Advertisers Shift Facebook Ad Spend

Facebook has 800 million active users, it’s valued at $96 billion, it’s been around for eight years, and there’s still nothing approaching a consensus about how to best use it for advertising purposes. But as Facebook’s own advertising strategy evolves, so does the attention brands and marketers approach the network, and so does the way effectiveness and performance is measured there.

Online advertising management services platform provider Marin Software — which claims to manage $100 million in Facebook ads — took a look at its data and recently released some figures on the subject: Ad spending is shifting from Marketplace Ads — those display ads that show up in a user’s right-hand column, and which become visible to users via targeting by demographics and the like — and toward Sponsored Stories — posts that brands pay to promote for greater visibility, with which users can interact and which become visible via data pulled from each user’s social graph. Between April of 2011 and March of 2012, Facebook ad budgets allocated to social ads grew from 5 percent to 23 percent, and Marin predicted that by this trend, 50 percent of advertisers’ Facebook ad budgets will go toward ads that incorporate the social graph. Cost per click for social ads increased 86 percent over that time frame, which CPC for those right-column ads decreased 15 percent. And looking at click-throughs, Marin determined consumer engagement with Facebook ads had increased 50 percent.

Those numbers suggest something about both marketers’ confidence in Facebook and users’ response. Of course, there are a lot of variables involved as well. Reached on the phone today, Marin research analyst Gagan Kanwar, who assembled the stats, said he’d considered data drawn from advertisements from “several dozen, maybe a hundred clients. It’s a fairly representative sample” across several industries, he said. He said Marin is seeing, in Facebook ad spend, “an increase of budgets… across a client space that’s growing and expanding every month.” But he acknowledged there’s no standard metric for determining ROI, and he even questioned the merits of any across-the-board standard. “Different types of companies determine ROI very differently.” Disney, for example, wants to see a large social media fan base. “They see that as an important part of their strategy,” he said, while, from another side, “Audi keeps track of mentions.” And best practices to really reach potential consumers in social media are evolving, so there’s room for growth. If you look at engagement rates on Facebook, he admitted, “It’s still pretty low compared to search. Is it like comparing apples and oranges? The issue with Facebook is… people are not looking to buy products. They’re looking to stay in touch with people. Companies that do well on Facebook capitalize on that need, that emotion.

“I think people compare Facebook to Google, but I think they’re fundamentally different,” Kanwar added. “I always think of Facebook as being targeted to top-of-funnel. Facebook probably sees social ads as a strategic differentiator to Google.” And in any case, he said Marin’s data suggests Facebook and Google generally aren’t even competing for the same share of budgets — advertisers are not shifting budgets from search and toward Facebook. “In general, budget is coming from more traditional media such as television or print, or radio even,” he explained.

The money’s flowing into Facebook, but as time passes, attitudes about what that money’s being spent on will change. “Facebook wants to think more in terms of engagement and less in terms of conversions,” Kanwar said. “I think the gap is being able to see ROI in the traditional sense, but I think people will be seeing Facebook as an engagement tool.”

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