Study: Facebook ad click-through rates surprisingly low

WebTrends shows regular online banner ads get better response (but 'friend of fan' strategy works)

Don't count on this causing a drop in Facebook's advertising revenue -- expected to double this year to $4 billion -- but it may prompt some uncomfortable questions from prospective advertisers, as well as some fancy footwork from Facebook ad reps. An analysis by online analytics firm Webtrends of more than 11,000 Facebook campaigns shows that ads on the social networking site last year had click-through rates which on average were about half the click-through rate of your typical non-Facebook web banner ad. (Also see: Mark Zuckerberg's first website at Harvard sold in online auction) The average click-through rate (CTR) for Facebook ads in 2010 was 0.051%, or about one click-through for every 2,000 ad impressions. The industry standard CTR is 0.1 percent, or one CT for every 1,000 impressions, as Mashable's Todd Wasserman points out. Facebook's CTR last year also was down from 0.063% in 2009, while the cost per click (CPC) increased in 2010 to 49 cents from 27 cents the previous year. That downward trend in CTR and upward trend in CPC is a "typical pattern for display ad networks as the audience becomes more savvy and demand causes prices to rise," Webtrends explains. "Brands investing now will save money building their Facebook ad programs now by taking advantage of currently low rates that will continue to increase over time." There's your positive spin, Facebook ad sellers! And while the low CTR for Facebook ads relative to regular banner ads might trouble some advertisers, don't expect them to go running back to Myspace. Facebook's audience is massive, and it's worth it to advertisers to keep pounding the rock and trying new things. The alternative -- writing off Facebook as an advertising medium -- is fraught with peril, not to mention potential unemployment for skittish ad buyers. Indeed, Webtrends writes that "Facebook’s top advertisers have increased their ad spend 10 fold," so nobody's bolting the tent just yet. Other interesting data from the Webtrends analysis: * The older Facebook users are, the more they'll click on ads, at least until age 65, when the CTR begins to decline. Maybe once you've seen one AARP ad, you've seen them all. * Women click on Facebook ads at a higher rate than men. * The ad category that performs best on Facebook is "tabloids and blogs," with a CTR of 0.165% and CPC of 12 cents. Next best is "media and entertainment," with a CTR of 0.154% and CPC of 25 cents. * The worst-performing ads on Facebook are in the categories of healthcare (0.011% CTR and $1.27 CPC) and "Internet and software" (0.021% and $1.03). * Ads have higher CTRs if a user's Friend is listed as "liking" the ad. Further, marketers who use this "friend of fan" targeting can extend the life of an advertising campaign. So it really is who you know.

Chris Nerney writes about the business side of technology market strategies and trends, legal issues, leadership changes, mergers, venture capital, IPOs and technology stocks. Follow him on Twitter @ChrisNerney.

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