Facebook’s Ads Snowballing Ahead of IPO

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Facebook investors who have bubble talk babbling in the back of their heads recently received some news that should make them relax. The social networks advertising business is snowballing thanks to increased costs to advertisers, according to a recent study from TBG Digital.

The social agency analyzed 372 billion impressions for 235 clients between the first quarter of 2011 and the first quarter of 2012, and found that the average CPM (cost per thousand clicks) increased 41 percent in the past year.

Cost per click (CPC) increased by 23 percent since the last quarter, with a 35 percent increase for France, and a 34 percent CPC in the US.

“Unbalanced supply and demand could be the reason behind these rises,” the report stated. “Growth in new users may be slowing, but the social network is becoming more attractive to advertisers.”

Plus, those ads are engaging users less, likely due to the fact that Facebook has increased the number of ads to appear on the page. The top five territories saw an average Click Through Rate (CTR) decrease by 6 percent, including 8 percent in the US and 13 percent in the US.

Retailers, however, have taken the lead on Facebook advertising, increasing 10 percentage points for a total of 23 percent of Facebook advertising.

“This increase could be due to retailers beginning to use Facebook as a discovery tool and as a way to communicate new products, seasons or sales to their Facebook fan bases,” the report noted.

Facebook also increased on the new front, with a 196 percent increase in news CTR, placing Facebook ahead of Twitter.

Facebook has managed to demand higher premiums for its ads, even though those ads are engaging with users less. It’s a sure sign of increased demand for Facebook advertising, which helps lift it above the bubble talk as it prepares for its IPO.