Paid Media, Paid Social , Facebook Advertising 

Are Advertising Costs on Facebook Increasing?

It’s been an interesting past year or two for Facebook .. (depending on who you ask, that is.)

.. On one hand, advertising revenue continues to grow ($16.6 in Q2 2019 – a 28% increase YoY /year-on-year), and commands more users across its platforms than any other social media platform (2.41 billion users per month).
On the other hand, the company has been rocked by multiple data scandals, leading to the emergence of significant legal battles and PR headaches that could have far-reaching consequences for the company’s future. And likely – the digital advertising world at large. 

– But for the everyday advertiser, only one thing really matters – have these changes made any difference to what are you getting for your advertising dollar?

The Social-Media Conglomerate's Audience-Pool

Facebook from Day One ..

Since the inception of Facebook advertising back in 2007, the social media conglomerate has been a reliable advertisement source for producing targeted, engaged and affordable traffic.

From global corporations to local, small businesses – Facebook’s social media advertisement services meant that advertisers now had access to an enormous data-rich pool of potential customers. Ones that were easily targetable and cheap to acquire.

It didn’t take long for Facebook to quickly became a reliable method of driving traffic to your site through large, appealing ads – seeing moderate cost per click (CPC), and strong click-through rate (CTR).

And with changes in targeting options and a larger glut of companies & agencies flocking towards the platform; has an increase in advertisers (many competing for the same eyeballs) resulted in a drop in efficiencies for individual advertisers?

The Data

The 3-Year Period's Spends-&-Such ..

We reviewed accounts across a range of verticals and spend levels over a three-year period (2016-2019) to determine if costs were trending upwards.

Our findings showed that cost per click (CPC) had increased 158% on an average, across our range of clients. However, not all accounts saw increases (some saw drops as much as -67% but were far in the minority).

If broken-down as per our three largest industry verticals, ‘Education’ saw the largest increase (235%), while Finance and Entertainment both saw increases of 81%.

The costs in bringing users from Facebook-to-website have undoubtedly increased for our clients.

This isn’t necessarily the bane of the platform contrary to as it may seem, as Facebook still offers very comprehensive awareness and consideration options for increasing brand status & interaction.

However, in terms of acquisition and on-site conversions, investments towards Facebook begins to take place as a lower priority amongst a field of far cheaper, display clicks. Not to mention, more targeting search activity.

 

Note (Left – Graph) : Only campaigns with a link click objective were considered to ensure YoY comparisons as reasonable.

How much of a problem is this for Facebook?

Currently, it’s not much of one.

Advertising revenue continues to climb across Facebook’s family of platforms, driven in particular by Instagram.

Instagram’s main strength is its relative affordability. On a CPM basis, Instagram is lower than Facebook or YouTube by at least 30%. But if advertisers push the auctions within Instagram as well, we may see Instagram’s costs rise in a similar fashion to Facebook’s.

Additionally, Facebook is feeling the squeeze of regulations on its targeting capabilities.

Users are being given the power to remove their third-party data associations, which will ultimately limit advertorial capabilities in reconnecting to known customers. And may even have implications towards tracking campaign successes within the platform.

Facebook is still the one that’s most invested in – from all the advertorial social media platforms.

The Bottom-line

This is a big step away from the digital advertising ecosystem that many have grown accustomed to –  and has been described by Facebook as an action that could “possibly impact our bottom line.”

It’s hard to imagine Facebook dropping out as a major player in the digital advertising space, nonetheless.

But the looming threat of impending severe regulatory, tracking & targeting changes – coupled with a rising cost of using the platform –

 

may result in many advertisers departing in favour of a rather affordable, reliable traffic-churning alternatives.

 

Keen to learn more social media must-knows? Here’s our take on why an expert – and only experts must manage your business’ social media.

Read more on the Indago Digital blog and by following us on LinkedIn today!

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