June 20, 2012 0

How effective is Facebook’s paid advertising?

By in Digital Marketing Strategy, Social Media for Business

The effect of Facebook’s paid advertising has been a huge bone of contention in recent months with General Motors cancelling all its paid ads on the network and Reuters publishing a scathing poll that states that four out of five users are not swayed by Facebook Ads.

We however sought to establish when and if Facebook advertising does work.

We formed our deductions from three research papers; one from UK Firm TBG Digital, which based its research on  326 billion impressions for 266 clients across 205 countries, ComScore and Social Fresh.

We figure there are some major points to consider:

Industry Sector

Let us start with TBG’s breakdown of Facebook click-through-rates across different sectors:

Facebook Advertising Click-Through Rates by sector

Facebook Advertising Click-Through Rates by sector

As we can see here the results vary greatly across the different sectors. General Motors would fall under the Auto & Vehicles sector, which is somewhat towing the line according to this research. This table certainly indicates what we should now expect as digital marketers from our Facebook paid advertising efforts as we interact with clients in different market sectors.

How advertising budget is spent

Social Fresh also provided data that gave us more to think about.

Facebook advertisers see an average cost per click of $0.80 and average clickthrough rate (CTR) of 0.041 percent. There are also various variations to this average based on how brands conduct their Facebook advertising. For instance, clicks that keep traffic within the Facebook ecosystem cost less on average at $0.70 while ads that drive users away from Facebook cost more at an average of $1.08 per click. Brands using agencies seemed to report a higher than average CTR of 0.049 percent while those using a Facebook rep reported an even higher CTR of 0.05 percent as a opposed to 0.038 when they did their own internal advertising. This may be down to more refined tactics from both agencies and reps. In essence, using an agency or Facebook rep for your advertising and keeping traffic within Facebook’s ecosystem by building brand pages will give you the highest possible CTR.

Sponsored stories vs regular ads

We find that ComScore makes a very compelling argument for Facebook advertising by summarizing the activities that brands ignore that lead to far better CTRs.

Facebook Brand Amplification

Facebook Brand Amplification

ComScore is actually referring to many brands’ lack of focus when it comes social media strategy. Getting fans is considered by many as the sure path to hitting their social media ROI. Facebook activities should lead to amplification which simply means your fans talking about content and inherently spreading it to their friends who are not fans.

Facebook Amplification Ratios

Facebook Amplification Ratios

ComScore indicates that brands can as much as double their reach through sponsored stories on Facebook. The amplification ratio here indicates the number of ad impressions received from fans against those from their friends as a ratio. Therefore the answer here is simple. Build a better Facebook strategy and it should lead to better CTRs through the use of sponsored stories rather than regular ads.

In summary our research has led us to believe that there are too many factors to take into account with Facebook’s paid advertising to completely write off its effect. It is certainly down to your agency to keep you one step ahead by harnessing all this knowledge and technique.

 

Links:

ComScore’s Facebook Ad Effectiveness Report

TBG Global Facebook Advertising Report

Social Fresh Facebook Advertising Survey

 

 

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