It’s been almost eight weeks since Facebook revamped its News Feed algorithm, pushing posts from friends and family higher in people’s feeds at the expense of posts from brands and publishers.
Facebook ad costs spiked higher after a big change to its News Feed algorithm
Mark Zuckerberg said people would spend less time on Facebook after the change. It looks like that might be happening.
CEO Mark Zuckerberg said at the time the change would result in people spending less time on Facebook, an interesting side effect considering Facebook is an ad-driven business. The general thinking is that less time spent on Facebook typically equates to fewer ads seen on Facebook.
That seems to be the case, at least based on early data. The number of ad impressions Facebook delivered in News Feed in January was down year over year, and in February ad impressions were up, but at a much smaller rate than previous months, according to data from AdStage, an ad tech startup that is one of Facebook’s official marketing partners.
Fewer ad impressions also means that ad prices are rising, AdStage found. In January, Facebook CPMs — the cost of a thousand ad impressions — was up 122 percent year over year. In February, CPMs were up 77 percent. It marked the two highest year-over-year jumps in ad prices for Facebook over of the past 14 months.
That data makes sense. If the algorithm change is indeed leading to less time spent, it should theoretically lead to fewer ad impressions. And fewer ad impressions should lead to higher prices, assuming advertiser demand stays consistent.
“If I were just looking at January and February, it looks like that algorithm change definitely was a huge factor,” said JD Prater, the director of growth marketing at AdStage. “A lot more than I thought it was going to be, to tell you the truth.”
There are a few caveats. The first is that this data is from just one of Facebook’s many ad partners and represents just a sliver of the company’s overall ad revenue. It’s also early — the data highlights just seven weeks of ad spending since the algorithm change was unveiled.
It’s also worth noting that this trend — fewer impressions, higher ad prices — has been ongoing for the past few quarters. Facebook also said in the past that it’s running out of places to put ads in News Feed, which means impressions should theoretically plateau over time as Facebook reaches peak “ad load.”
That seems to be happening. Facebook self-reported that ad impressions were up 10 percent in Q3 2017 and just 4 percent in Q4. The algorithm change may just be exaggerating a trend we were already seeing.
It’s also a reminder that Facebook’s ad system is ultimately mechanical — it’s an auction process that sets prices based on demand and competition and isn’t biased toward the buyer, whether it’s a big brand or a political campaign.
Facebook is an ads business so it’s worth watching closely to see how changes to its consumer experience impact its bottom line, or advertisers eager to hand over their money. That’s never been a problem in the past. Facebook’s ad revenue keeps going up and up. It made $12.8 billion in ad revenue last quarter, and its total pool of advertisers keeps getting bigger and bigger.
This article originally appeared on Recode.net.
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