The $67 billion “machine” that is Facebook’s advertising business is powered by the wide array of creative it offers advertisers, enticing the average user to click on ten ads per month.
This is in comparison to the out-of-favour banner ad, which boasts an average click-thru rate of 0.06 per cent, and in some cases can actually result in a decline in sales.
Adtech firm Polar has released these findings as part of a new report into the social media giant and its advertising power, which reveals Facebook is on track to overtake Google in advertising revenue next year.
The recent acquisition of Instagram has aided Facebook’s continual rise, giving advertisers “a cheap alternative to YouTube and Facebook”, with its average CPM of $6.70, compared to the $9+ premium on Facebook and YouTube.
“Facebook has 71 per cent of global social ad spending, even when including YouTube as social,” says Polar in the 45-page report.
“Twitter, Snap, LinkedIn and Pinterest are fighting for scraps from the giant – Facebook. YouTube’s growth is also slower than Facebook’s.”
The creative value
However, Polar believes there is a misunderstanding among advertisers when it comes to appreciating the true value of Facebook.
“Advertisers believe that Facebook works due to targeting and targeting alone. We think there is more to the story,” says the firm.
“Creatives on Facebook are better than ever. The platform offers 11 different creative ad formats (including video, carousel and Stories).”
By addressing “every aspect of the marketing funnel” through its creative offerings, Facebook enables brands to leverage existing content (photos, videos etc.) and turn them into engaging campaigns.
The success of Facebook creative is also in part due to its ‘format familiarity’ for users, who are conditioned to engage with social posts.
The ‘toxic’ web
The report does not ignore the recent scandals that have plagued Facebook, rather it points out some issues that have arisen.
Engagement is dropping and prices are increasing, according to Polar.
“Advertisers saw a 17 per cent increase in price per ad in Q2 of 2018, all while engagement is steadily dropping quarter over quarter,” says the report.
“Facebook has hit ad density, and with revenue growing 25 per cent (faster than audience growth), that means only one thing: prices will continue to rise.”
And despite the unquestionable financial success of Facebook and its advertising business, there are still problems around trust for brands.
The report references a recent Harvard study which suggests Facebook’s approach to targeting may, in fact, be problematic.
People who were told that they were targeted based on activity elsewhere on the internet were turned off and became 24 per cent less interested in the brand, according to the research, while those who were told they were targeted for an ad based on “what was inferred about you” were 17 per cent less interested.