Budgets for advertising on Facebook continue to grow at a faster clip compared with paid search, according to Kenshoo Social. But are budgets growing faster because social appears as the shiny new object, or have marketers finally figured out how to calculate ROI from Facebook campaigns?
Analysis of more than 100 billion ads served on Facebook worldwide through Kenshoo Social finds the digital marketing agency's customers spent 109% more on Facebook in Q4 of 2011 compared with the prior quarter.
New proxy metrics can help marketers better understand how ads perform, according to Aaron Goldman, chief marketing officer of Kenshoo. "Some are starting to think about Fan acquisitions similar to the way they thought about email acquisitions," he said. "The savvy email marketer can put a price on a new email lead."
Marketers have begun to learn how to connect the dots, even when Fans of a brand are identified on sites other than Facebook. When someone Likes a brand on Facebook, marketers can remarket them with posts to the page and outbound messages.
While the season did contribute to some growth, the increase in global Facebook ad budgets shows an increase compared with search channels like Google, Bing and Yahoo that, in aggregate, saw paid-search ad budget growth of 27% globally, sequentially.
When adjusted for seasonality, Facebook advertising continues to gain in popularity. Ad impressions grew by 47% in Q4 vs. Q3 2011. Consumers clicked more as Facebook ads gained acceptance. Clicks grew by 105% in Q4 versus Q3 2011, a growth rate more than double that of impressions. Facebook ad quality also improved, which appears to have consumers clicking on ads 27% more sequentially in the fourth quarter.
Market segments include retail, automotive, telecommunications, entertainment and finance.
In contrast, growth in paid search advertising was culled from a collection of Kenshoo Enterprise and Kenshoo Local customers across verticals covering more than 400 billion global paid-search ad impressions on Google, Bing, Yahoo, AOL, Baidu and Yandex.
Based on a percentage, Matt Lawson, Marin Software VP of marketing, agrees that budgets continue to rise faster on Facebook, compared with paid search. But that’s only because the numbers for Facebook are still relatively small. Search budgets continue to rise much faster than Facebook when it comes to ad dollars flowing through Marin.
However, the social network's $3.7 billion in revenue last year pales in comparison to Google's, according to Frank Lee, head of sales and marketing at DataPop. He doesn't believe Facebook is gaining share at the expense of paid-search budgets. Advertisers are not shifting budgets from Google and Bing to Facebook, because paid search still drives better performance than any other media. Lee believes budgets are coming from display campaigns.
U.S. search revenue will grow at 8.1% CAGR, from $17.4 billion in 2010 to $25.7 billion in 2015, and local search revenue from $5.1 billion to $9.1 billion, respectively, according to BIA/Kelsey. Compare that with social ad spending in the U.S. at $2.1 billion in 2010, reaching $8.3 billion in 2015, and local social ad spending from $400 million to $2.3 billion, respectively.
Facebook dominates shares of social ad impressions served and ad revenue generated. The social network serves up the most display ad impressions of any digital company, surpassing Yahoo, Google, Microsoft and AOL. By 2015, BIA/Kelsey projects social ad impressions will take a majority share of all display advertisements.
BIA/Kelsey analysts expect the social nondisplay segment to grow from $50 million in 2010 to $610 million in 2015, although display continues to be the predominant social ad format. The research firm defines social media advertising as money spent on advertising formats across social networks. It does not encompass virtual goods and rewards, social gaming, social commerce or social marketing.