Facebook Ad Rates Jump Ahead of IPO

Average CPM rose 41 percent since Q1 2011, per TBG Digital

Facebook will make all kinds of pretty pennies when it goes public later this year, but the company has already been filling its coffers through a booming ad business. The average CPM for those ads running along the right rail of friends’ Facebook profiles and brand pages have jumped 41 percent year over year since the first quarter of 2011, according to social advertising firm TBG Digital.

For the report, released April 16, TBG Digital analyzed impressions it had managed on Facebook for clients between Q1 2011 and Q1 2012.

The 41 percent jump may not seem so substantial when considering the units’ growing adoption among advertisers, but from the last three months of 2011 to the first three months of 2012, the average CPM rose 11 percent for right-rail ads targeted to U.S. users only. TBG attributed the rate increases to Facebook becoming more attractive to advertisers, despite slowing user growth.

Experiencing even steeper growth in the quarter-over-quarter period were ads bought on a cost-per-click basis. TBG said that the average CPC for U.S. Facebook campaigns grew 20 percent quarter over quarter—even as the average clickthrough rate for examined U.S. campaigns fell 8 percent between Q4 2011 and Q1 2012.

For an apples-to-crabapples comparison, Google’s most recent quarterly earnings statement noted that average CPCs fell 12 percent from Q1 2011 and 6 percent from Q4 2011, although those numbers include search and display ads running on Google-owned and network sites.

But the advertisers whose campaigns saw the biggest percentage rate increase amid Facebook’s rate boom were those seeking fans. TBG said the average cost per fan acquisition for U.S. campaigns increased by 37 percent between Q4 2011 and Q1 2012. That number is likely to change with Facebook repositioning its ads for interactive as opposed to acquisitive ends, as demonstrated in the company’s announcements during fMC, its marketer conference, in February.

Retailers accounted for 23 percent of the 372 billion impressions examined by TBG, but financial services companies had the most expensive advertising costs, per TBG. The company attributed the expense to the fact that 91 percent of the vertical’s ads directing users outside of Facebook. TBG had said in an earlier report that ads keeping users within Facebook can see CPC rates reduced by up to 45 percent.

TBG did not disclose specific cost numbers for any of the rates mentioned.

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