As Facebook Prepares to Face Its Earnings Music, It's Sounding Pretty Good

As far as digital is concerned, this is Marissa Mayer’s week, but let the Social Media Insider get your mind off that. For a few minutes, let’s not worry about whether a pregnant Silicon Valley superhero can really run a struggling Internet concern, and worry just a little bit, about Mark Zuckerberg and Sheryl Sandberg, not to mention thousands of down-in-the-dumps Facebook shareholders.

Yes, let’s talk (again) about Facebook. A week from now, Facebook will announce its first earnings as a public company, and the Social Media Insider, along with all those bitter Facebook haters, will be out in force. Given the context of these post-IPO months, these earnings will read like the Rosetta Stone of social media, whether that’s fair or not, so get ready.

With that in mind, what I’m going to talk about today is a pretty ballsy report that came out this week from social media specialist TBG Digital, a major source of stats concerning what’s really going on with Facebook advertising. It’s the timing that’s ballsy. TBG, which based its current report on client data covering 406 billion impressions for 276 clients over the last year, will either find its report dovetails beautifully with what Facebook reports, or it won’t. If it doesn’t, that will only deepen the mystery of what’s really going on underneath the covers at Facebook and leave TBG with egg on its face.

Now that I’ve successfully buried the lede -- as they say in the journo biz -- the data finds TBG downright bullish about Facebook. Some highlights:

  • CPMs have increased by 58% in the last year, with a 25% increase in the U.S. in the last quarter.
  • Ad engagement, measured by clickthrough-rate, went up by 11%, after decreasing by 6% last quarter.
  • The cost of advertising on Facebook declined by 9% over the last quarter. (TBG’s explanation: “If … the CPC and CTR of an ad are not high enough, Facebook will not publish it because the ad’s corresponding CPM will not be enough to secure its place on the page when compared to other ads.”)
  • Sponsored Stories score 53% higher on engagement than “standard” ads.
  • Facebook ads in the Newsfeed have a click-through rate seven times that of righthand column ads.
  • The clickthrough rates of mobile Newsfeed ads are 14 times higher than ads on the desktop.
  • Facebook’s mobile ads are four times more than engaging than Twitter’s. (Take that: Dick Costolo!)

If you read the report closely, you could argue that the primary driver of these positive statistics is novelty. The data indicates that what we’re seeing is consumers embracing new ad units, a rising tide that is lifting all boats. Sponsored Stories in the Newsfeed have had positive effects on engagement. The same can obviously be said about mobile Sponsored Stories, another new addition to the Facebook ad arsenal which users seem relatively interested in.

But, actually, the secondary plot line is more interesting, because novelty could be just that. (I thought we were all so over clicking on ads just for the fun of it, but this data indicates otherwise.) So what's the second story? It's the role of demographic targeting and social endorsement in building a better social media ad.

The data that stand out here are comparisons between Facebook engagement data and Twitter engagement data, which TBG also tracks. Most of the novelty factor is stripped out of the comparison, of course, because mobile ads are new to both platforms, yet Facebook’s ads are four times more engaging.  TBG surmises it’s because Facebook’s ads are more targeted and contain a social endorsement. It’s that age-old word-of-mouth thing.

I won’t really close the column here, because I see this as part one of two; next week, I’ll look at how, and if, the earnings reflect TBG’s data. Now back to Marissa Mayer watch, everyone.

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1 comment about "As Facebook Prepares to Face Its Earnings Music, It's Sounding Pretty Good ".
  1. Lowell Hussey from MobGenius , July 19, 2012 at 6:41 p.m.
    From what one reads, it seems that growth in actual U.S. users and usage of Facebook has leveled. Given that FB serves as a generic meeting place compared to the more targeted Linked-in, Pinterest, etc and that things like privacy and simple scope of interest will lead to the creation of ever more specialized meeting places, FB is unlikely to see much future U.S. user growth. Therefore a stellar growth in CPM isn't a windfall of good news, it ranks barely above "jacks or better to open".