Facebook ad spend has increased 25 percent during the third quarter of 2011, according to research by performance marketing company, Efficient Frontier. The cost of advertising on Facebook has also increased, with cost-per-clicks up by 54 percent in Q3 over Q2. Search spend has increased by 16 percent year-on-year in the UK (20 percent in the US).

Efficient Frontier’s quarterly Global Digital Marketing Performance Report, out today, includes the following findings:

• Facebook ad cost-per-clicks (CPCs) increased 54 percent in Q3 over Q2, and are predicted to continue rising. This indicates that advertiser competition in Facebook marketplaces is rising. Facebook has become an essential marketing channel for many brands. Increased cost per clicks reflect both a higher volume of advertisers and more price competition on the platform. Prices are predicted to continue to rise between 30-40 percent quarter on quarter.
• Facebook ad spend increased 25 percent in Q3 over Q2. Advertisers see the value in significantly increasing investments in social. Strategies that are contributing to spend growth include maximising fan reach with Sponsored Stories and acquiring new fans with Facebook ads. 84 percent of Facebook engagement can be attributed to Likes which are credited to Facebook advertising. Today brands increase their fan count by, on average, nine percent per month, doubling their fan base year on year. Facebook is emerging as a significant part of the marketing mix.
• Facebook fan engagement increased in Q3, with engagement (Likes, comments and shares) per post increasing by 31 percent on average, and impressions per post increasing 24 percent on average, over Q2.
• Search spend increased 16 percent year on year in the UK and 20 percent year on year in the US. ROI from search spend in the UK rose by 18 percent in Q3, having been fairly level in the earlier part of the year. This increase is likely to be the result of a rise in ad spend and late bookings from the travel sector. In the US, however, the opposite was true, with advertisers increasing budgets but seeing a decrease in ROI.
• The UK travel industry showed a 15 percent increase in search spend and a five percent increase in ROI year on year, the result of a late booking market. Impressions on Google have risen by 22 percent for travel advertisers, and clicks have increased by 130 percent. This is likely to be the result of a combination of changes in user behaviour, more targeted and relevant ad copy, and Google’s continued efforts to make paid search look more like natural search. The net result is an increased click-through rate (CTR) of 6.5 percent, year on year. This improved CTR has resulted in an 11 percent decrease in cost-per-click year on year, which contributes to improved ROI.
• Google continues to dominate search spend in the UK, as it demonstrates higher ROI for advertisers over Yahoo. Google’s higher spend share (which increased by 2.5 percent year on year), combined with efforts to improve CTRs and ad formats, results in greater ROI for advertisers over Yahoo. UK advertisers will move search spend towards Google; Bing and Yahoo need to implement the Search Alliance to reverse this trend, though the European zone financial crisis could dampen overall growth. Both Yahoo and Bing exhibit a higher click share than spend share, signifying less expensive CPCs. This may also imply lower ROIs on Yahoo and Bing, meaning a greater share of clicks are being driven by brand terms with lower CPCs as the ROI from building out extensive generic campaigns is minimal.
• Google regained market share in the US for the first time since the Yahoo/Bing Alliance was implemented. As search spends increase and advertisers look to scale in volume, Google wins back market share because of its ability to offer more inventory, despite Yahoo/Bing’s power to produce higher ROI. In contrast to the US and UK, Google is losing market share to Yahoo in France, Germany, and Australia because of a disparity in relative CPCs between search engines and between different countries.

Jonathan Beeston, Global marketing director for Efficient Frontier, says: “Facebook is the real success story. Ad spend is growing and as a result, costs are increasing, but despite that, Facebook still offers great value to brands. Used well, Facebook advertising integrates to search and social engagement to give a combined result that is better than the sum of its parts.”