Facebook advertising cost-per-clicks increased by 22 percent in Q2 2011

Facebook advertising cost-per-click (CPC) rose by 22% in the second quarter of 2011, according to a Global Digital Marketing Performance Report from performance marketing company, Efficient Frontier and its subsidiary, Context Optional, a social marketing management company. Facebook CPCs are expected to reach 80% growth in a year, by the end of 2011.

Findings of the Global Digital Marketing Performance Report include:

• Facebook CPCs up by 22% in Q2 of 2011 over Q1, and this is expected to rise through 2011. If they continue to increase at 20% each quarter, this will result in 80% growth in one year.

• Facebook spend is around five percent that of search spend overall. However, for some advertisers this can peak at 25% during specific promotions, or at key buying times.

• Facebook spend currently is mostly incremental and not cannibalising search. Budget for Facebook is mostly coming from offline media such as TV and print. Efficient Frontier believes that Facebook will show the strongest growth in the months ahead.

• Brands are aggressively acquiring Facebook fans and those brands who are active on Facebook will, on average, double their fan base by October 2011.

• Analysis of 20 million fans managed by the Context Optional platform shows that for every brands post, there were an average of 100 comments per post in response. Brands will greater numbers of fans receive greater number of interaction; on average, each 17,000 fans generates one additional comment per post.

• Search spend growth in Q2 slowed globally, but still showed an eight percent increase year on year (year on year increase in 2010 was 17 percent globally). Search growth in the UK was seven percent year on year. Efficient Frontier believes this slower growth is, in part, the result of:

o advertisers focusing more on ROI than volume
o uncertainty in the Eurozone and the recovery of Japan from the March earthquake. Search is a strong indicator of macro-economic conditions.

• In the UK, Google continues to dominate with a share of 92.5%. (Note: as the Search Alliance is yet to be implemented outside of the US, Efficient Frontier reports Yahoo! and Bing separately.) Yahoo! was the only search engine that had a higher percentage of clicks than spend, reflecting cheaper clicks.

• The travel sector in the UK remains strong, with an 18 percent increase in ROI compared to the same period last year. Spend has increased by two percent. Despite the small spend increase, the sector has seen a 30 percent rise in clicks year on year (the result of a 15-30 percent fall in CPC over the same period), and a nine percent increase in click-through rate from Q1 to Q2 this year, as consumers become more specific in their searching.

Efficient Frontier’s global marketing director, Jonathan Beeston, says: “The biggest increase in spend this year is on Facebook advertising. Over the year, we expect it to have grown by 80% from last year. Budget for Facebook advertising is mostly coming from offline media such as TV and print rather than search.

“If the Yahoo!/Bing Search Alliance renews integration outside of the US next year, then the UK will see the same effect as the US: advertisers will move money towards Yahoo!/Bing to take advantage of ROI improvements.”

Methodology

The analysis was completed based on data from Efficient Frontier search engine marketing customers and the resulting Efficient Frontier Customer Index. The Efficient Frontier Customer Index represents a subset of clients who have spend data for six consecutive quarters or more, whose resulting metrics are then normalised to average industry category contributions established by multiple third party data providers.

For the first time, the report also uses data from Context Optional (which Efficient Frontier acquired in May 2011).

FACTFILE:

Efficient Frontier is a leader in online digital marketing, managing search marketing, display and social media campaigns for advertisers and agencies around the world. Efficient Frontier currently manages well over a $1 billion in annual digital marketing spend on behalf of its clients globally. The largest and most sophisticated advertisers and agencies partner with Efficient Frontier to achieve and sustain optimal digital advertising campaign performance.

In May 2011, Efficient Frontier acquired Context Optional, the leading provider of social marketing management for global brands and agencies. Context Optional’s Social Marketing Suite enables brands to create highly customized social media interactions that generate real value from their fans – through increased mindshare, word of mouth, website traffic and customer service recovery.

The Efficient Frontier/Context Optional combination offers marketers the opportunity to unite customer acquisition and engagement, creating an exponentially greater number of brand advocates across social media properties. Together, Efficient Frontier and Context Optional offer a complete solution for brands to acquire, activate and drive value from fans on Facebook and Twitter. The united Efficient Frontier and Context Optional platforms and aligned service teams ensure flawless execution of social marketing campaigns including strategy, creative, execution and optimisation.

Efficient Frontier is headquartered in Sunnyvale, California, with offices in New York, Chicago the United Kingdom, France, Germany, and India, and technology licensing partnerships in Japan, Hong Kong and Australia. Context Optional is headquartered in San Francisco. Efficient Frontier is a privately held company with funding from Redpoint Ventures and Cambrian Ventures. For more information on Efficient Frontier, visit www.efrontier.com and for Context Optional visit www.contextoptional.com.