May 012010

Facebook’s self serve ad platform has had a giant impact on many businesses and individuals. It continues to be a great tool to reach targetted users, but maybe it’s not quite as great as it was earlier on.

Facebook users are spending hours online each day. Once they have been on the site for 45 minutes and consumed 1100 ads they are not very likely to click your ad. If you have a very attractive, high click-thru rate ad, Facebook will notice your ad has great performance and then they will start rotating it to individual who are less likely to click.

  • Example: If you are bidding $1CPM and your ad has a .50% Click through rate, you will receive 5 visits for a cost of $0.20 each. Facebook doesn’t want to be sending such cheap traffic out, so they will start rotating this high click thru rate ad to users who’ve already consumed 1000s of ads and are less likely to click. Your click-thru rate then drops to .20% and now your effective cost per click is $0.50 each. You’ll notice ads that show high CTR after they are initially approved fall off a cliff once FB’s system recognizes it. Sometimes I think their system is showing the same ad to the same users over and over to try to lower the amount of traffic they are sending out.

This allows facebook to control the amount of traffic they are sending advertisers, it also allows them to control the prices we must pay per actual click regardless of what bid type you are using.

Facebook traffic quality Has Plummeted As Game Participants Consume 1000s of ads per hour without engaging.

Yesterday Facebook sent out a letter to advertisers detailing a further drop in CPM bid ad performance because of new adserver upgrades. Cost per Click ads are becoming more productive on FB lately and their letter indicated ads bid on cpc basis will continue to run in higher value areas.

To me this means they are going to prevent CPC ads from running in a lot of the game and app areas where quality is lowest and the quality of CPM will be total junk. Has overall performance gotten so bad that they must seperate the two types of bidding to isolate certain areas of Facebook’s site from affecting ad quality? Why not let advertisers pick which areas their ads run in ? Will Facebook ever offer frequency capping options?

Personally I’m optimistic as we’re continuing to find great ways to make our ads produce. The game of Facebook Advertising Unknowns is won by experimenting and finding out the answers for yourself. Try creating a CPC and CPM version of the same ad and see which one offers the best performance. Repeat this test every few weeks so that you have barometer on performance shifts between bid types.

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