TBG Digital, who is one of the biggest spenders on Facebook advertising, recently released their first quarterly Global Facebook Advertising Report of 2012. The report, which is based on 12 months of data for 235 clients in 190 countries, analyzed 372 billion ad impressions to determine how the Facebook advertising landscape is changing. To ensure accuracy, The University of Cambridge Pyschometrics Centre has independently verified TBG Digital’s methodology and findings.
According to the report, during the past year the Cost per Thousand Impressions (CPM) on Facebook has increased by 41%. This number, which indicates how much money Facebook earns each time an ad is displayed, has grown by 15% over the last quarter alone.
In addition to the rapid increase in CPM, the Cost per Click (CPC) has increased by an incredible 23% since last quarter. The substantial increase, which is most likely directly tied to an unbalanced supply and demand, shows that Facebook advertising is gaining in popularity. However, Facebook ads have experienced a substantial decrease in Click Through Rate (CTR), which indicates Facebook’s users now find the ads less engaging than before. Since Q4 of 2012, CTR has decreased by an average of 6% across Facebook’s top five markets and by 8% in the US market alone. While the quality of an ad and several other factors often impact CTR, this decrease is most likely a result of Facebook increasing the number of ads displayed on a page.
The CEO of TBG Digital, Simon Mansell said the following of the report:
“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, sometimes up to seven, which you would naturally expect to actually deflate prices.”
Although Facebook’s exponential user growth rate appears to finally be losing some momentum, the social network is now attracting new advertisers at a rapid pace that is driving advertising rates higher. With Facebook’s number one monetization method commanding higher premiums as they near the IPO, investors are sure to be pleased.