for promotions sold based on the number of views or hits.

That comes from a report by TBG Digital, which studied over 372 billion marketplace ad views on behalf of 235 clients with audiences in over 190 countries, and had the results verified by the University of Cambridge.

The average cost per thousand views, or impressions, grew 15 percent in the last quarter, with the U.S. enjoying a rise of 11 percent and the U.K. seeing 13 percent in this timeframe.

The TBG report also discovered that clickthrough rates on news sites nearly doubled just from the last quarter of 2011 to the first quarter of this year, a rise that the consultancy attributes to the advent of social readers, which has made media more profitable than ever.

All the trends together lead TBG to recommend that brands focus their attention on so-called earned media, which really amounts to Facebook’s sponsored stories, the type of ad that offers the strongest return on investment of all promotions on the social network. A past report by TBG found that sponsored stories yield a 46 percent higher clickthrough rate than all other ad types.

Meanwhile, TBG Digital’s latest ad report also found:

  • Cost per click grew 23 percent from the last quarter of 2011 to the first quarter of this year within the top five territories, leading TBG to conclude that while growth in new users may be slowing, the social network is becoming more attractive to advertisers
  • The U.S. experienced a reduction in average clickthrough rate of eight percent in this quarter with the top five territories — seeing an average decrease of six percent — which could be attributed to an increase in the number of ads being placed on users’ pages.
  • Retailers had the largest number of ad views, making up 23 percent of all impressions in the first quarter.
  • The finance sector had the most expensive ad costs, with 3.5 times higher costs per click than the sector with the lowest ad costs, which was food and drink.
  • The top five industry sectors — TBG ranks based on 18 industries — continue to dominate Facebook ad impressions, representing 78 percent of views.
  • The cost per fan acquired has increased by percent across all territories from the last quarter of 2011 to the first quarter of 2012.
  • The U.K. had the greatest jump in cost per fans over this time period, at 77 percent.
  • The second biggest gain over this time period occurred in the U.S., which had a 37 percent rise in the cost per fan.
  • Ads that directed clickthroughs to Facebook pages wound up costing less than promotions that sent traffic off the site, due to incentives that the social network offered to advertisers.
  • Cost-per-click reductions of up to 45 percent motivated the food and drink industry to only send four percent of its traffic off the site, making for the lowest ad fees among industries.
  • The financial services industry directed 91 percent of clickthrough traffic off of Facebook, which explains why this industry had the most expensive ad costs on the site.
  • The average percentage of ad clickthrough traffic sent off of Facebook was 38 percent across the 18 industries studied by TBG.

TBG Digital Chief Executive Officer Simon Mansell summed up all of these patterns as follows:

The recent Facebook advertising report unearthed some compelling trends as it relates to how brands are using the site to engage customers. One amazing finding is that Facebook has seen an increase in pricing at the same time when it has also grown the number of ads per page to seven which you would naturally expect to actually deflate prices.

Additionally, the rapid increase in CTR for news clients is promising for Facebook as it demonstrates that the platform works well for sharing news as well as gaming and photos, an offering which other social networks, such as Twitter have dominated to date.

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