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Facebook makes 58% more per ad than last year

New report shows that just a few weeks in, mobile ads are outperforming Twitter ads

Technology trends and news by Krystal Peak
July 18, 2012
Short URL: http://vator.tv/n/2875

Facebook has been banking on mobile as a way to show revenue and usership growth this quarter and, according to a quarterly report from ad agency TBG DIgital, its getting at least one of those things right.

Last quarter, sponsored Stories saw 53% more engagement than standard ads, and mobile ads had four times the engagement of Twitter ads.

The report looked at 406 billion impressions, covering 190 countries and 276 clients, and as with past reports has been vetted by the Cambridge University Psychometrics Centre.

The latest report from TBG Digital, released Wednesday, states that the cost per thousand impressions (CPMs) on ads on the social network increased by 58% compared to the same period last year and overall engagement also grew by 11%. This reversed the decline experienced the previous quarter.

This bump in ad impressions and engagement, TBG points out, is likely due to the public's growing acceptance of seeing ads target to them and the general shift from many brands to blend the types of ads and social engagement they are striving for.

“Our clients, upon our advice, are now willing to pay more for quality clicks and fans. Focus is shifting toward measurable engagement and the difference Social Media connections are making to their bottom line,” the report states.

Germany had the largest increase in CPMs, up by 31%, while the U.S. was second-highest at 25%. The UK trailed behind the most with only a 7% rise in CPM.

This news comes after the Facebook stock (NASDAQ:FB) hit a month-long low during Tuesday of $28.09, after reports from Capstone analyst Rory Maher stated that the social network's user base declined by more than 1.1% over the last six months and the European market was also seeing a decrease in users. 

The shares opened Wednesday at $28.31.

The drop in users for the US market is something that Facebook has anticipated in the past.

“We anticipate that our active user growth rate will decline over time as the size of our active user base increases, and as we achieve higher market penetration rates,” Facebook stated in its original S-1 filing. “To the extent our active user growth rate slows, our business performance will become increasingly dependent on our ability to increase levels of user engagement in current and new markets.”

There are other markets, such as India and China that Facebook is looking at more aggressively to help combat the falling numbers in the US, but word on the mobile and Web advertising pick-up are likely going to help the company as people wait to hear the first quarterly earnings from the company in a week.

How the CPMs grew

TBG assess that the increase in CPMs because of the increased interest and use of Sponsored Stories as well as mobile ads.  Both of these methods already have higher CPMs than basic display ads.

Also, as Facebook works on its analytics, feedback and algorithms, ads are becoming more targeted and effective. Since mobile ads have only been on the scene for two months, there are signs that the effectiveness of them could outpace the display ads on the Web platform. In addition to having higher CPMs, mobile ads helped push the overall click-through number up 31% compared to a year ago. 

When comparing Facebook mobile CTR to the 24 million Twitter ads looked at (which garnered .266% CTR), Facebook mobile pulled in 4x the interaction that Twitter ads did.

TBG also explained that “desktop” ads — those that appear in the right column of the Facebook page, and news feed ads are performing significantly poorer than mobile ads. I also find these to be some of the least relevant and poorly constructed ads on Facebook -- usually with some disjointed clip art that doesn't make sense and text that is not interesting in the least.

Desktop ads had CTRs of 0.083%; with desktop news feed ads with CTRs of 0.588%. To put that in perspective, mobile ads, which appear within a users’ news feed, ad a CTR of 1.140%. 

This ad information will likely be major highlight in the upcoming earnings report from Facebook and should encourage the company to keep innovating their advertising offerings for even better engagement opportunities. 

 


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