Facebook advertisers boost video budgets 24%, study finds

Brief:

Facebook advertisers increased their video media budgets 24% in Q3 from a year earlier, the third straight quarter that video spend more than doubled image ad spend, per a study by ad platform Nanigans. Cost-per-click (CPC) rates for video ads rose 31% during the period amid greater demand. The quarterly report focuses on Facebook and Instagram advertising trends among Nanigans' e-commerce, gaming and lead-generation customers.
Click-through rates (CTR) for video ads fell 28% in Q3 from a year earlier, but the rise in video spending indicates that advertisers saw a positive return from video ads, per the study. Cost per 1,000 impressions (CPM) for video ads dipped 5% from a year earlier, but gained 4% from Q2.
Facebook advertisers ramped up spending on dynamic ads — which have a template that pulls in images from an advertiser's product catalog in real time — 98% in Q3 from a year earlier, pointing to their effectiveness in driving conversions. Dynamic ads also delivered CTR of 2.4%, or more double the rate of non-dynamic ads at 0.96%, per Nanigans.

Insight:

The growth in video advertising on Facebook shows how marketers are working to engage users of the social network with more emotionally compelling creative that can drive a direct response. Boosting engagement is particularly important for direct-to-consumer (DTC) brands that are equipped to fulfill direct orders, app marketers that aim to drive downloads and lead-driven companies in the banking, insurance, automotive and education industries, according to Nanigans.

Facebook advertising, including video, saw a 6% gain in CPM to $8.79 in Q3 from a year earlier, with key strength in CPM for transactions, which rose 20% to $7.20 for the comparable periods. CPM for lead generation rose 6% to $13.76, while CPM for app installs gained 3% to $7.96 in Q3 from the prior year.

CPM for transactions rose 11% from the prior quarter as e-commerce advertisers began to ramp up ad spending for the holiday season, while CPM for app installs rose 12% as game developers increased spending to coincide with the September release of Apple's new iPhone, per Nanigans.

The demand for dynamic ads helps to explain why Snapchat, a competitor to Facebook for digital ad dollars, last week started testing a dynamic ad format. The new format selects items from the product catalogs of advertisers and targets them to specific groups of Snapchat users. Shady Rays, Princess Polly and Vitaly were among the brands whose tests of dynamic ads saw declines in cost-per-purchase rates and gains in return on advertising spend, pointing to how tailoring ad creative and placement to target groups can more effectively engage users and optimize spend.