More marketing dollars are flowing to Facebook, Twitter and other social networks as social media ad spending is expected to reach $23.68 billion this year, a 33.5% increase from $17.74 billion last year, according to a new report by research firm eMarketer Inc. The report suggests marketers’ social media ad spending will reach $35.98 billion by 2017.
North American marketers will spend $10.10 billion this year on social media ads, which is 42.7% of total worldwide spending. That’s a 31.0% increase from $7.71 billion last year. And eMarketer expects that North American advertisers’ spending will total $15.15 billion by 2017.
Facebook accounts for most of that spending as eMarketer expects the social network to generate $15.50 billion this year, or 65.5% of total social media ad spending worldwide. That’s up slightly from last year when Facebook generated $11.49 billion in ad revenue, which was 64.8% of the $17.74 billion market.
Facebook is increasingly a platform marketers use to drive shoppers to respond directly to ads, whether by clicking their sites, downloading their mobile apps or taking another action.
In the first quarter marketers devoted the vast majority of their Facebook budgets to direct-response ads, according to a new report from social media advertising firm Nanigans. Facebook’s unpublished page post ads, which marketers can use to drive shoppers to their websites, accounted for 64% of the Facebook budgets for Nanigans’ clients, and mobile app install ads accounted for another 30% of their spending. Domain ads, which are the ads that appear on the right-hand side of the screen for Facebook desktop users, and a collection of all other Facebook ad types, accounted for 3% each.
Marketers are significantly increasing their spending on some of the newest of the ad units grouped under the “other ad” category, Nanigans found (the vendor did not share specific spending amounts). For example, advertisers spent 5.2 times more on Facebook’s multi-product ads in the first quarter than they did in the fourth quarter, and they spent 2.8 times more on video ads quarter over quarter.
The spending jump is the result of marketers finding Facebook ads to be increasingly effective. The average click-through rate for Facebook ads for Nanigans’ retailer clients was 0.87% in the first quarter, up 283% compared to the same period a year earlier. In turn, the cost-per-thousand (CPM) impressions for the ads increased 228% to $3.74 compared with $1.14 a year earlier. But while CPM costs have risen, the cost per click has decreased. The average cost per click fell to 43 cents, down 14% from 50 cents a year earlier.
“CPMs are up primarily due to increased demand in the marketplace and the shift to larger right-hand-side ad units and newer ad products,” says John Marsland, Nanigans’ senior vice president of analytics. Click-through rates fell because some of Facebook’s newer ad products, like multi-product ads and video ads, often have higher click-through rates than Facebook’s other ad units, which drove the cost per click down.
“Ad units for e-commerce companies on Facebook have become increasingly engaging and effective, and marketers at e-commerce companies have developed more solid, mature strategies on the channel to ensure the right message is targeted to the right individual at the right time,” he says.