Strong Performance And Soaring Prices Explain The Explosion In Spending On Social Media Ads

The social media ad industry is having a record year, with spending on social ads that appear on mobile devices exploding over 70% in annual terms, according to BI Intelligence estimates.

What's behind this surge? The story comes down to two factors, prices (which are tripling) and performance.

Consider:

• Advertising performance is improving. During the second quarter, click-through rates (CTRs) on Facebook averaged 0.36% globally during the second quarter of 2014, rising from 0.14% one year earlier, based on a selection of advertisers studied by Nanigans.
• Mobile-social ad formats are proving to be particularly effective, particularly mobile app-install ad units, which analysts suggest could account for anywhere from one-quarter to more than one-half of Facebook's mobile ad revenues.
• Prices are rising to reflect that performance boost, according to data gathered by BI Intelligence. Just as an example, Facebook's mobile app-install ads sell for as much as $20 per ad on Facebook, according to The Wall Street Journal.
• Average price per thousand impressions (CPM) on Facebook has tripled from the same quarter last year, according to Nanigans.
• Brands and businesses are realizing that paid promotion works best on content that's already popular. For instance, Facebook posts with more than 5,000 interactions (likes, shares, comments) saw an average of 86.6-times higher number of impressions when promoted using paid ads, a much higher "multiplier" than posts with poor organic performance.

Our new data finds that US social-media ad spend will top $8.5 billion this year and reach nearly $14 billion in 2018, up from just $6.1 billion in 2013. The report gives a five-year CAGR for the industry.

In the report and associated PowerPoint presentation, BI Intelligence looks at all the numbers and explores the drivers of social ad adoption.

Access The Full Report And Downloads By Signing Up For A Free Trial »

The report is full of files, slides, charts and data that can easily be downloaded and put to use.

In full, the report:

• Provides over 15 charts, forecasts, and datasets on social media ad spend and performance trends
• Includes revenue/spend trends for Twitter, Facebook, and LinkedIn
• Tracks trends in price, click-throughs, conversions and paid vs. organic reach statistics (5 charts)
• Explains why there has been a spike in spending growth on social-mobile
• Sets the context in terms of social media audience trends and user growth
• Lists the news on Instagram and Pinterest's ad efforts
• Analyzes the influence of FBX and MoPub on the social ad ecosystem
• Shows how a disproportionate amount of social media ad spend is domestic rather than international

For full access receive to all BI Intelligence's analysis, reporting, and downloadable charts and presentations on the digital media industry, sign up for a free trial.