A lot of people have been highly critical of Facebook's ability to generate meaningful ad revenue over time. I've admittedly been one of those critics. Shameless plug: http://www.bloomberg.com/video/91999017-facebook-valuation-at-75-billion-palit-says.html
That being said, a new report by TBG Digital suggests that overall CPM rates and engagement appear to be improving at Facebook. Ultimately, if click-through rates can show sustainable improvement, then CPM and CPC rates should rise over time, and the company should be able to generate substantial ad revenue growth for the forseeable future. It remains to be seen if current trends are sustainable, but the recent data is quite compelling.
Notable data points from TBG's report.
- 2Q2012 CPM rates rose 58% Y/Y. This is pretty impressive, and actually represents an acceleration over the 41% Y/Y growth seen in 1Q2012.
- Click-through rates (CTR) grew 11% in the five major territories that TBG analyzed: Canada, France, Germany, UK, and U.S. The highest CTRs were in the 0.041% range in 2Q2012 versus about 0.032% in 1Q2012.
- The cost-per-click (CPC) data is a bit of a mixed bag. On the positive side, CPC rates rose 9% on a Y/Y basis, which is a solid number (compare that to, say, Google, which is seeing CPC declines despite paid-click growth). However, this growth was a deceleration from the 23% growth seen in 1Q2012.
- Sponsored stories, which is when Facebook says your friend likes a certain item or brand as part of an advertisement, receive a 46% higher CTR than regular ads. The flip side, however, is that CPC rate is 20% lower.
There one part of the study I have to disagree with. TBG compares CTRs on Facebook newsfeed with CTRs of Twitter. In my view, Twitter is less about CTR on ads than engagements. In other words, it would be more fair to compare data on Facebook's "cost per fan" vs. Twitter's "cost per retweet" or "cost per follow" performance.
That being said, a new report by TBG Digital suggests that overall CPM rates and engagement appear to be improving at Facebook. Ultimately, if click-through rates can show sustainable improvement, then CPM and CPC rates should rise over time, and the company should be able to generate substantial ad revenue growth for the forseeable future. It remains to be seen if current trends are sustainable, but the recent data is quite compelling.
Notable data points from TBG's report.
- 2Q2012 CPM rates rose 58% Y/Y. This is pretty impressive, and actually represents an acceleration over the 41% Y/Y growth seen in 1Q2012.
- Click-through rates (CTR) grew 11% in the five major territories that TBG analyzed: Canada, France, Germany, UK, and U.S. The highest CTRs were in the 0.041% range in 2Q2012 versus about 0.032% in 1Q2012.
- The cost-per-click (CPC) data is a bit of a mixed bag. On the positive side, CPC rates rose 9% on a Y/Y basis, which is a solid number (compare that to, say, Google, which is seeing CPC declines despite paid-click growth). However, this growth was a deceleration from the 23% growth seen in 1Q2012.
- Sponsored stories, which is when Facebook says your friend likes a certain item or brand as part of an advertisement, receive a 46% higher CTR than regular ads. The flip side, however, is that CPC rate is 20% lower.
There one part of the study I have to disagree with. TBG compares CTRs on Facebook newsfeed with CTRs of Twitter. In my view, Twitter is less about CTR on ads than engagements. In other words, it would be more fair to compare data on Facebook's "cost per fan" vs. Twitter's "cost per retweet" or "cost per follow" performance.
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