Since mid-March, the cost of inventory on Facebook & Instagram has dropped an estimated 10% to 20% across all verticals. This was a result of advertisers being forced to pull back rapidly as stay-at-home orders closed shop for several industries. With fewer advertisers on the playing field, competition, and cost of bids in the auction have decreased, leading to an overall decrease in CPMs in the platform.
Aside from the drop in demand, the primary factor that led to a drop in CPM has reported record-high monthly active users (MAUs) on the platform. Users becoming more active on Facebook & Instagram and having more time on their hands to engage with content on the platforms have influenced the pricing of CPMs. Because the Facebook ads platform optimizes the consumer experience, with more users engaging with your ads and taking action towards your desired outcome (i.e. purchases), CPMs will be lowered as the algorithm registers your ad as highly relevant which improves metrics such as estimated action rate and user value.
We examined a portfolio of over two dozen ad accounts and came up with the following findings:
- Brands saw a decrease in CPMs in March Week 2 and Week 3 which is the time when COVID-19 became severe and stay-at-home quarantines were implemented across states
- Consumer and advertiser confidence returning in April Week 3 and Week 4 due to Americans receiving their Stimulus Check and Earth Day promotions
- CPMs will likely remain relatively stable over the next few weeks, even as states begin to open up, as consumer and advertiser confidence remains low. This can change relatively quickly if other macroeconomic factors like additional stimulus checks or a pivot in unemployment rates occur.
Although some brands may be hesitant to advertise on Facebook during this time of crisis, Facebook’s declining CPMs provide an opportunity for brands who wish to reach more users who are spending more time on Facebook and Instagram to stay connected.
If you have any questions – or would like to learn more, please reach out to [email protected]
— Khari Motayne, Digital Media Supervisor at Direct Agents & Samantha Ha, Senior Yield Analyst at Direct Agents