April 17, 2012, 11:29 AM

Facebook ad prices soar 41%

The average cost per click, or CPC, jumped 23% over the fourth quarter.

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Increasing the supply of ad spots on Facebook hasn’t lowered the price of those ads, according to a new report from Facebook advertising firm TBG Digital. With demand for Facebook ads continuing to rise, the average cost per thousand impressions, or CPM, over the last four quarters (that is, the year ended March 31)increased 41% compared with the same period a year earlier. 

In the first quarter of 2012 alone, CPMs rose 15%, with the average CPM rising 11% in the United States and 13% in the United Kingdom. Retailers’ ads accounted for 23% of all impressions in the first quarter, a 10 percentage point increase from the previous quarter.

The average cost per click, or CPC, jumped 23% over the fourth quarter in TBG’s top five territories—the United States, the United Kingdom, Canada, France and Germany. However, for marketers whose ads click through to another place on Facebook—for instance, a retailer’s Facebook page—the social network offered a 45% lower CPC. TBG says that Facebook aims to encourage marketers to keep consumers on the social network, rather than sending them to another site. Facebook provided no immediate comment on the practice.

The report shows that Facebook is earning more money per impression or click even though it increased the number of ads it shows on most pages from six to seven earlier this year. “Facebook has seen an increase in pricing at the same time when it has also grown the number of ads per page—sometimes up to seven—which you would naturally expect to deflate prices,” says Simon Mansell, CEO of TBG Digital. That’s because demand continues to rise.

The rising costs of Facebook ads are making it increasingly expensive for marketers looking to use ads to garner Likes of their Facebook pages. The average cost per fan increased 43% in the first quarter compared with the previous quarter, with costs jumping 77% in the United Kingdom and 37% in the United States. The report did not offer actual figures.

Despite the rising costs, the average click-through rate declined 8% in the United States and 6% across the top five territories. That may be due to Facebook increasing the number of ads it presents consumers, says the report. More ads mean that consumers have more options that they can click on, which results in fewer clicks for each individual ad.

John Jackson, CEO and founder of DecisionStep, will speak at the Internet Retailer Conference & Exhibition 2012 in a session entitled “Social shoppers share their secrets: How e-retailers spin that knowledge into gold.”

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