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Facebook ad pricing up yet spending is down – digital ad trends

Facebook ad prices up

Facebook advertising cost-per-click (CPC) rose 22% in the second quarter of 2011, as more advertisers have come online as was always Facebook’s plan for financial growth. The earliest adopters saw the lowest price when there were the fewest members and as the number of reachable members rises, so will the price.

Efficient Frontier’s 2011 Global Digital Marketing Performance Report says that Facebook CPCs are expected to reach 80% growth by the end of 2011.

Efficient Frontier notes that brands actively seeking fans on Facebook are “on course to double their fan base Year on Year (YOY) by October, demonstrating an increasingly competitive marketplace for consumers’ attention.”

That said, the dollars spent were up 8% in the second quarter but dropped 17% from the first quarter of 2010 with Efficient Frontier suspecting advertisers are focusing on their return on investment (ROI) over volume. We suspect an alternative reason could be that advertisers are diversifying their digital ad spends to include niche target sites rather than the standard Twitter/Facebook duo.

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Facebook comments are viral

According to Efficient Frontier, comments on Facebook have a viral effect. “An analysis of 10 million fans managed by Context Optional demonstrated that for every brand post, there was an average of 100 comments in response. However, brands with more fans received additional interactions. For every 17,000 additional fans generated, the brand received one more comment per post. This demonstrated that there is a viral effect to having more fans as this creates more direct responses (from existing fans) and also indirect responses (from friends of fans).”

Facebook spends are incremental

The study found that Facebook spends are mostly incremental. “Facebook constitutes approximately 5% of search budgets, though for some advertisers this can peak at 25% during time-sensitive, offer-led promotions.In the entertainment category there are some large advertisers who solely advertise on Facebook. This hints that there are new advertising budgets from the gaming and dating sectors going to Facebook, which would not have gone into Search otherwise.”

Bing/Yahoo! rising in spend share

Lastly, the study revealed that Bing/Yahoo! gained a stunning 3.4% points of spend share from Google since Q4 2010. “Bing’s continued focus on higher quality and higher monetized traffic is paying off. Last quarter it was noted that the ROI on Bing/Yahoo! was better than Google. Bid management technology such as that used by Efficient Frontier has enabled advertisers to take advantage of that by moving budgets as appropriate.”

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