Earlier this week, Facebook strategic PBM Spruce Media released a report, the “State of Facebook Advertising,” that looks back at Facebook’s ad marketplace in Q1. Facebook’s first-quarter earnings were also shared this week.
In light of these announcements, here’s a look at where Facebook advertising stands, Facebook’s new commitment to attribution and measurement, and what’s next for the advertising platform.
The State of Facebook Advertising
Despite a post-holiday decline in media spending, Facebook CPMs overall have risen very slightly (by 3% to be specific) from Q4 of 2012.
CTRs have increased overall by 50%, while CPCs have decreased by 31%. One likely contributor to these dramatic shifts is the improved optimization abilities made possible by Facebook’s new reporting and attribution offerings.
The report also mentions Facebook’s recently released CPA Bidding options, which allow advertisers to pay for ads based on actions taken (e.g. $1 per new Like). Because the CPA Bidding option was only announced in April, there isn’t yet sufficient data to measure its effect on the state of Facebook advertising overall. That said, it is likely to be a major factor in any subsequent state of Facebook advertising report.
What’s Next for Facebook Ads
In Wednesday’s earning call, COO Sheryl Sandberg, discussed Facebook’s plans to incorporate the capabilities of a recent acquisition, Atlas Advertiser Suite, into their advertising offerings. The acquisition, which was announced in February, was finalized last week. Atlas is a tool for planning, executing, measuring, and optimizing digital ad campaigns.
The initial announcement led many, myself included, to speculate that Facebook intended to build an ad network that would let advertisers use Facebook data to serve ads on external sites.
However, Atlas Sandberg stated unequivocally that Facebook has no plans to build out an external ad network, and will instead be leveraging Atlas to build more robust attribution solutions.
Facebook hopes to discourage advertisers from relying on clicks as a measure of performance for campaigns. The evidence demonstrates that for display campaigns, clicks rarely correlate with conversions, and measuring the performance of display campaigns with clicks tends to undervalue the campaign. Since so many advertisers rely on this method, it makes sense for Facebook to invest in their own measurement solution, which will most likely result in Facebook ads receiving more credit where credit is due.
Better measurement as a part of Facebook’s ad offerings also provides an obvious boon to advertisers, many of whom run multiple ad campaigns at once and struggle to find the best way to measure which campaigns performed best.
A more robust attribution platform could be extremely beneficial for both advertisers and Facebook, and could dramatically improve Facebook’s CPA offerings, a pricing model that’s becoming more popular with marketers by the day.