Watch out, Google, Facebook is eating into paid-search budgets

Paid search no longer dominates the performance budgets for advertisers. In fact, some have noticed that paid-social ads on Facebook can deliver better results, such as driving traffic to sites, than they did previously.

As a result, some advertisers have shifted between 10% and 20% of their performance budget to paid-social ads, predominantly on Facebook, said Allyson Griffiths, head of earned media at iCrossing. This migration has pushed the social platform’s share of paid-search budgets to anywhere between a tenth and a quarter over the last year, said Griffiths. These campaigns may not have driven last-click revenue, but the impact they had on other channels like direct, brand search or store visits is clear to some advertisers and has led to increased investment, Griffiths added.

The flow of money moving away from paid search, aka PPC, ads to paid social will be felt most by Google — rather than any other search engine — given its dominance in Europe. Google accounts for 94% of all search engine traffic in Europe versus the 2.29% share owned by its nearest rival, Bing, according to May figures from Statcounter.

“We’ve seen clients using this approach increase their social revenue by 280%, reverse declining brand interest, and their overall site conversion rate increase 26% versus the previous year, said Griffiths.

Advertisers have asked digital agency Roast to examine whether to re-allocate their own budgets. Paid-search budgets remain flat so far this year, according to Roast’s managing director, Gareth Owen, and the bulk of that money still goes to Google.

“It used to be that Facebook’s cost per acquisitions was five times worse than Google’s CPA,” said Owen. “Now, that figure is around twice as high. There’s still a gap there, but it’s close enough to see that ads on Facebook can have a bigger impact on the customer journey than one of the many generic keywords on Google,” said Owen.

When travel retailer increased its average monthly spend on Facebook by 20% in March, for example, traffic to its site grew by 200% over the same period versus the previous month.

But the increase in traffic wasn’t just down to the increased budget, said Marek Lacina, director of programmatic marketing at Better targeted ads also played a role as the advertiser was able to serve custom offers to audiences. On Facebook, all the creative assets are custom made for the exact audience for which the ads are targeted to, including destinations and interests, said Lacina. Whereas on Google, the creative assets are more generic and had a few images that are served to a bigger audience, he added.

Facebook’s growing influence over PPC budgets has been attributed to two factors: Buying PPC ads is a competitive, therefore costly business. A client of performance agency Journey Further has seen their CPMs jump between 40% and 50% on Google to more than £1 ($1.27) as a result of more competition, said strategy director Dan Peden. On the flip side, CPMs on Facebook range between 60p (76 cents) and £1.20 ($1.53) depending on the category and ad bought, said Peden.

The second pressure point on PPC comes down to how easy it’s getting to see whether paid social makes money for advertisers. “We’re able to see Facebook being able to deliver more quality traffic at a cheaper cost than it has done before,” said Adam Chugg, head of biddable, at media agency The7Stars. “Although Facebook is better able to show ROI against new audiences, this is often within silos.”

Part of the reason PPC ads have typically shown the highest returns was because of last-click attribution. But the more advertisers like pursue sophisticated attribution models the more advertisers focus on understanding the real cost and value of those impressions. Facebook’s conversion-focused objectives have been successful at demonstrating ROI, albeit within a walled garden. This is by no means perfect, but it’s appealing to advertisers to be able to pull reports that demonstrate ROI against new audiences straight from the platforms.

“Advertisers are also becoming more interested in attribution and scalability, leading Facebook to move on from its traditional attribution tools and invest in its own multi-touch attribution capability,” said Catherine Chappell, client partner of performance solutions at iProspect. “This not only allows advertisers to understand incrementality on a global scale but also provides a platform for smaller advertisers to measure the effectiveness of their campaigns.”

That said, when it comes to sharing accurate numbers, Facebook’s history isn’t exactly squeaky clean. Metrics from the social network don’t have the best reputation among buyers in the wake of accusations it had inadvertently shared inflated video metrics. For that reason, other advertisers haven’t decided to commit their PPC money over to the social network.

“We’ve seen advertisers that have gone heavily on Facebook start to pull money from it because the platform won’t share data with anyone so they can’t question the returns made from their ads, said Peden. “Facebook doesn’t really share campaign data with anyone. Some advertisers have taken the final 10% of PPC budget that can be quite expensive and spend it on YouTube because it will show a clear link back to their bottom line.”

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