Will Facebook Ad Costs Decrease?

Key Takeaways

hi guys it's ben heath from lead guru and in this video i'm going to talk about whether or not facebook ad costs are going to decrease in the future now that's not typically what we've seen with facebook advertising costs those of you who've been involved in this industry over a number of years will have seen costs increase but are we about to see the opposite i think there's a chance we will explain why in a minute before we get into that just want to very quickly ask you to smash that like button and subscribe to my channel if you are new and haven't done so already so before i get into facebook ad cost decreasing there's something i wanted to share which i think is really important now this is an article um from cnbc on their website and there's all the major news outlets of reported on facebook's um profitability really in q1 of 2021 and you can see that their headline is facebook revenue rise is 48 driven by higher priced ads okay um so immediately that tells you a lot but if i scroll down to some interesting stuff i want to show you first this graph okay so this is quarterly results and this is quarterly average revenue per user so we can see that what we need to do this is q1 2021 so that's that ended fairly recently we're in q2 2021 as you're recording this video now it looks like it's gone down on the quarters but you have to fully discount um q4 which is what that is because um revenue is always higher there's a lot more advertiser activity there's christmas all that sort of stuff so you have to discount that what you need to compare is q1 2021 to q1 20 20. you see q1 is typically the um the first quarter year is typically the the smallest and you can see that there's a big old increase we're looking at what roughly seven dollars per user there up to well you can see it's 9.27 and you can see here the company reported revenue of 26.17 billion for the quarter which was up 48 compared with a year prior so same period comparison to last year that's also pre-pandemic q1 and just literally just about um we've seen a 48 increase so i think there's a lot of facebook advertisers that are looking at their campaigns and they've just seen their cost steadily going up and up and up if you've been advertising say that 12 month period and you may be thinking is it ad fatigue are there things that you know i need to change in my campaign and that may well be a part of it for you if you have seen cost increase but a lot of it is quite simply this is the fact that uh their revenues are at 40 and they generate their revenues nearly exclusively from advertising there's a little bit of other stuff but it's basically all ads from from you guys um and they're generating significantly more revenue per user right how does that happen it happens because of increased advertiser demand for those users for those eyeballs for that ad real estate within the platform so the increased advertiser competition so more facebook advertisers more advertisers spending more money on the platform means that prices rise those prices rise it makes it more difficult for you as a facebook advertiser to get fantastic results with facebook and instagram ads that's just an unfortunate truth and that's certainly something that's happened now this has been accelerated by the pandemic and people being in lockdown and business having to turn to online um and that's you can see you know from sort of 2020 was right at the end of q1 here is when that all started to kick into play and you can see that these this has grown significantly in comparison to uh to previous years so if facebook ads costs have been increasing and that has led to it being more difficult for us as facebook advertisers to get great results what is going to happen going forward you know are we going to continue to see costs decreasing well actually as you may have worked out from the title this video i wouldn't be surprised if we actually start to see a decrease in costs and the main reason for that is ios 14. so i think that ios 14 the changes that are being enforced and it's not just ios 14 there are going to be other changes coming into play like in 2022 it's being talked about that we're going to be entering into a cookie-less world and you won't be able to re-target website visitors at all a lot of this is going to i think drive is going to put off advertisers i think there's probably a lot of facebook advertisers that seem to drop off right now and are going to leave the platform and i think that reduction in competition is going to reduce the cost of facebook advertising we are going to see a decrease in cost and for those of us that stick it out and for those of us that work out how to get our campaigns to produce great results under the new the new paradigm the new setup and it actually might be very very beneficial you know it would it seems almost contradictory that bad facebook advertising news might be good for facebook advertisers because all the sort of fair weather facebook advertisers that have attracted to the platform and hear all the good news stories they're going to leave and they're going to leave it for those of us to stick around and we might have more ad real estate that we can buy with the same amount of ad spend which is going to help improve our results okay i think i absolutely think that's happening i think we're not going to see it for a few quarters for it to appear in facebook's numbers is definitely something i'd recommend keeping an eye on is what does facebook's quarterly revenue look like because if that starts to decrease in comparison to previous years or even if not even the recipes years i mean there's a massive increase look from 2020 q1 to 2021 q1 if we see it start to come down in comparison to what it is now because typically over the quarters we see a steady increase then that is a real indication to me that advertisers are either scaling back budgets or leaving the platform i think a lot of the uh for a lot of businesses we're seeing both um of course there are always gonna be businesses that join the platform there are always going to be businesses that are scaling up that are getting great results we've got clients like that right now which is fantastic and we're taking on new clients which is fantastic um but overall we might see a bit of movement wave platform movement to other platforms or maybe even some offline advertising or other forms of of of digital advertising and that might be fantastic for us advertisers to stick it around so paradoxically as a facebook advertiser someone who uses facebook ads a lot who um perhaps relies on the customers and clients generated through facebook and instagram ads for your business you kind of want the news to get as bad as possible about facebook ads scare off all your competitions scare off all those other advertisers and that can lead to lower cpms lower cost per thousand impressions and that can lead to a significant improvement in your results and there's no doubt that if we look at cpm's now as opposed to five years ago the difference is you know really significant and that obviously feeds in into uh into cost so i think there's probably a lot of negativity around around the ios 14 changes actually for those of us to stick around and those us persevere it might be a great thing and i'm absolutely convinced and i have talked about this a lot the facebook's going to find a way to fill in those data holes and find a way to get um to have systems and processes in place that give us the data that we need as facebook advertisers because they know their platform relies on this and if they do start to see reductions in quarterly revenue they're going to do absolutely everything they can to uh to go ahead and change that and to fix it and to make sure that their customers their paying customers which is us the facebook advertisers not the facebook users um are taken care of and get great results and things like that one thing i want to mention around this um topic here is that whilst we've seen revenue increase significantly you know up 48 is what the revenue has gone up um q1 2021 versus q1 2022 so if you think about that's the demand for facebook advertising the supply so how many users are on facebook and instagram and using it often hasn't increased anywhere near as much which is why we've led to cost and inflation in facebook advertising that's just simple economics if supply is fairly fixed and demand increases the price goes up right now i think what we're going to see is we're going to see a similar supply i don't see huge differences coming in facebook instagram advertising but i think we're going to see a decrease in demand which should lead to a decrease in price because facebook advertising is as close to a uh you know a perfect market as you can get it's done on an auction very much adjust the prices are just in real time and uh and yeah so whilst there are certainly challenges going on right now i think the prices might decrease over the next few quarters next year or so maybe and that might be fantastic for those of us to stick it out and work out how to make things work with a new setup okay before we go a few things i want to quickly mention the first is our facebook advertising services so my company lead guru is a facebook advertising agency we create manage and optimize facebook ad campaigns for our clients and if you're scratching your head by all the changes going on in facebook ads right now wondering how to get results in this setup and we can certainly help with that we can certainly help relieve that anxiety and and take it off your hands and hopefully um improve things or at least steady things if they've dropped off and so if you're interested in that what you want to do is go ahead and book a free call with one of my team members a link will be in the video description below you can go straight through its website book in that call um we do require that businesses have a 3k per month minimum budget to work with us so please only call if you meet that criteria otherwise we won't be able to help you at this point and uh yeah just an obligation call to find out more about what it is that we can uh help you out with um and um and yeah should be useful if you found this video helpful please give it a thumbs up and if you enjoyed the content give it a like that really helps me out comment below to let me know that's also really really appreciated really helpful i know it doesn't seem like a lot but it does make a big difference and subscribe to my channel if you are new and you you haven't done so already thanks a lot guys best of luck i'll talk to you soon