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Facebook ad costs rise steeply

News, 08 December 2014

SAN FRANCISCO: Facebook's average cost-per-thousand impressions (CPM) increased sevenfold year-on-year to November 2014, but advertisers' ROI nearly doubled over the same period, a new industry report has shown.

According to Kenshoo, the marketing software provider and a key Facebook partner, the click-through-rate (CTR) on the social network also rose five times since November 2013.

Better performance from the newsfeed ads, increased mobile usage by consumers and competition from advertisers for mobile adviews all contributed to the price increase, Kenshoo said.

Facebook now shows fewer ads in the right hand column, which has encouraged advertisers to buy more of the page post ads that appear in users' newsfeeds.

These newsfeed ads perform better, the report said, because they are more contextual and native, delivering more impact and better engagement, which has helped to push up prices.

This means an increasing number of advertisers are seeking newsfeed placements and are using advanced targeting features like Custom Audiences to generate more engagement.

Commenting on the findings, Kenshoo research analyst Laura Ruszkowski, said: "As Facebook advertising has evolved, it has given marketers the opportunity to identify and target their highest valued audiences to drive engagement and conversations.

"By driving efficiencies and optimisations in their paid social programs, marketers have become more sophisticated and their strategies more vigorous, thus increasing overall competition within Facebook advertising and, in turn, upping the worth of Facebook users."

Kenshoo based its findings on data from marketers who use it to manage their advertising on Facebook.

Data sourced from Kenshoo; additional content by Warc staff