Cost of Facebook ads and fans

An article by Eve Dmochowska    1 Comment

While I was researching my book, Social Media Case Studies, it became obvious very quickly that Facebook and Twitter are the most essential tools for almost all social media campaigns, and everything else is an “add-on”.

That’s not surprising, of course, given the popularity of both services, but it does beg the question of “How do we do it best?“. If everyone is using Facebook Pages, then you have to try really hard to stand out. Of course there are ways to do that, and the book gives you quite a few ideas. One method is to try and buy your way to a fan base.

But is that worth it? Webtrends has released a report, based on 11,000 Facebook ad campaigns that show the following stats:

In 2010, Facebook ad campaigns, had, on average:
CTR = 0.051%
CPM = U$ 0.25
CPC = U$ 0.49
Cost of acquiring a “fan” = $1.07

(Side notes:
1. There are some discrepancies in those numbers, I think, but I believe it is because Webtrends probably deals with unique ad impressions to work out the CTR, not overall impressions
2. If you are suffering from acronym overload, here is a quick recap: CTR is Clickthrough rate (what % of ads get clicked on); CPM is cost per thousand impressions (would be good to know if those are unique impressions, but probably not); CPC is cost per click
3. In theory, “fans” have been replaced with “likes”, but I’ll go with Webtrend’s terminology here)

Here is the VERY interesting thing though: The higher click through rate your ad gets on Facebook, the lower will be your cost-per-click. Facebook rewards “social brands” with lower prices. For example, the weakest performing ad sector on FBook is “Healthcare”, with 0.11% CTR, and CPC of $1.27. But the best performing sector is “Tabloids and blogs” with 0.165% CTR and CPC of just $0.12.

Unlike Google’s search ads, Facebook ads have a very short lifespan. The social ads burn out after about 72 hours, and FBook deactivates them.

So, back to the question of : Is it worth it?

Personally, I wouldn’t be happy paying $1 for a fan, because I think fan acquisition should be organic, and driven by the network and the campaign itself (as well as brand goodwill). On the other hand, if your budgets allow, AND if you have a strong strategy of converting your fan to a paying customer, then it could of course well be worth it. It is certainly true that the strength of any social media campaign is vastly improved with a strong fan base, especially on a social network as strong as Facebook. Your one fan can himself drive new fans, organically, as a response to a clever campaign.

If you are an active buyer of online advertising, then you probably have firm stats about your customer acquisition costs. And of course if they compare favourably with the cost of “buying” (and converting) a “fan”, then you should go ahead. For example, I just read a post about how Mailchimp’s acquisition cost is $100, for example. So if they had a clever way to convert 1 out of 50 fans to a paying customer, it would be worth their while.

I actually think all that is good news for social media marketers, because it forces us to put on our thinking hats and come up with innovative, fun, organic and effective campaigns that encourage the consumer to engage, rather than to click.

I’d be interested to hear about your conversion experiences with Facebook. If you are willing to share some stats, please do so in the comments.