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A recent report published by TBG Digital shows that advertising on Facebook is getting a lot less expensive…. and it turns out that’s a good thing for them and for advertisers.

Supply and Demand

The report, “Global Facebook Advertising Report Q4 2012” shows that Facebook cost-per-click (CPC) advertising is 37% less expensive than in Q3 2012, where engagement is up 25% from the previous quarter and 157% year-over-year.   In other words: users are clicking paid advertisement more frequently driving the cost down because of the increased supply.

TBG attributes this to advertisements being shown in user’s news feeds, although it’s worth noting that the EdgeRank algorithm change occurred during this period as well.  If EdgeRank works as effectively as Facebook expects it to, one would expect engagement to be even higher in Q1 2013.  TBG went on to affirm Triggit’s assertions about the effectiveness of retargeting through the Facebook Exchange.  Coupled with recent news about the effectiveness of Facebook mobile advertisements, Facebook seems to be doing right by its advertisers.

Challenging some basic assumptions

What does it say about Facebook that a business without any social footprint could effectively advertise there?  And what does it say that a year ago brand advertising on Facebook was limited to fans of fans and was one of the biggest problems identifies when they went public.  It should probably challenge some long-held assumptions about how users consume content on social networks.

When Mark Cuban wrote that user consumption on Facebook was similar to television consumption he was widely criticized.  Yet doesn’t the fact that television-style interruption marketing is more effective than social-imbued ads justify his claim?  When you consider it for two seconds, you’re much more likely to click on intriguing content before you click on some drab banality that one of your Facebook acquaintances Likes.

That said, there is a lot of evidence about the power of social influence to persuade users.  But with Facebook’s new signature tool, Graph Search a little thin on social signals and potentially skewed towards paid advertisers one wonders if businesses will be able to leverage organic social influence on Facebook without becoming an advertiser.

What do you think?  What does it mean that standard display ads have been so much more effective on Facebook than social influence ads were?  Can a brand meaningfully build an organic community on Facebook without paying for it?

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Jim Dougherty

Jim Dougherty

Writer and chief of miscellany at leaderswest.com
I aspire to give people something to think about rather than tell them what to do. My favorite Google Alert is "social media research," I am increasingly compelled by Gen Z, and I appreciate good writers agnostic of where they write. At one time I was Kred's 12th most influential social media blogger and Klout's most influential person on the topic of David Hasselhoff. Transplant from Seattle living in Cincinnati. Haven't entirely adopted the local sports teams yet.
Jim Dougherty
Jim Dougherty
Jim Dougherty
  • TheTysonReport

    Small caveat – TBG is, to my mind, a bit of a FB groupie and has been pushing FB hard as a marketing channel for ages. So I take this with a grain of salt; nonetheless I don’t doubt FB ads are improving, they had to really because they face very stiff competition.

  • jimdougherty

    Great insight, Robert! It’s difficult to correlate this to Facebook’s earnings report because of the huge discrepancy between their GAAP and non-GAAP numbers, so it would be nice for it to be substantiated further by other sources. Great comment – thank you!

  • http://www.facebook.com/people/Bob-Walker/1628460015 Bob Walker

    We have received feedback from a few advertisers now who have a completely different view from you guys. CPC maybe lower, but other things are increasing…

    http://blog.yieldkit.com/en/2013/02/07/sort-out-ads-facebook/

    I have had tweets from other companies saying the same. Pretty annoyed with whats happening, and our ads are now being basically spammed to users. That isn’t a good way to create a strong and healthy social presence.

  • jimdougherty

    Great insight Bob! Didn’t mean to paint a rosy picture and as someone else pointed out the company releasing this data may be bullish about FB adverts.