Here’s a data-point for you: in 2002 you could buy clicks on AdWords for 5 cents that now cost 50 cents. A price increase of ten times in just eight years.
A related question: if you can currently buy highly targeted Facebook ads for 40 cents or less CPM, what will they cost in eight year’s time? Will they have gone up 10x to $4 cpm? Why won’t they cost $4, when non-targeted CPMs of $2.50 are common these days?
Conclusion: if Facebook ads in due course will be valued at 10 times what they are currently, doesn’t that make them a huge, massive bargain right now?
Facebook’s traffic has enormous potential: it offers targeting through the social graph that is available nowhere else. And it is clearly, obviously underpriced. So how come we still see so many publishers, advertisers and even networks that aren’t using Facebook?
The response of many will be, lousy click-through rates. But that’s not the right answer. Facebook offers so much more than just a possible conversion path with each click. It provides targeting data that allows for further optimization, it provides insight into your customer’s social graphs and that then allows for much better targeting of friends-of-fans which will increase CTRs in turn.
Only looking at CTRs for Facebook ads is like only looking at people paying $35 for an online training course without accounting for the $200 upsell and downsell offers following on fast behind the initial transaction. It doesn’t provide a true picture of what’s really going on and where the value is.
Facebook advertising is so familiar to us in the affiliate marketing space that it is easy to forget that it’s still a rapidly evolving platform. We still have memories of the Acai berry and tooth-whitening campaigns that paid for Facebook to build its ad-serving platform. But that very familiarity can blind us to the reality that Facebook is selling its traffic cheaply and the real reason is that its advertiser ecosystem is still very young.
In order for Facebook to reach its potential it needs to attract major brands as advertisers. That means it needs to educate the enormous potential client base, provide positive customer experiences and out of those develop a library of case studies that will persuade reluctant ad agencies.
In addition, it’s easy to see that Facebook has some way to go to generate the sheer volume of advertising data that will allow it to optimize pricing across every market niche. And it has an ongoing project to test and develop new ad units and positioning in order to maintain click-through rates.
So Facebook knows it has work to do and it is willing to sell its traffic cheaply while it is building. The bottom line remains: Facebook advertising is cheap by any metric. If you aren’t using it, or you feel you have suffered from CTRs that are too low, you may want to think again about how you are calculating its value.