The performance of Facebook ads improved significantly over the past year, according to a study from Adobe that looked at 130 billion ad impressions and 400 million unique visitors on the social network.
Click-through rates (CTRs) on Facebook ads are up 275% year-over-year in the third quarter. We saw a particularly steep increase in CTRs during the third quarter, which was likely driven by advertisers investing in higher-quality creative ahead of the holidays, and also Facebook's efforts to improve its targeting methods.
Although click-through rates are up for Facebook ads, the cost per click (CPC) went down 40% year-over-year. This suggests that there is a positive return on investment opportunity for direct response marketers. In particular, retailers that want Facebook users to click on an ad that brings them to a product page, for example, could see very strong results.
However, advertisers in retail, consumer packaged goods (CPG), and other verticals that invest heavily in direct response marketing often undervalue Facebook as a sales driver.
"Social media is often not the last thing you do before you buy," Adobe Digital Analyst Tamara Gaffney told VentureBeat. "It's often the first thing … so advertisers are undervaluing social [media advertising] by as much as 116%."
Some retailers are realizing the benefits of Facebook ads, however. Social media advertising firm Nanigans is also seeing Facebook ad performance improve. Its more than 100 clients in the retail vertical averaged a 109% return on investment with Facebook ads during the third quarter. "Facebook is now a performance marketing platform and retailers are focusing on results," Dan Slagen, senior vice president of marketing at Nanigans, told Internet Retailer. "They're generating strong returns, which is leading them to continue investing in the platform."
Brand marketers on the other hand, often measure their ad campaigns in terms of impressions. Adobe found that the cost per thousand impressions (CPM) is up 120% year-over-year. This suggests that there is growing demand for Facebook ads that get in front of as many eyeballs as possible, which is a technique advertisers often use to accomplish branding objectives.
It's important for advertisers to consider what their objectives are for an ad campaign, and to focus on metrics that will help them realize the most return on their investment.
Download the chart and data in Excel.
