While Google's Ad Rates Are Dropping, Facebook Can't Keep Up With Demand

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Photo: Laughing Squid via flickr

Here’s another indication of how the power on the Web is slowly shifting from Google to Facebook: Google’s advertising rates have been dropping lately, but Facebook can’t keep up with demand.In the last quarter, cost per click (CPC), which measures how much advertisers pay every time a user clicks on a Google ad, dropped 12% from the previous year.

That may be because Google added a bunch of new display inventory and hasn’t gotten enough small and mid-size businesses on board to buy it, according to a person in the digital ad world.

In the meantime, Facebook is in the exact opposite situation: ad rates are rising because the company can’t keep pace with advertising demand.

A rep from digital marketing firm TBG Digital told Business Insider that Facebook CPCs rose 28% over the same time, from about $0.70 to about $0.90.

This matches what another source in the digital ad business told us: demand for Facebook ads is outstripping Facebook’s inventory. Everybody wants to advertise on Facebook, this person said.

Facebook is planning to add mobile ads later this year, which could help the crunch (but drive CPCs down).

It’s also been widely speculated that Facebook will build an ad network to place ads on third-party sites, along the lines of Google’s AdSense, although Facebook has denied it.

Either way, it looks like Facebook has quite a bit of runway to grow its ad revenues.

See also: Facebook Had A Massive Q1 In Ad Sales, But Performance Softens In The US

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