How effective is Facebook advertising?

In this series of Smart Insights Best Practice Advice, Dave Chaffey of SmartInsights.com shares tips on best practice to get better results from digital marketing. This week, Dave looks at the effectiveness of Facebook advertising.

I was recently asked this question by a student putting together a budget model for an online marketing campaign. I pointed them in the direction of this post on online ad clickthrough rates, but they specifically asked about Facebook, so this post is to answer the question and help others.

The best public source on Facebook advertising effectiveness I’m aware of, is the analysis of 2.2 million clicks from 4.5 billion impressions that Webtrends track as part of their analytics system, which I’ll summarise here.

Average clickthrough rates and media costs

Well, the overall number of clicks compared to impressions above give their own story – response rates are low – around than 1 in 2,000 page views results in an ad clicks. No surprise since banner clickthrough rates are low and we’re mostly online to socialise.

Unfortunately, there is no breakdown of the the value of the click in terms of conversion – the majority of Likes will be encouraging likes or will they?

You can also see the average costs which are increasing – I saw a recent post from Efficient Frontier which showed that Facebook CPCs have increased 22% in the most recent quarter! (For the remainder of 2011, Efficient Frontier also predicts that Facebook CPCs will continue to rise at double-digit growth).

Clickthrough rates by age and gender

This chart certainly suggests it’s harder to engage the younger generation with Facebook ads…

Clickthrough rates by market sector

Transactional commerce sites and not-for-profits fare best here. The relatively popularity of media, entertainment and blogs suggest this is a type of value that can be offered by other companies.

Facebook banner ad burnout

This is a well known phenomenon in display advertising and in on-site promo banners/merchandising.

But the effect seems even more marked here – with a substantial fall within a week.

However, the use of friend of fan targeting (where firms can deliver ads to the friends of people already connected with their Page, Application, Group or Event) suggests the burnout effect can be reduced:

I hope you find the summary helpful. You can Download full analysis of Facebook Advertising response.

To learn more about Facebook Advertising, I recommend Imran Farooqs article on Facebook Advertising Best Practices.