From October through December 2016, e-commerce advertisers on Facebook conducted their annual tradition of clamoring for holiday season shoppers. While different brands have varying methods for determining which users to target, the aggregate results pointed to mobile and dynamic ads being big hits. Overall, advertising costs expectedly rose from non-holiday levels thanks to increased competition.
Before tackling more esoteric trends, let’s first examine some high-level figures from the quarter, beginning with Facebook ad CTR (click-through rate). As always, data cited here reflects my work analyzing customer advertising activity at Nanigans, with these specific stats pulled from the latest Q4 Facebook benchmark report (registration required).
Aggregate CTRs decreased worldwide just 5 percent quarter over quarter but remained near the record-high levels of Q3 2016. The broader trend in CTRs continues to advance upward, with Q4 2016 global figures up 42 percent year over year. This applies to both the e-commerce and gaming verticals, which each saw CTRs either at or just below historic highs.
Meanwhile, Facebook CPMs, while increasing on a quarterly basis, are gradually rising at slower rates over time. Global CPMs are up only 10 percent year over year. That’s the lowest year-over-year increase in three full years of our reporting, and the second straight quarter growth has fallen below 20 percent.
Collectively, these CTR and CPM figures underscore the evolution of Facebook as an advertising platform, particularly for the primarily direct-response advertisers who are reflected in this sample. These organizations have become increasingly focused on profitable actions, rather than solely looking at the costs of driving those actions.
Improving CTRs, while not necessarily a predictor of revenue, understandably portend better results downstream (assuming you are targeting and segmenting well, increasing clicks likely will increase purchases or downloads).
The slower growth in CPMs is more multifaceted, but it also reflects this change in industry thinking. For example, e-commerce marketers actually experienced a year-over-year CPM decrease as a larger amount of spend went to carousel ad units. Carousel ads are generally less expensive than photo or video ads, but they tend to drive more purchases.
Along these lines, advertisers committed more of their budgets to Facebook’s Dynamic Ads in Q4 2016. These include single and multi-image product-oriented units and those focused on mobile app installs.
Across Nanigans advertisers, the share of all Facebook ad spend that was allocated to Dynamic Ads increased 164 percent from Q4 2015. The pricing of these ad units also tracked well with Unpublished Page Post placements.
The slow dip in desktop for retailers
When it comes to advertising spend, online retailers are generally more focused on desktop. That is because while mobile users traditionally boast higher CTRs, desktop users tend to actually purchase at higher rates.
Thanks to changing shopper habits and dramatic price swings on desktop, e-commerce advertisers have shifted more of their holiday ad spend toward mobile — the graph below showing the change in 2015.
In the most recent Q4 benchmarks, online retailers scaled up on mobile at substantially higher rates than in 2015. Looking at a same-advertiser set, mobile captured a 23 percent greater share of total spend in Q4 2016 compared with the same period one year prior.
For marketers in the e-commerce vertical, these trends collectively point to a couple of notable takeaways. Chief among them is the importance of a profit-focused (ROAS, or return on ad spend) advertising strategy, rather than one concerned with costs (e.g., CPA, or cost per action).
This is the reason advertisers continually make those dramatic swings toward mobile during the holidays; mobile users’ purchase rates and the share of overall purchases increase, while costs generally equalize with desktop.
While dynamic ads may not be right for everyone, their usefulness as a retargeting method on Facebook is especially worth testing. We’ve seen these ads outperform more traditional website custom audience-referred retargeting campaigns, and the recent increased spend shares going toward this ad unit points to positive performance gains.
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