According to a report by Digiday, brands are reducing their expenditure on Facebook ads. Some of the brands are moving as much as 30 percent of their ad budget from Facebook.
Digiday interviewed 10 Direct-to-consumer (DTC) advertisers and found that they have reduced the amount spent on advertising on Facebook due to high CPM’s with lower ad impressions in an already excessively cluttered News Feed of the platform.
“The effectiveness for Facebook has gone down and got particularly bad in late April and early May, which is why we are shifting significant spend,” said, Fabian Seelbach, the SVP of marketing for Curology, a company that sells acne treatments.
Seelbach stated that Curology decided to shift 30 percent of their ad budget which was initially dedicated to Facebook after paying 30 to 50 percent extra on CPM’s at the end of April. And this won’t be the end of the budget cuts for Facebook; in the upcoming weeks, the company would be slashing 3 percent more of its ad budget meant for Facebook.
“We can’t work fast enough to maintain the stability of the pricing,” Seelbach told Digiday.
Similarly, Brooklinen, another DTC luxury bedding startup which used to spend up to 75 percent of its overall budget on Facebook, realized that Facebook ads are quite expensive for their pockets. DTC Brands like Brooklinen, Thinkx, Roman, and Quip are finding these ads too costly and are diversifying their ad funds on new channels like out-of-home, terrestrial radio, and even – heavens – print.
“We’re trying to move away from Facebook as fast as we can,” said Fulop founder of Brooklinen, who said CPMs on the platform are double what they were a year ago. “We’re fighting in this little slip of real estate with everyone else out there, and it’s hard to cut through. You’re paying an impression-based auction, so you are essentially bidding against anybody and everybody that wants to compete for that space, so it’s become a hyper-competitive environment.”
Since January this year, Facebook made changes in its news feed giving priority to user content over branded or publisher content. This hassled to increased competition as there is limited ad inventory in the feed. And due to less stock in the ads auction, CPM prices have risen drastically, and with fewer ads, ad impressions have gone down. This has created a ripple effect and resulted in quite a few brands directing their ad budget to other platforms.