July 14, 2011, 10:57 AM

Facebook takes up 5% of retailers’ search marketing dollars, a new study finds

Efficient Frontier shows a 22% increase in cost per click on the social network.

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Retailers spend as much as 5% of their search marketing budgets on Facebook, according to a new report from Efficient Frontier.

The analysis is based on data from 15 advertisers from the second quarter of 2011. The report marks the first time the search marketing agency incorporated data from Context Optional, the social commerce technology provider that Efficient Frontier bought in May.

The median cost per click for Facebook advertising increased 22% in the second quarter compared with the first quarter; the report offered no specific spending amounts, nor earlier data. The report predicts that Facebook the cost per click on Facebook ads will continue to increase at a double-digit pace for the rest of 2011, which could result in a 100% increase in revenue for Facebook’s Marketplace ads.

That growth means retail marketers face a significant decision, says Siddharth Shah, Efficient Frontier’s senior director of business analytics. “The question for retailers is: Should they wait for Facebook advertising to mature or do it now? It will only get more expensive as time goes on,” he says.

The report tilts toward immediate action, urging brands to acquire Facebook followers now using multiple methods, including advertising tied to Facebook’s Sponsored Stories, which lets companies place their logos alongside content from Facebook posts related to the advertiser. The report is less clear about whether spending on Facebook advertising is taking money away from search marketing dollars, at least in the retail sector. “At this point, most signs seem to point that Facebook spend is incremental and not cannibalizing search,” according to the report. “However, we anecdotally know that some cannibalization has started to occur in retail during promotional times.” That contrasts with the entertainment sector, where several large advertisers have moved their money from search engine advertising to rely solely on Facebook, the report adds.

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