Facebook CPMs Dip, Ad Revs Rise Overall

A seasonal shift in ad spending and expanded inventory led to lower CPM rates on Facebook in the first quarter, but the increased volume of ads overall will boost revenue growth in the period.

The data, released today by Facebook ad partner Spruce Media, shows that CPMs dipped for key ad types on the social network in the first quarter. That includes ads that run in the right rail on the desktop, which saw CPMs fall to 22 cents from 29 cents in the fourth quarter. Likewise, desktop news feed ads dropped to $4.41 from $5.37, and mobile news feed ads to $3.58 from $5.21.

However, CPMs for run-of-network ad buys -- across both the right side of the page and the news feed -- rose slightly to 39 cents from 38 cents. Spruce Media attributed the quarterly decline in rates to a seasonal dip in demand following the holiday season, as well as Facebook increasing the number of ads in the news feed and the content eligible to appear in the feed.

“While individual placement CPM’s may have suffered due to increase of supply -- the overall page eCPM is likely much higher, meaning Facebook is monetizing its users better,” the report stated. With Facebook set to report first-quarter earnings on Wednesday, Wall Street analysts, on average, expect revenue to rise 36% to $1.4 billion.

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Analysts will be watching to see how well Facebook is monetizing on the mobile side in particular, where the company has seen the fastest user growth over the last year or so. The Spruce report showed that the click-through rate (CTR) for ads running in the mobile news feed rose to 1.86% from 1.74% in the fourth quarter.

Advertisers focusing on mobile and desktop news feed placements are seeing click rates 11 to 18 times higher than run-of-network campaigns. Cost-per-click (CPC) rates in the quarter for run-of-network buys dropped 31% to 38 cents from 55 cents in the quarter as Facebook increased the number of ads served in the news feed.

“Since CPCs are 30%-50% lower than right-hand-side, the increased share of news feed impressions drove an overall decrease in the 'All Facebook’ CPC,” the report noted.

CPCs for mobile news feed buys fell 37% to 19 cents from 30 cents. Conversely, CPCs for less efficient right-hand-side ads on the desktop rose 16% to 87 cents fro 75 cents. That said, Spruce pointed out that Facebook has back-filled the right-rail inventory through advertising generated from Facebook Exchange (FBX), its real-time ad marketplace.

The study also highlighted some of the steps Facebook has taken recently to ramp up ad sales, especially from performance-based marketers. These include:

*Partner Categories: Introduced earlier this month, this offering allows advertisers target ads using third-party data from providers, such as Datalogix, Acxiom and Epsilon, according to specific audience segments tied to interests, purchasing behavior, and lifestyle.

*CPA bidding: Facebook publicly released pay-per-action bidding, allowing marketers to advertise on the social network without paying directly for clicks or impressions. If an advertisers chooses to pay $1 per Page Like, for example, Facebook will optimize the impressions to be shown to people deemed most likely to “Like” their Facebook page.

*Nielsen Online Campaign Ratings (OCR): Spruce teamed with Nielsen this month to offer access to Nielsen’s OCR to better assess the effectiveness of their campaigns on Facebook. Previously, the measurement service was only available to advertisers working directly with Facebook on large budget commitments.

In a separate research note released Monday, Brian Wieser of Pivotal Research Group forecast ad revenue growth of 48.9% for Facebook in the first quarter. He cited international expansion, FBX and adoption of Promoted Posts and mobile app install ads as factors driving acceleration in ad sales in the first quarter. 

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