Marketers warn they could be 'priced out' of Facebook advertising

Facebook: its ad-buying auction is meant to ensure ad relevance instead of just taking the highest bid
Facebook: its ad-buying auction is meant to ensure ad relevance instead of just taking the highest bid

Rising CPMs on Facebook are a concern for 85% of marketers who spent at least six figures on the platform in October.

The growing cost of advertising on Facebook has become a concern, marketers have reported, with cost per mille almost doubling on the platform.

CPMs on Facebook have grown 90% year-on-year, according to US research by software company AdStage earlier this year, and a new survey by marketing platform LiveIntent found that this rising cost is a concern for 85% of marketers. Meanwhile, one in seven marketers (13%) are "extremely concerned" about a rise in CPMs.

If costs continue to rise, almost half (47%) of those surveyed said they could be priced out of paid Facebook advertising.

"Facebook has been a huge channel for us, but we like to operate like it’s going to disappear tomorrow," Bret Fredrickson, customer acquisition marketing manager at athletic clothing company Vuori, said. "So, what does that mean? Taking full advantage while it’s here, but also looking at new channels and investing where we think attention is going."

The AdStage research for Facebook advertising in 2019 confirms a recent trend that Facebook CPMs have been growing significantly for several years now. Statista showed that Facebook CPMs more than doubled (122%) between January 2017 and January 2018.

However, Zenith's head of performance Thiago Correa told Campaign that some marketers may be seeing higher CPMs on Facebook because they are trying to be "too hypertargeted" in their approach.

Correa said: "I'm not massively concerned about macro trends of CPMs going up or down: we’ve actually seen the opposite trend for our clients. I suspect these concerns are a consequence of some brands' buying tactics." 

He added: "People forget to factor scale into their targeting strategies: if you go in broader, you leverage a lower CPM cost to deliver better outcomes. If you go after a bigger audience your CPM will be way cheaper. Intuitively a lot of people want to optimise for metrics like clicks or engagement, which further exacerbates the issue, by narrowing your delivery further to a particular behaviour." 

In August, LiveIntent gave three reasons for why CPMs on Facebook were "exploding": an increase in demand (partly driven by direct-to-consumer brands "flooding" the platform); changes to Facebook’s algorithm that reduced available ad impressions; and Facebook’s decision in July to remove some ad targeting options.

Facebook said it could not comment on LiveIntent’s research but the social media giant has been clear that its auction system to buy advertising is designed to deliver value for both users and businesses in terms of ad relevance – not just pick whichever advertiser makes the highest bid. 

Instead, Facebook uses a highest total value metric to determine which advertisers win.

This metric comprises a combination of three factors: ID (what the advertiser is willing to pay to achieve their desired outcome); estimated action rates (the probability that showing an ad to a person leads to that desired outcome of the advertiser); and ad quality (feedback from people viewing the ad and assessments of low-quality attributes in the ad, such as too much text or "engagement bait").

During Facebook’s most recent earnings call, its chief financial officer David Wehner pointed out that the average price per ad decreased by 6% while ad impressions increased by 37% in the third quarter of the year.

However, Wehner explained: "The year-over-year decline in average price per ad was primarily driven by the ongoing mix shift towards geographies and Stories ads, which monetise at lower rates."

The LiveIntent study polled more than 200 marketers who spent over $100,000 on Facebook during a single month (October 2019). 




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