Are rising Facebook ad prices a cause for concern?

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As more and more small businesses and major brands get into the Facebook advertising fold, competition for News Feed and sidebar space is increasing. As competition rises, bids go up and the total cost of advertising on Facebook rises.

For many companies, that’s enough to look elsewhere. Ted Dhanik, President and CEO of online marketing firm Engage:BDR, says that many of the company’s clients have started increasing their spend elsewhere on the web while shifting focus away from Facebook. Engage:BDR’s ad ecosystem encompasses 253 million unique users per month in 25 countries.

While Facebook ads do still deliver solid results, Dhanik told Inside Facebook that the price is starting to get too high for many businesses, who are looking for the most bang for their buck.

Dhanik explained how many advertisers are starting to look away from Facebook:

Typical display buying strategies enable advertisers to reach their users and targeted audience in a couple of different ways: leveraging third-party (sources) like BlueKai, and there are others like direct targeting for content across thousands of sites across the web and all three channels: display, mobile and web. Typically, depending on the audience that advertisers are trying to reach, we have access to the sites where they live and we place granularly targeted buys placement that is compression curve specific, audience specific, stuff like that.

In the first couple of years, when Facebook caught on fire, a lot of budgets shifted to Facebook and so the price for display and mobile advertising came down quite a bit, and it has come down because saturation isn’t as great as it was before.

As an example, Engage:BDR notes that a retail fashion client ran a test with the company to test their ROI on Facebook vs. other online venues. The CPA goal was $50 per new customer, since their Facebook advertising CPA was reaching $60 and climbing. Utilizing proprietary online and offline data, Engage:BDR did some A/B testing to single users with gender-specific creative, directing them to appropriate landing pages.

For display advertising, the client was able to lower its eCPA by 50 percent and increase ROI by 200 percent. Because of these results, the client shifted 40 percent of its Facebook ad budget to display advertising for the rest of 2014.

Dhanik explained what many  advertisers are thinking when they compare Facebook to other methods of advertising:

When people are looking for external forces and looking at incremental channels, they’re doing it because the cost is going up. The cost, meaning not necessarily the cost per click or CPM, but their effective cost of the ROI based on their KPIs. … It’s not necessarily profitable as it was before and now we have to try to find channels that are within the range of what’s acceptable for us to operate profitably. As the price goes up, the competition gets deeper, and engagement is less and conversion rates go down.

Readers: Have you shifted ad budget money from Facebook to somewhere else?

Top image courtesy of Shutterstock.

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