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Click-through rates on Facebook ads have increased 50% over the past 12 months, according to data from Marin Software.
It also found that the cost-per-click of social ads increased by 26%, while the CPC of marketplace ads decreased by 26%.
Marin said the improvement in CTRs is thanks to Facebook’s new social ads, such as Sponsored Stories.
These ad formats are targeted based on brands that you and your friends have ‘liked’, which Facebook says makes them more relevant.
Sponsored Stories form part of Facebook’s strategy to encourage businesses to pay for ads to complement their existing brand pages.
As we all know, if Facebook can prove the success of its social ads then the revenue potential is massive.
Econsultancy’s new Facebook Pages for Business Best Practice Guide includes data that shows 65% of companies use Facebook as part of their marketing strategy.
Furthermore, in October 2011 Facebook reached more than half (55%) of the world’s global audience.
So if it can encourage even a small proportion of businesses already using its platform to pay for Sponsored Stories then it can easily justify its $90bn IPO.
However the social network does not publish CTRs for its social ads, instead suggesting that CTRs are irrelevant.
It claims that you can’t click on a TV ad, but that doesn’t mean it didn’t encourage you to buy a product.
The accepted CTR for Facebook ads is less than 0.03%, but Marin states that this now stands at 0.04% in the UK and 0.06% in the US and Eurozone.
Marin’s statistics also show that the amount of Facebook ad budgets allocated to social ads has risen from 3% to 26% globally over the past year.
It predicts that 50% of Facebook ad budgets will go to social ads by the end of 2012.
This tallies with data from Econsultancy’s Marketing Budget Report 2012 which shows that 70% of marketers plan to increase their budgets for off-site social media this year.
However, almost 40% of companies believe they are poor at measuring ROI from this channel.