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Slowly but surely, Facebook users have been noticing the influx of advertising in their newsfeeds. These advertisements appear to be from a trusted friend or business the user has liked, with the only difference being the “suggested post” tag next to their company name. Traditional advertising on Facebook has been on the right or left side of the page, outside of the area of user interaction. Users are not making a direct effort to read these ads, and the click through rates for traditional ads are incredibly low, meaning low profits for advertisers – and for Facebook. With investors hot on their heels, Facebook felt pressure to reinvent their advertising options. After their long quest to generate profits from a brewing pot of data, newsfeed advertising, although still in its infancy, has been the first effort to show great moneymaking potential. According to a WSJ post , Spruce Media estimates the average Cost per thousand views (CPM) on Facebook overall is $0.39, while the CPM for a newsfeed ad is $4.41.
This giant difference can be explained with the new data algorithms behind the newsfeed advertising. These take into account the number of people like you that have also liked the post. Facebook is not entirely clear how they determine a person’ s similarity to another , but it does appear to resemble their lookalike audienceadvertising option. When focusing on the high CPM generated from newsfeed advertising, the system appears a success. Facebook users, however, have been vocal in their dislike of the newsfeed ads, some threatening to leave Facebook forever in favor of Google+.
Even with the resistance to the new advertising, Facebook is seeing results, which means marketers will see results. With a “suggested post” newsfeed ad, users will be more likely to comment on, like, and share your ad because it is directly interwoven with their user experience. Users may say they aren’t a fan of the new format, but their activity and interaction with the ads says differently.
With a new advertising system comes the need for a new payment system. Cost per Action bidding (CPA) is the new method; as an advertiser, it is necessary to become familiar with the system. CPA charges the advertiser only when a predetermined action has been performed. The advertiser sets a limit on what they are willing to pay for each action, (i.e. $1.00 per like), and an auction runs each time an ad is needed for a page. Similar to Google AdWords, the advertiser will only pay 1 penny more than the next highest bid if they win the spot. Marketing Land lays out some examples of potential CPA:
Facebook hints that in the future advertisers will be able to pay for each comment or share their advertisement receives.
Facebook advertising is a necessary part of today’s modern business world. Advertising methods are constantly changing, and it can be difficult to keep up. Lucky for you, inSegment employs industry experts in PPC who are always on top of the latest methods. Is the new bidding system confusing, or are you still working on mastering the more classic Facebook advertising methods? InSegment has experts on staff who want to help you with your next campaign. Contact us today to learn more.