Engagement rates for retailer ads in News Feed on desktop and mobile generated on average 26.4 times higher CTRs than RHS in the first three quarters of 2013 (see Figure 15). News Feed CTRs increased 18% from Q1 to Q3, averaging 1.19% most recently in September, while RHS CTRs remained stable at 0.04% during the same period.
With regard to pricing, retail News Feed CPMs nearly doubled from Q1 to Q3, averaging $5.48 most recently in September. CPCs in News Feed increased 69% during the same period, averaging $0.56 most recently in September.
A more mature delivery location, the RHS remained more stable. RHS CPMs ranged month-to-month from $0.22 – $0.26, averaging $0.24 for the year, and RHS CPCs ranged from $0.49 – $0.63, averaging $0.55 for the year.
Unpublished Page post ads – both photo and link versions – have been at the core of increased budget allocation to News Feed (see Figure 16). Adoption of these ad products grew from representing 20% of spend in March to 68% in September. With a new format announced recently, retailers have increased spend on unpublished Page post link ads, growing from representing 3% of spend in August to 15% in September.
With unpublished Page post ads touting testing and targeting benefits over organic Page posts, the latter has decreased from comprising 39% of retail spend in Q1 to 1% in Q3. Similarly, budget allocation to Domain Ads directing to External URLs has decreased from representing 50% of retailer spend in Q1 to 19% in Q3.
Of note with Facebook’s recent simplification of ad products, sponsored stories and other ad types such as sponsored results have collectively represented only 1.4% of retailer Facebook ad spend in the first three quarters of 2013.
In examining the most widely adopted Facebook ad products by retailers, it is evident that CTR is not a proxy for ROI (see Figure 17 and Figure 18).
While domain ads to external URLs averaged 0.04% CTR for the first three quarters of 2013, a fraction of the 0.99% and 1.4% CTR averages unpublished page post link and photo ads, it generated more than double the ROI.
Another trend apparent for retailers is the trend of decreasing ROI for unpublished Page post ads, with photo versions averaging 61% lower ROI in Q3 than Q1 and link versions averaging 71% lower ROI in Q3 than Q2. This is likely due to both increasing demand for News Feed as well as the novelty of the ad units in the first quarters of 2013.
The trend of retailers increasing spend in News Feed is similar with Facebook Exchange (FBX). Nanigans was one of three companies participating in a Facebook alpha program enabling remarketing in News Feed with Page post link ads. Since this launch in May, News Feed has grown from representing 14% of retail FBX spend to 66% in September (see Figure 19).
Retailer CTRs for remarketing campaigns in News Feed averaged 28.3 times higher than RHS in the first three quarters of 2013 (see Figure 20). The ROI for these delivery locations is strong and very similar, with retailers averaging 335% ROI on RHS and 386% on News Feed in Q3.
Recommendation #1: Coupling media buying strategies in News Feed and the RHS is core to successful retail Facebook advertising campaigns. While News Feed delivery offers increased prominence and larger creative (among other benefits), it is critical to measure post-click behavior such as purchases to understand the true ROI of these efforts. Through this lens, the RHS continues to be core to scaling successful campaigns and delivering strong ROI on Facebook.
Recommendation #2: Performance differs by both delivery location and ad type on Facebook. Retailers should test multiple strategies to understand what resonates best with their customers, focusing on downstream metrics like RPC and ROI as opposed to upper funnel metrics like CTR.
This is the third of a four-part series highlighting Facebook advertising benchmarks for the retail sector going into holiday shopping season.Download the Full Report