Report: Facebook Ad Performance Is Abysmal

Facebook’s advertising business is soaring. Yet the performance of the average Facebook ad is abysmal.

At least that’s according to a new report issued by the analytics firm Webtrends, which recently examined 11,000 different Facebook ad campaigns which totaled 4.5 billion impressions. Webtrends found that in 2009 the average clickthrough rate on Facebook was 0.063 percent. That figure slipped to 0.051 percent in 2010.

Because of that decline, CPMs on Facebook have crept upward, going from 17 cents in 2009 to 25 cents by last year.

The only ad categories that were able to crack 0.1 percent clickthrough rates were “tabloids and blogs” (0.165 percent) and “media and entertainment” (0.154 percent). The worst performing ad category on Facebook, per Webtrends, was health care, which generated 0.011 percent clickthrough rates and an average cost-per-click of $1.27.

However, Facebook’s CPMs are still relatively low in the grand scheme of things (consider that video ads on Hulu can sometimes fetch $50 CPMs). And while many advertiser turn to Facebook to drive traffic or sell products, many traditional brands use the site for its social value, not its propensity to drive clicks.

Yet even “social ads”—at least as defined by Webtrends—are only effective for so long. “Out of the ads we measured, we found that interest-targeted ads began to burn out after three to five days,” reads the report. “Eventually the rotting CTR leads to Facebook deactivating the ad, and it’s back to the drawing board.”

Regardless, advertisers continue to flock to Facebook. According to eMarketer, ad spending on Facebook will reach $2.19 billion in the U.S. in 2011 and close to $4 billion worldwide.