May 29 Is Buying on Facebook More Expensive? And is it Worth it?
Facebook CEO Mark Zuckerberg announced in January the platform would be revamping the news feed to prioritize content from friends over content from brands, businesses and publishers. Recent updates to the news feed algorithm has increased ad cost, according to Recode. The algorithm change means fewer ads being severed to users, leading to fewer impressions at higher prices. With users spending less time on Facebook comes fewer opportunities to gain reach for organic and paid impressions. Although, the change in algorithm will impact CPM (cost per 1,000 impression) Facebook shared on average users were already spending less time on the platform in Q4 2017. This is likely due privacy concerns circulating around the company.
The volume of advertisements on the platform is increasing slowly due to the company’s decision to slow the increase in the number of advertisements in the news feed. The goal is to not overwhelm fans with too many commercials. Facebook has reported ad volume would be less important going forward and instead revenue growth would come from higher ad prices. Bloomberg reported higher ad prices in Q3 of 2017 with a 10% increase of ad spots and a 35% increase of prices.
In addition, ad space in the news feed has been running low as the platform approaches maximum ad load for some time now. As competition in the newsfeed continues to increase advertisers can expect higher prices. Impressions could level out once Facebook reaches maximum ad load causing CPMs to increase if demand remains the same. As a result, Facebook has been advocating for multiple ad placement to support the newsfeed, audience network, messenger, and Instagram to drive down cost.
Considering Facebook is an ads driven business it will be interesting to track how these changes will impact ad delivery and cost while providing users with a safer and more enjoyable experience. Based on general Q1 observations I have seen slightly higher CPMs from year over year. Going forward advertisers should focus on the platforms extensive targeting features, experiment with platform placement, and utilize video content to maximize ad space with video ads that capture the user’s attention for longer periods of time.
Facebook continues to be an important advertising channel for brands and I don’t see that changing anytime soon. By reassuring user’s confidence regarding privacy and making the experience more personal Facebook is doing what it can to make it right. Only time will tell as we watch and learn.