What’s up with the changes to ad prices on performance marketing giants Facebook and Google
The entire world is currently in the midst of a completely unprecedented state of emergency, the impacts of which are felt far and wide. That includes marketers and people who oversee advertising budgets. Acting quickly and effectively is paramount in determining if a company thrives, survives or dies during the corona crisis. OMR spoke to experts about the effects corona has had on current ad prices on Facebook and Google, what chances are available for even the hardest hit branches—and what no one should be doing under any circumstances.
“The theory is simple: People are more frequently online and sessions are longer than normal. That means that the inventory increases,” says Florian Litterst, digital marketing consultant, CEO at adsventure.de and author of several OMR Reports. “In addition, the demand for the larger inventory has sunk because many advertising budgets have been or will be stopped,” says Litterst. “Since we’re acting in an auction-based environment, the logical consequence is a dramatic drop in the CPM.
When the first corona-induced restrictions on daily life took effect in Germany last week, the average CPM on Facebook sank noticeably for Litterst’s clients. “typically, the first two weeks of the year are the cheapest to advertise,” explains Litterst, who oversaw roughly EUR 3.5 million adspend last year. After the Christmas season, many campaigns are halted and budgets are redistributed. “Last week, the CPM was in some cases below post-Christmas levels.” Whereas 1000 impressions ran for EUR 3.70 the week before, Litterst says that the CPM fell to as low as EUR 2.55, a full 7 cents lower than in the first two weeks of January, where CPMs averaged EUR 2.62. Some clients have even experienced a 45% drop in their CPM. “It’s quite remarkable. It’s been a long time since we’ve seen CPMs under 2 euro on the Facebook feed.”
No one needs my product – should I still be advertising on Facebook?
The above CPMs are the average from all of the ads run by Litterst’s clients and accounts. “They are all eCommerce companies,” says Litterst. Therefore, his clients are not hit as hard as the thousands of single retailers, who are now forced into creating an online presence and turning to Instagram in the hopes of generating revenues. But his portfolio does include clients who are struggling mightily at the moment.
“One of our clients is active in team sports,” says Litterst. “Once games started to be postponed, revenues ground to a halt.” Instead of continuing to run and optimize campaigns designed to sell goods and equipment that no one can use right now anyway, Litterst and his team are employing a different approach. Using previously available content, like training videos, tutorials for exercise routines that can be done at home, email leads can be generated. “We set up the campaigns so that the content is only visible after users enter their email address. The hope is to profit from these contacts down the road with bounce back mailings,” says Florian Litterst.
Are lead generation campaigns the tool du jour?
Such lead gen campaigns, in which the goal of advertisers is to obtain a single means of contact, usually an email address and, if possible, other personal information, such as interests, age, etc, which can then be used in more personalized sales campaigns in the future, seem to also be profiting from the current situation (sinking CPMs and people with more time on their hands). That’s something that OMR’s Facebook campaign whisperer Christoph Mühle has also observed.
“We currently have a lead gen campaign running where users have to answer 5 questions,” says Mühle. “It’s generating two to three addresses per minute. Across all adsets, the leads cost €0.15.” Why is that? “Users receive a personalized voucher that they can use to download an OMR Report of their choice after answering all 5 questions,” says Mühle. Roughly 2000 users have begun the questionnaire and 82% of them have completed it in the past 48 hours and entered in their email address. Mühle went on to say that educational offerings seem to be very effective at the moment. “And actually the CPL (cost per lead) is under EUR 0.10 when you take into consideration that the offering is shared outside of Facebook.”
How has the current situation impacted the conversion rate?
The most important question for many when it comes to campaigns on Facebook: How have Corona and the falling CPMs impacted the conversion rate? “As of today, everything appears to be normal,” says Litterst. “There is room for improvement in the results here and there, given that the reach is cheaper.”
As discussed in the current episode of the Social Marketing Nerds (a Cologne-based social marketing agency) podcast with Florian Litterst (in German), the short-term gains and performance are largely dependent on the sector in which sellers or service providers are active. A fact that should be obvious when you consider that running ads for leisure travel or events is not a good idea at the moment. But even in the middle to long term, there figures to be several industries that will find it much more difficult to turn leads into conversions, as there are other, more pressing issues.
What about Google?
It’s not only essential to meticulously monitor the performance of all of your ads on Facebook. There has been a lot of tumult on Google in the past few days as well.
Carlo Siebert is an online marketing consultant and has been primarily active in SEA over the years. He currently oversees an average annual spend in the 8-figure range. “I am fortunate to have a very diverse client portfolio. It would not be ideal to be focussed on a single segment like tourism. That industry is standing completely still,” Siebert told OMR. But it’s also a challenging time for eCommerce companies who should be profiting directly from the shift to online business. “Because of the fact that the competition is increasing, the CPC, cost per conversion, is also increasing,” says Siebert. “That leads to Google swallowing up the theoretical margin that companies could have had with the increase in demand.”
In addition, Siebert is of the opinion that fewer purchases are being made at the present. “While searches for non-essential goods remain high, people are buying less as a result of the current economic challenges, like reduced salaries, unemployment and insolvency,” says Siebert. All of which are reflected in the KPIs of Siebert’s clients, as a comparison of this past Sunday, March 22, with the Sunday before March 15, shows. In it, spendings, conversions and clicks have sunk 10%, 14% and 21% respectively, while the CPC has increased by 15%.
Online commerce on Google is tough at the moment, but it could change quickly if Amazon further rolls out a stop on delivery of non-essential goods to the rest of Europe as it did in Italy and France. That would benefit online commerce in countries, like our homebase of Germany. “That development would be a boon for smaller merchants and help kickstart German eCommerce,” says Siebert.
What should be done now—and what should advertisers avoid?
Obviously, there is no single, universal playbook for how every advertiser should approach advertising on Facebook and Google. The innumerable variables that are known, like company size, budget, target group and the like, are exacerbated by the developments regarding the coronavirus pandemic, which can change by the hour and thus turn everything upside down at a moment’s notice. According to Litterst, company decisions should not be made at a slower pace, despite the fact that many people are currently experiencing a deceleration of their daily lives. “Right now the exact opposite is true. The crisis demands quick action.”
There are a few ground rules, according to Litterst, that everyone needs to follow. “I think that people are looking for a sense of normalcy, and that includes seeing ads.” He says that there is nothing wrong with engaging in marketing activities at the moment. “What you should not do is advertise with straight-forward discounts, where the promo code is ‘covid-19’ and is good for 19% off.” Otherwise, it is now more important than ever to engage in clear communication and transparency (e.g. could there be a delay in delivery?)—and to closely monitor the performance of every channel. “The need to analyze campaigns regularly has never been this great,” says Litterst. “The all-important question is: how much return will I see on my spend.”