Over the last year, we’ve analyzed over 8.8 billion Facebook ad impressions. We found that during the first six months, the average CPM increased from $4.12 to $11.17, and the average CPC increased from $0.42 to $0.99.
- The average CPM on Facebook ads has increased by 171% since January 2017
- The average CPC on Facebook ads has increased by 136% since January 2017
- The average CTR for Facebook ads has remained consistent over the last six months
Facebook’s Supply and Demand
Facebook’s ad impressions are flat while ad spend is moving up. This tells us advertisers are paying more to enter the auction while getting the same number of impressions.
Facebook’s CPM Increase 171%
Based on our data, we saw CPMs increase by 171% during the first half of 2017. This shows how competitive the auction is and illustrates why Facebook is having ad load issues.
Facebook’s CPC Increase 136%
The CPCs of Facebook Ads went from $0.42 to $0.99 during the first six months of 2017. That’s a huge jump, especially when thinking about the role of Facebook in the customer journey.
Facebook’s CTR Remain Flat
Advertisers are getting consistent CTRs month-over-month, but it’s costing more to get the same result due to higher CPMs and CTRs.
Why Are Facebook’s CPMs Increasing
Our ad spend data includes all ads run on Facebook, Instagram, and Audience Network. There are a number of possible explanations for the increase in CPMs and CPCs.
1) Advertisers Are Flocking to Facebook
Facebook reported a total of five million advertisers as of April 2017. That’s up from four million monthly advertisers in September 2016, and three million in March 2016. Put another way — Facebook gained two million advertisers in one year.
Keep in mind that Facebook’s five million advertisers are only 8% of the 65 million businesses active on the network. Therefore, we don’t foresee a slowdown in advertisers’ growth over the next 12 months.
2) Advertiser’s Facebook Budgets Are Growing
Hanapin Marketing conducted a paid social survey asking marketers where they plan to increase and decrease budgets in 2017. They reported that 73% of marketers are investing the majority of their social spend on Facebook and 71% plan on increasing their Facebook ad spend within the next year.
Our Facebook data confirms that advertisers are indeed increasing their Facebook budgets as overall ad spend more than doubled since January 2017 (122% increase).
3) Facebook Is Reaching Max Ad Load
Facebook CFO, David Wehner, said on the Q2 2016 earnings call:
“We anticipate ad load on Facebook will continue to grow modestly over the next 12 months and then will be a less significant factor driving revenue growth after mid-2017.”
The company’s Q2 2017 results showed its reaching max ad load with only a 19% paid ad impression growth compared to Q1’17’s 32% and Q4’16’s 49% growth. However, Facebook’s revenue will continue to increase as surging ad prices, user growth, and Instagram are enough to pick up the slack.
4) Facebook’s Ad Load Slowdown Is Real
Facebook’s Q2 2017 paid ad impression growth slowed to 19% compared to Q1’17’s 32% and Q4’16’s 49%.
Eric Jhonsa of The Street reported:
“Slower ad supply growth is naturally boosting prices. But given that supply is still growing (albeit at a slower rate), it’s also clear that strong ad ROIs — made possible by Facebook’s powerful and steadily improving targeting abilities — are motivating marketers to pay more for ad impressions and clicks. A growing mix of video ad sales might also be helping, given that video ads tend to carry relatively high prices.”
Takeaways and Insights
Based on the data, here are our main insights and takeaways:
- Small and mid-size brands are flocking to advertise on Facebook
- As a result, Facebook’s CPMs & CPCs are rising fast
- Advertiser aren’t afraid to increase budgets even as the auction gets more expensive
- Are results driving the increase in budgets or is it the competitive auction?
- How will advertisers react to increased competition and ad prices?
- Q4 is historically more expensive on Facebook, will they find more inventory or will CPMs skyrocket?
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