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Thanks to the incredible popularity of the world's social network, soon-to-be-publicly-traded Facebook is top of mind for advertisers both large and small, many of which have been pouring more money into Facebook advertising campaigns.

But how are those Facebook ad campaigns treating advertisers?

According to ad agency TBG Digital, which looked at several hundred billion impressions across campaigns for more than 200 clients, the cost for a thousand impressions on Facebook has increased substantially (41%) in the past year, but over the past quarter, click-through rates have dropped by nearly double digits (8%). Ads sold on a CPC basis have also risen in price during the same period.

Somewhat surprisingly, that apparently doesn't concern TBG Digital CEO Simon Mansell, who told Mashable, "[Facebook has] gone from four to seven ads on a lot of pages, so even though click-through is declining, that’s okay. If you isolate that and point to to you could say it’s a negative thing, but I think that’s a bit of a red herring."

But is it?

Facebook is certainly aware that its ads frequently deliver clicks at paltry rates; numerous advertisers have shared their Facebook experiences publicly over the years. Yet in the run-up to its IPO, Facebook is making it clear that it doesn't feel it owes advertisers any favors, and as part of that has decided to stuff more ads on its pages.

And why shouldn't it? Yes, creating more ad inventory is dilutitive, but so long as advertisers are willing to pay more for less, and the agencies helping them don't see a problem with paying more for less, Facebook wins.

Needless to say, savvier advertisers and agencies will recognize that it's not their job to pad Facebook's bottom line at their own expense. At the end of the day, the only ad campaigns worth running are profitable ones, and when profitable campaigns become less profitable, paying more for less is a recipe for said campaigns to quickly become unprofitable.

Yes, advertisers arguably can't ignore the world's largest social network, but when Facebook campaigns don't make dollars, they don't make sense, and when they make fewer dollars, they make less sense. 'Like' it or not.

Patricio Robles

Published 16 April, 2012 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

2429 more posts from this author

Comments (2)

David Iwanow

David Iwanow, SEO Product Manager at Marktplaats.nl

Hmmm... i think the move to timeline has also impacted profitability of accounts who dumped the "welcome" pages when they upgraded to timeline. But I see that the "welcome" or "like gate" pages are making a return already as the conversion rates landing on the timeline just don't really deliver.

over 4 years ago

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Gary Orman

I spent a lot of money on facebook advertising, trying different things. I got a lot of click-thrus but no conversions. I couldn't understand it. I changed my facebook page several times, tidied it up (it gets messy and confusing pretty darn quickly) and targeted specific events. Zilch.

Then I realized that visitors weren't ever going to my website! I discovered that I could set the link to the facebook ad to go directly to my website, bypassing the facebook page entirely.

Wow! I started to actually make sales for the first time.

Still, hardly enough to make the advertising costs worthwhile. I was spending a lot less on getting people to go to my website via other means and was getting much greater conversion rates, about 4-5 times more!

Something is not right in Denmark...

I still advertise occasionally on facebook, but it's very expensive for very little (a few lines of text and a tiny thumbnail). I'm already cutting back because of the increase in price and may eventually stop altogether. The writing is on the wall fb, unless you make it A LOT more attractive for advertisers (and qualified fb members to click-thru and buy).

over 4 years ago

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