Here's Facebook's Q4 Ad Performance In A Set Of Delightful Charts

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Photo: Aepoc, CC.

Facebook’s cost-per-thousand ad impressions rose 8 per cent between Q3 and Q4 2011, and 23 per cent since Q1, according to data from TBG Digital, an agency that specialises in placing and serving Facebook advertising.The numbers bode well for Facebook’s IPO, expected in the spring. Cost-per-thousand impressions (CPMs) are the money the social network earns by selling ads. The more it can charge, the greater Facebook’s dollar revenue is likely to be.

TBG Digital culled the data from 266 clients and 326 billion impressions it handled during Q4 2011. Its clients include Dell, Coca-Cola and Heineken.

Facebook gets a global average CPM of 22 cents, according to TBG Digital CEO Simon Mansell. “They are driving that CPM up … to have that CPM number creeping up, that’s the important number for them” in terms of pricing the IPO against future revenues.

Mansell (pictured below) declined to say what he thought Facebook’s Q4 revenue would look like in actual dollars, but said he thought our earlier estimate — of about $3.6 billion for 2011 — was in the right ballpark.

Simon Mansell

Photo: TBG Digital

That’s the good news. The not-so good news is that Facebook remains heavily dependent on just a few business sectors for its revenue. Facebook’s top advertisers are finance brands and games, at 18 per cent and 13 per cent of impressions, respectively (see charts in the following slide show).That doesn’t sound too bad until you realise that those shares are calculated after TBG Digital excluded one large gaming client from the analysis: “We’ve excluded an advertiser here because it skews the numbers,” mansell said, cryptically. He declined to name the advertiser but it’s probably Zynga, which pays Facebook a 30 per cent cut every time someone buys something in a game via Facebook Credits, and is constantly seeking new players on Facebook.

In other words, Facebook remains heavily dependent on Zynga’s health for a portion of its revenue.

The other story in the numbers is the effect of Sponsored Stories, the new Like-based ad function that rolled out in Q4. It’s working, Mansell says. “Those get a better click-through rate than normal Facebook ads [such as the display boxes you see on the right side of the page]. That allowed advertisers to pay a lower cost-per-click.”

Cost per click up just 1%

The average cost per click (CPC) has seen an increase of only 1% between Q3 and Q4 of 2011 overall. The U.S., however, has seen an increase of 10% in CPC prices. Facebook's global average cost-per-click -- the money advertisers have to pay -- was 68 cents in Q4, Mansell says.

CPM impression rates have increased 8% since Q3.

TBG says, 'This means that Facebook has now seen an increase in how much they earn per impression served in every quarter of 2011. In fact, there has been an increase of 23% in CPM rates since Q1 2011.'

In advertising, Q4 is usually the biggest sales quarter due to the holiday shopping season. It's not clear from this chart (because Q4 2010 is not represented) how big the Xmas effect was for Facebook.

Click through rates increase by 18% from Q1 to Q4

TBG: 'In the five major markets measured, click-through-rates increased by 18% from Q1 to Q4 in 2011 which would suggest that advertisers are building better ad creative that attracts users' interest whilst also learning to harness the targeting options available. It would also appear that Facebook's ads are connecting with their user base as they are becoming more engaging.'

'TBG data shows an average increase of 7% in click-through-rates between Q3 and Q4 2011, pushed up by France (100% increase) and brought down by Germany (18% decrease) and the United States (2% decrease).'

Facebook's clients are dominated by finance, food and drink advertisers.

This chart excludes the effect of one large game 'advertiser,' i.e. Zynga, indicating that Facebook's client based is heavily concentrated in games and finance.

Food and drink ads generate more click-throughs than other ads.

'Anything alcoholic gets the best click-through-rate of all,' Mansell says.

TBG says: 'Finance brands have become even more dominant in Offsite campaigns with a 61% stake in the total number of impressions served in the category, almost a 50% increase in the share they held in Q3. Offsite campaigns are those which direct users out of the Facebook environment.

Figure 6 shows the top five sectors and their share of the group's impressions. Similar to PPC Search campaigns, the Finance sector also sees high cost-per-click costs (200% more than the average CPC in Q4) and low CTR values (48% lower than the average CTR in Q4).'

Price incentives keep users within Facebook

TBG says: 'Fanning / Facebook Application CPCs were even cheaper in comparison to Offsite CPCs in Q4 2011. We now see that keeping traffic within Facebook via Fanning and Facebook Application campaigns can reduce CPCs by 45%. More and more brands in a huge range of business sectors are building a presence within Facebook to harness these lower costs.'

Facebook increased cost-per-clicks in the post Thanksgiving runup to Christmas.

The click-through-rate was not declining. It's that it became increasingly inefficient to advertise on Facebook the closer you got to Christmas -- suggesting that once shoppers have bought their gifts no amount of advertising can make them buy more.

Here's what it's like to work inside New York's most aggressive PR spin machine...

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