July 19th, 2010
“Never reinforce failure” — an old military adage that’s equally applicable in the world of Facebook advertising. Why? Because Facebook wants it that way.
Here’s the deal: Facebook charges for advertising on a sliding scale, with the cost going down as ads perform better (i.e., higher click rate = cheaper ads). As an example, we’ve been running ads lately for an NMS client and keep finding that creativity actually hurts — the “clever” ads under-perform their more pedestrian colleagues, with real financial results. Two ads we tried recently had relatively low click rates, for instance, and Facebook penalized us by charging more per response, in the 50-60 cents-per-click range. By contrast, our more generic, more successful and longer-running ad cost only 13-14 cents over the same time period, meaning that we got FIVE TIMES as much value from the same expenditure.
The obvious implication is that Facebook advertisers need to watch the statistics and shift resources away from failing ads in favor of more successful alternatives. From our experience and from chats with a couple of folks in the field, the threshold seems to be a click rate of around .04%, and for reference our generic/successful ad for the campaign above has averaged around .12%.
Of course, this bias in the system doesn’t mean that you have to throw creativity completely out the window, since advertisers need to come up with a solid array of potential messages and targeting strategies to find the ones that resonate with the Facebook audience. But Facebook clearly skews its system in favor of ads that perform well, and smart advertisers will watch the numbers closely. At least, until the company changes its ad model.