Facebook Fine-tunes Ad Algo

Facebook appears positioned to survive the looming ad recession just fine. The site appears to be able to tweak its algorithm in ways that will produce higher click rates.

According to research released by TBG Digital, click-through rates for advertising on the social media site increased a whopping 18.5 percent quarter over quarter. And while click rates increased during the quarter, the cost per click actually fell by 10.8 percent. At the same time, cost per thousand impressions increased by 7.1 percent.

A report from EfficientFrontier covering the same time period revealed even more surprising results. According to that platform’s Digital Marketing Report for Q3 2011, Facebook ad CPCs increased 54 percent from Q2 to Q3. The report also revealed that Facebook ad spend increased 25 percent.

Like Google, Facebook appears to have control of its ad system in such a way that it can tweak its algorithm to suddenly generate more clicks and ad revenue. It happens particularly at the end of quarters, according to Patrick Toland, managing director of North America for TBG Digital. That’s a sure sign Facebook’s ad system is proving powerful. It can play those kind of algorithm games because it is top of mind with marketers.

Toland, whose clients include Jet Blue and Heineken.said that in meetings during last week’s Ad Week in New York, he met with representatives from three different Fortune 50 companies who all echoed the same sentiments.

“The three Fortune 50 companies said to me basically, ‘I’m freezing my digital budget. I’m cutting budgets everywhere except in Facebook. And in Facebook, I’m growing my budget.’ That was really startling to me.”

According to the TBG report, brands now account for more than 50 percent of advertising on Facebook, an increase of 6.7 percent quarter over quarter.

Facebook’s performance advertising is also gaining the reputation as a safe harbor, another positive in rocky economic times. The Efficient Frontier report predicted that as the social media platform begins to institute many of the advertiser-friendly features introduced at the recent F8 conference, Facebook would continue to be a highly attractive vehicle for “cautious advertisers.”




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