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3 Strategies To Deal With Rising Facebook CPMs4 min read

4 min read

Have you recently seen performance on your Facebook buys dip? Have you seen more expensive traffic, but little incremental revenue to show for it?

It isn’t just you. Facebook actually has become more expensive. Throughout 2016 (1) and across different formats (2), industry press noted a rise in what it costs to advertise on Facebook. Across Croud’s social client base, the trend has played out as a 32% rise in CPMs and a 51% rise in CPCs.

The primary driver seems to be slowing inventory growth. In recent earnings calls, Facebook executives have stated that they believe there is limited room to increase ad load in news feeds. User growth and increased ad load in secondary pages (e.g. group pages) may provide some additional inventory, but inventory won’t increase as quickly as demand.

Another factor may be Facebook’s oCPM bidding model. As the new pixel has been adopted and deployed, the company is gathering lots of data on how consumers behave and what advertisers are willing to pay. It is likely that, in economic terms, Facebook is getting better at extracting advertiser surplus from their share of the ad economy.

The holiday season is always extra-competitive. Most advertisers want to be in market and want to be considered for gift-given and personal deal shopping. Given the competitive time of year, it’s unlikely that advertisers will see any relief prior to 2017. So, what can advertisers do?

Strategy 1 – Change Your Auction Play

The first option is to change your auction strategy. Instead of relying on oCPM to buy valuable impressions, test CPM or CPC bidding to place a ceiling on what you are paying. The downsides to this are a) that you may limit traffic volume and b) that you get less-qualified traffic.

There are upsides too. If you are having trouble making Facebook work from a profitability standpoint, a smaller volume of more-profitable traffic may be okay.

Less-qualified traffic may also be okay. Yes, Facebook’s oCPM algorithm has a lot of data to work with and can get pretty smart. If it’s too expensive, though, you may be better off with a less-qualified audience that you pay less for. As a quick example, if your conversion rate drops by half, but so does your CPC, your net CPA or ROAS will be stable.

This tactic depends quite a bit on what you are selling and how much you know about your audience. Products with broad appeal or advertisers who already understand their audience well will have better luck ditching Facebook’s algorithm and going it alone.

If you decide to stick with Facebook’s oCPM model, make sure you have enough volume for the algorithm to optimize against. Over-segmenting your buy by geo, audience, creative, etc can starve the algorithm of the data it needs to come to statistically significant conclusions about which users are most likely to buy your product.

Strategy 2 – Use Facebook Differently

Many advertisers are using Facebook for both prospecting and retargeting. Prospecting often appears to be the least cost-effective tactic for advertisers. If squeezing more out of Facebook is the order, consider using it for retargeting only.

The caveats here are that we know prospecting and retargeting work together as a system. If you aren’t investing in prospecting, there won’t be anyone to retarget to. Cutting Facebook prospecting will only work if you are making significant investments in driving traffic through other platforms or channels.

Measurement will also be more difficult for any advertisers who aren’t already using a cross-platform attribution solution. Barring a sophisticated traffic segmentation and audience strategy, all traffic driven into the retargeting funnel will be essentially fungible. While you can still measure overall results across channels, optimisation will be extremely difficult.

Strategy 3 – Change Your Media Mix

Facebook has a lot of strengths: powerful targeting, strong algorithms, and a format that has yet to succumb to ad blindness, but with premium features come premium prices. If Facebook has become too expensive to play a cost-effective role in your media plan, consider shifting some budget to other vendors.

Which vendors should get the budget will depend heavily on your goals, your creative, your industry, your maturity as a business, and many other factors. No matter what that mix, however, there are other competitors in the digital ad market. Paid search, SEO, content syndication, display, and other social vendors should all be up for consideration.

In the “social” space alone, YouTube, Snapchat, Twitter, Pinterest, and LinkedIn all offer significant audiences and a variety of products that can work well for goals ranging from high-level awareness to conversion-focused direct response.

These strategies aren’t necessarily mutually exclusive. Consider your goals, budgets, and commitments. The right mix will be different for everyone. For example, if your budgets are fluid between channels, your options will be different than if you have a set social budget.

Rising CPMs may be a challenge, but they won’t be the end of Facebook and they certainly won’t be the end of performance marketing on the Internet, even if they do change the landscape a bit.

If you want to find out more about how you can optimise your Facebook use as a brand, get in touch with us now.