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Benefitting from Display Advertising on Social Media

Advertising on social media channels, in spite of their promised demographic targeting, carries risk. Although Facebook and other channels deliver large numbers of impressions, the click-through rate (CTR) at 0.05 to 0.2 percent is significantly lower than search engine pay per click (PPC) campaigns.

Search engine users are actively searching for what you have to offer — the people who read the ads are actively shopping. Therefore, they’re more likely to become prospects or customers.

Ads on social media services vary widely. For example, an ad on Facebook is a cross between a text-only PPC ad and a small banner with an image. A paid ad on Twitter appears as a promoted tweet in boldface at the top of a page based on the search term that’s used.

Most social media channels use a bid-based PPC model, although some also offer an option for traditional CPM (cost per thousand) impressions.

Facebook ads on the right use a PPC bidding model to combine an image and some text. [Credit: Court
Credit: Courtesy of Diane Martin
Facebook ads on the right use a PPC bidding model to combine an image and some text.
Advertising Options on Social Media Channels
Resource Typical Cost Other Notes
Digg Cost per click bid auction A social news site where ads that users don’t like are voted on and forced to the bottom of a page.
Facebook Minimum CPC $0.01; minimum CPM $0.02 Suggests bid ranges that are often much higher than the minimum; very low average CTR of 0.10 to 0.25 percent.
Flickr Daily spend rate set by advertiser Served by Yahoo!.
LinkedIn Minimum CPC $2.00 Possible that suggested bid range may be higher.
MySpace Monthly budget range between $5 and $25,000 Pay per click banner ads.
Reddit Daily spend rate set by advertiser Total number of daily bids is used to calculate every sponsor’s portion of impressions; if you spend $100 per day and the total amount spent is $200, you get 50 percent of sponsored traffic that day.
Twitter CPM only; monthly budget range between $5,000 and $9,999 No display ads but accepts promoted accounts, tweets, and trends.
YouTube Minimum $1 CPM for entire YouTube site; $2 CPM for specific content categories Served by Google AdWords.

Even if social media ads may not be cost-effective for you, they’re certainly working well for social media services. Facebook ad revenue is projected to jump from almost $2 billion in 2010 to $6 billion in 2012, according to the latest eMarketer projections. About 60 percent of the revenue derives from the self-service ads that appear on the right side of every page, and the rest from home page banners.

According to eMarketer, other big earners in social media advertising are MySpace, LinkedIn, Classmates.com, and Twitter — in that order. These high earnings are now driven by large corporate campaigns.

Compare bid rates carefully. Facebook and Twitter, in particular, attract large corporations with deep pockets, forcing up bid prices. Factor their lower CTR and higher costs into your budget to decide whether social media advertising is cost-effective for you.

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