The placement of ads in Facebook’s news feed has caused click-through rates to soar by more than 20 times, from 0.058 percent to more than 1 percent, according to an analysis of some 86 billion impressions between the third quarters of 2011 and 2012, from 459 clients in 113 countries by Spruce Media.
Spruce Media added that the placement of Facebook ads on the mobile news feed has also been successful for advertisers on the social network, as they have led to not only higher CTRs, but 15 times higher cost per thousand impressions (CPMs) for Facebook.
Other findings from Spruce Media included:
- CPMs are up 27.5 percent in the third quarter of 2012 compared with the year-ago period, with the U.S. experiencing a 40.5 percent jump during the same time frame, to $0.59 from $0.42. The bulk of that increase occurred between the first and third quarters of 2012, after the debut of ads in the news feed.
- During that same 12-month period, CTRs are up 57.2 percent, and 61.1 percent in the U.S.
- Cost per click is down 18.2 percent in the third quarter compared with the third quarter of 2011, and that drop was 12.3 percent in the U.S., to $0.59 from $0.68.
- Domain ads have slipped from 82.3 percent of all impressions analyzed in the third quarter of 2011 to 70.6 percent in the third quarter of 2012, while the opposite has been true for page like sponsored stories, which saw their share rise to 13.4 percent of all impressions, from 5.6 percent.
- However, sponsored stories outperformed page like sponsored stories across-the-board, with a 20 percent higher conversion rate and nearly double the CTRs.
Spruce Media concluded:
Looking at the CPMs, CTRs, and CPCs; our data suggest a win-win-win trend in the past year, and the past six months, in particular. Facebook is making more money per ad served, while advertisers are seeing improved performance. And, from a user’s perspective, increasing performance suggests increased relevance, which makes for a better user experience because it means users are seeing fewer ads that are not relevant to them.
We’re in the midst of a transition toward advertisers embracing social media as the mainstay of their advertising budgets. Advertiser spending on social networks increased by two-thirds in 2011, and it may grow around 50% in 2012 (Consumer Internet Report, Morgan Stanley; Oct. 17, 2012). Facebook user growth and time spent on-site remains exceptionally strong, and more brands are embracing Facebook as a “must-buy” as they realize the value of self-reported user data and the fact that their customers are spending significant time within Facebook.
As our report showcases, Facebook has increased revenue per ad view, while yielding better performance for advertisers by introducing better-performing native ad units, such as sponsored stories. In addition, the introduction of different placements, such as news feed and mobile, has yielded strong results for Facebook and its advertisers.
Facebook has the ability to continue boosting ad pricing and, hence, overall earnings materially over the next several years by offering more robust analytics offerings, higher-value ad formats, and greater reach into higher-value ad verticals — all while providing a better experience to advertisers and users.