Earlier this week, Adweek reported on a Webtrends report that suggested “the performance of the average Facebook ad is abysmal.”
Although it made for a hot headline, it was perhaps not the most accurate—or fair—statement. And in the context of using Facebook ads to promote hospitals online, it might be completely misleading.
The metric used to gauge “abysmal” Facebook ad performance was CTR, an acronym for “click through rate,” which is a popular metric for analyzing PPC (pay per click) advertising. Most simply, CTR is a the percentage of clicks an ad gets in comparison to how many times it appears (these appearances are known as “impressions”). So, if an ad appears 100 times in day and 10 people click on the ad, the ad has a CTR of 10.0 percent.
The report said the average CTR for all industries 2010 was 0.051 percent, which declined from 2009’s 0.063.The worst performing CTRs were for healthcare ads, which reported 0.011 percent.
Regardless of year or industry, those are some very poor numbers. Abysmal, even.
But are they enough to say Facebook ad performance was abysmal in big bold headline letters? Not quite. Here are two reasons—with a particular emphasis on considering Facebook ads for hospital marketing and advertising.
Low CPMs: Brand Exposure for Pennies
Facebook offers two pricing models for its ads. The first is the more traditional PPC model of CPC, or “cost per click.” It’s exactly as it sounds: Every time somebody clicks on an ad, the advertiser is charged anywhere from a few cents to several dollars.
The other model is CPM, which stands for “cost per thousand” impressions (the “M” presumably is a nod towards the Roman numeral for “1,000”). Rather than paying per-click (with a presumed end-result of a “conversion,” such as a sale being completed on a retailer’s Website), the advertiser is essentially paying for exposure, with lower expectation for clicks.
The report said that CPMs were “relatively low,” although the article failed to quantify that statement. Regardless, for hospitals, “low CPM” is a valuable hint that there’s an opportunity to get your hospital’s name in front of a lot of people, which is especially attractive for hospitals that don’t have (and perhaps don’t want or can’t afford) PPC campaigns with Google, Yahoo, Bing, etc.
Quality, Not Quantity: Conversion Rates?
Let’s return to CTR for a moment…and let’s presume that Facebook ad CTR was high, such as with the earlier example of a 10.0 percent CTR.
Each one of those clicks cost money. Naturally, the more clicks, the more the ad costs (and that’s without introducing the concept of how ad rates fluctuate).
So, for a CPC ad, how do you determine its return on investment (ROI)? The short answer: conversions, or more specifically, cost-per-conversions, also known as CPV.
Lower CTRs generally result in lower CPVs since a high CTR is not a guarantee for success. For example, an ad with a headline that reads “Free iPads!” will presumably get LOTS of clicks. But when visitors reach the destination Website and don’t find free iPads, guess what? They leave—or put another way, they don’t convert. So yeah, you can have a 100 percent CTR and a 0.00 percent CPV, but still get stuck with the bill for all of those clicks!
Although there’s an impulse to suggest that “CPV talks and CTR walks,” CPV cannot be fully related to a PPC campaign because, as illustrated in the “free iPad” example, the quality of the destination Website is a significant factor.
Still, when considering the performance of an online ad service—especially if the focus is going to be put on CPC models rather than CPM models—it’s critical to appreciate how the means relate the ends, which AdWords fully fails to do in this article.
Derek Rudnak | Healthcare Marketing Communications Specialist |
AVID Design
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