• by Mark Walsh  @markfwal, May 3, 2010

Marketers that buy advertising on Facebook on a CPM basis have been notified that their ads on the social network may soon get fewer clicks in connection with upcoming changes to the company's performance ad system.

In a letter sent to advertisers last Friday and posted on AllFacebook.com, Facebook conversely said that cost-per-click advertisers may see more clicks. Without providing further details, a Facebook spokesperson said Monday the changes taking place in the next few weeks won't affect where CPM or CPC ads are placed.

In its letter, Facebook stated the changes were part of ongoing improvements that include "refining our ads delivery system to better reflect the goals of our advertisers." It further advised: "If your main objective is to increase awareness of your business with an ad impression, there is no need for action. However, if your most important objective is to drive clicks on your ads, you should change your bids from CPM to CPC."

CPC advertisers are only charged when someone clicks on their ad, but rates are typically higher than on CPM placements. "In general, CPM performance advertising can be less expensive because it is not as directly tied to monetizable user behavior. So, CPM advertisers on Facebook who have quietly and inexpensively optimized their ad creative for clicks appear to be the ones affected by this change," according to the Inside Facebook blog.

In comments posted to AllFacebook and Inside Facebook, advertisers sounded uneasy about the changes leading to fewer clicks on CPM ads. "I think they may already be doing something," wrote "Brad" on AllFacebook. My CPM clicks are costing about double today what they usually do. I am getting the same amount of impressions, but CTR is half of what it usually is."

He continued, "The suggested CPC to the real estate agents I target is $.85-$1.10. There is no way I can afford that! That's double+ what CPM is costing."

Another commenter going by the handle "UTR" agreed that he could get priced out by CPC pricing. "For my business the reason I use CPM instead of CPC is because I can cut down the amount of people I'm advertising to using the demographic options thus getting more value out of my impressions," he wrote. "If you can't do this what's the point in using all the demographic stuff which is the key advantage that Facebook offers over other advertising mediums?"

Mike Lazerow, CEO of social media developer and marketing firm Buddy Media, said the shift toward CPC advertising fits with Facebook's goal of aligning ads with what people actually interact with on the site. "By basing the ads on clicks, or actions, how users interact with the ads determines what ads get available inventory," he said.