Spruce Media On The State Of Facebook Advertising In The Fourth Quarter Of 2012

Facebook’s fourth-quarter earnings call is set for Jan. 30, but Facebook advertising solutions provider Spruce Media offered its early look at the state of advertising on the social network during the last three months of 2012, and the company was optimistic that the sector will continue to grow.

Spruce Media provided statistics on metrics including cost per thousand impressions (CPM), click-through rates, and cost per click, and the Facebook Strategic Preferred Marketing Developer also offered its take on the social network’s advertising products, including mobile application install ads, view tags, and its newly introduced graph search.

Highlights from Spruce Media’s fourth-quarter-2012 report follow:

4Q Overview

In the fourth quarter of 2012, we found that ads served on desktop news feed cost an average of $0.24 per engagement. Engagement includes liking a page, liking a post, viewing a photo, viewing a video, clicking a link, etc. Ads served on mobile news feed cost an average of $0.76 per engagement within 28 days. While we found that mobile news feed is extremely effective at driving immediate engagement of liking a page or liking a post, further browsing after the initial engagement is more likely to occur on desktop placement.

In the fourth quarter of 2012, we saw a continued shift in agency and brand focus away from low-CPM placements and into high-CPM ad placements. Coupled with the widespread adoption by performance-based advertisers of Facebook Exchange to backfill what we’ve historically seen to be lower CPM placements, this makes us very positive on Facebook’s actual fourth-quarter revenue against its projections.

CPM

Mobile news feed CPM was down 10 percent from the third quarter of 2012. This could be due to increased inventory with the iPhone 5, iOS 6, and Facebook’s ramp-up of eligible devices and impressions.

Desktop news feed CPM was up 34 percent from the third quarter to the fourth quarter, showing sustained inventory volume, along with increased competition for ever-valuable news feed impressions during the holiday season.

CTR

Mobile news feed and desktop news feed CTRs were up 34 percent and 49 percent, respectively, from the third quarter to the fourth quarter.

Like in the first quarter through the third quarter of 2012, news feed CTRs in the fourth quarter continued to rise, showing a clear improvement in Facebook’s ad-formatting and ad-serving algorithm. Facebook is doing a great job of making sure that ads are shown to people who are most likely to be interested in them. If Facebook is able to continue its focus on ad relevance through 2013, it can ensure a better experience for its users and an increase in positive sentiment for its advertisers. User experience and positive advertiser sentiment are critical in Facebook retaining ad dollars and attracting new verticals to market on its platform.

CPC

CPCs fell for all placements, and significantly for mobile news feed ads. The 33 percent drop in mobile news feed CPC from the third quarter to the fourth quarter further opens Facebook up to the $1.6 billion-plus industry of mobile ad network advertisers.

Mobile App Install Ads

Facebook’s first deposit against serving direct-response advertisers is its mobile app install ad. Our data on this ad unit so far show an average cost per click of $0.39 and an average cost per install of $0.97 — numbers that fall right into the strike zone of your average mobile application advertiser. With Apple’s latest iteration of iOS 6, people are able to completely download an application after seeing a Facebook ad, without leaving the Facebook app and visiting the App Store. As more devices upgrade to the latest Apple iOS version, we expect to see a stark increase in conversion rate across all advertisers. With these promising early results, we expect to see a significant increase in mobile application advertisers in 2013.

Graph Search

The same exact paid media strategies that brands should be employing to maximize their news feed distribution will also benefit graph search. Brands with a high volume and frequency of engagements will benefit even more than they have in the past with more than just the improved new sfeed distribution.

View Tags

Spruce Media sees tag conversions as a longer-term positive industry development for Facebook. The attribution model is starting to shift from last click to multitouch, recognizing the assist that social media provides at the early part of the consumer purchasing journey through awareness. By doing so, social media, especially Facebook, should get more media allocation in the future as brands correctly attribute dollars based on time spent per media channel.

Predictions For 2013

Advertisers are actively discussing budgets for 2013, and so far, the outlook is positive. Most of the brand advertisers expect to increase spending on Facebook in 2013. The advertising activity appears to be sustainable, as the objective is being transitioned from fan acquisition to engagement and story amplification. Facebook’s new targeting tool, custom audiences, is a game-changer, since advertisers can match online identity with offline customer-relationship management and deliver extremely relevant ads.

Conclusion:

Facebook had an extremely productive 2012 and has shown the market that it has a commitment to developing innovative advertising products that provide a better user experience. Ending 2012 and going into 2013, we see brands continuing their Facebook investment from being a “let’s try this out,” to a “must-buy,” to now, being a “how do we strategically develop a media plan that accomplishes our goals?” Seeing the incredible engagement metrics from getting content into the desktop news feed makes developing strategies to get into the news feed and stay in the news feed critical now more than ever.

Facebook’s recent announcement of graph search (a revolutionary new way to discover people, places, and things) could make a great compliment to news feed for marketers. Similar to “getting into the news feed,” the best way to “get into search results” is to establish more connections (increase fans) and post relevant, engaging content. Graph search is just another reason why brands need to employ smart paid media strategies and continue investing on Facebook. Graph search inventory is “demand fulfillment,” which will attract more direct response and commerce advertisers to invest in their Facebook presence because it can increase the organic reach of image and video page posts that can contain links to their Web properties. This additional reach can come at no cost at all, so commerce advertisers need to make sure they are paying attention to Facebook. We are not in a position to speculate on the future performance of graph search as it relates to paid media. However, paid media could absolutely be a catalyst for graph search.

Facebook has made significant progress on product adoption and doesn’t show signs of slowing down in 2013. This brings about a huge opportunity for advertisers that are embracing the social media giant and big challenges in navigating Facebook marketing strategy. We’ve reached a world in digital advertising where we aren’t just talking about impressions, clicks, and conversions, and we can speak about people, reaching them, and exactly what they are doing. Humanizing advertising is a very exciting world that we look forward to Facebook continuing to develop.

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