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BizReport : Advertising : July 19, 2011

High demand for Facebook ads pushing up prices

Good news for brands that are active on Facebook. Efficient Frontier's latest Global Digital Marketing Performance Report says their Fan bases will double year-over-year come October. But there's bad news, too.

by Helen Leggatt

ef_logo_sept2010.jpgEfficient Frontier expects that brands actively seeking Fans on Facebook are "on course to double their Fan base year-on-year by October, demonstrating an increasingly competitive marketplace for consumers' attention."

As more brands hop onboard the runaway social networking train, demand for ads on Facebook is soaring, outpacing supply. Because of that increase the cost of advertising on the social network is also rising. Cost-per-click rose by 22% in the second quarter of 2011, having jumped 40% in the first quarter.

Efficient Frontier expects advertising costs on the social network to continue to rise throughout the year.

"Even if CPCs increase at 20% per quarter for the remainder of the year, this will still result in an 80% growth in a year," says the report. "This could reasonably equate into a doubling of Facebook's revenue from marketplace ads."

To this end, Efficient Frontier President and CEO David Karnstedt believes it wise for brands to implement social media marketing sooner, rather than later, and perhaps limit their exposure to high Fan acquisition costs.

However, as Econsultancy's Patricio Robles rightly points out, buying ads on Facebook should not be motivated by price but by the performance of those ads.

"At the end of the day, hot or not, brands should treat Facebook like any other platform or medium," writes Robles. "That means further investments should not be driven by a rush to buy ads before the price goes up even further."

Tags: advertising, advertising budget, customer acquisition, Facebook, social network

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