Cost of Facebook Advertising Rapidly Increasing

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Facebook CPM Increasing

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.

[Sources Include: TBG Digital & Forbes; Image Source: TBG Digital]

David Angotti

David Angotti

After successfully founding and exiting an educational startup in 2009, I began helping companies with business development, search engine marketing (SEM), search engine optimization (SEO),... Read Full Bio
David Angotti
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  • I am a very small-time advertiser on FB and find these results are totally contrary to my own experience. In the 3 years I have been advertizing my CPC has dropped approx. 85% overall and in the last 6 months alone they have almost halved. This without changing anything except reducing my bids in line with the CPC.

    It is also interesting to note that I am now paying only about 25% of the average price offered by the seeminglty unending number of agencies who phone me on a weekly basis touting for business and offering “guaranteed” traffic!.

    • David Angotti

      Hi Tony, that is interesting. Perhaps this is something unique to your campaign or industry? The study examined a much larger sample size (235 clients in 190 countries and 372 billion impressions) which probably produced more statistically relevant/representative results than analyzing one campaign.

      I would be interested to hear from others that use FB advertising regarding whether prices are dropping or falling?

  • As the mainstream adoption reaches saturation we might be faced with the future where Facebook becomes another reckless advertising media where the big player dominate.
    The “Social” in social media again favorable for the well-known brands that have resources, money and skills.

    I expect Facebook to roll out new features on its ads platform in the following months to enrich the options available to advertisers.

  • Google saw its adwords platform take a 12% decrease last year. Soon Facebook will be too expensive for PPC also. My guess is it will still be great for branding but not so much for direct response.

  • vicky

    I am a writer advertising on FB. Before FB went public in the stock market I was paying about thirteen cents per click and now I’m paying seventy-five cents per click. It was great way for small business owners to advertise but now it has affected my bottom line.