Facebook Advertisers React to Leaked CPC Memo

Facebook’s leaked memo to agencies about how clicks will be distributed via its CPC and CPM ad-buying models has got the attention of advertisers. First reported by AllFacebook.com on April 30, the letter had this to say about potential changes in the frequency of ads being delivered:

“CPC advertisers [advertisers who have chosen to bid ‘cost-per-click’] may receive more clicks. CPM advertisers [advertisers who have chosen to bid ‘cost per thousand impressions’] will continue to receive impressions but may receive less clicks.”

CPC ads can cost significantly more when compared to CPMs. When asked whether or not CPC inventory was being increased at the expense of CPM advertisers, Facebook spokesperson Annie Ta responded via e-mail: “The changes that we will be implementing over the next few weeks will affect how we deliver ads based on advertisers’ objectives. This will not affect inventory for people running either type of campaign.”

Facebook.com advertisers speaking with ClickZ rejected, for the most part, the simplicity of the Palo Alto, CA-based company’s public stance. “My reading of the update led me to believe there is more than meets the eye,” said Derek Pangallo, an ad buyer who received the Facebook memo.

John Keehler, director of digital strategy for marketing agency ClickHere, said that the changes would “certainly” increase available inventory for CPC advertisers. “However, it will likely also increase ad revenue for Facebook by ensuring that more clicks are funneled towards these CPC ads.”

Michael Scissons, CEO for the social media firm Syncapse, speculated brand advertisers will not be dramatically affected by CPM/CPC changes that Facebook appears to have in store. At the same time, he agreed with Keehler that the social site is moving towards a platform designed to significantly spike ad revenue.

“This is a good move on the part of Facebook as it will help increase revenue from local and regional markets, while allowing them to build consistent algorithms that govern performance ad units,” Scissons said. “I believe Facebook has the most opportunities of any of the online players to capture advertising dollars at a mass scale from local [and] regional markets.”

Some suggested that Facebook’s newly available data from social plug-ins would not only cause a shift towards more CPC but also higher rates. Oz Sultan, executive advisor for Perks Consulting, said Facebook appears to believe the data it will collect from the universal Like button and other sources will allow it to rewrite many of the current rules for online advertising.

“They must feel like the data will make the [clicks] statistically better for advertisers,” Sultan said. “This move signals that they are confident about what the CPC model can [achieve].”

Facebook could be leaning towards using a targeting system that leverages behavioral, contextual, demographic, and cookie-based data, he said. “It looks like they are going to change the entire ad model,” Sultan said. “It’s the only thing that makes sense. They have way too much information they are not doing anything with.”

Since announcing its so-called social graph on April 21, Facebook has been the buzz among marketers, lawmakers, and late-night talk show comics due to newly created data-collection practices and privacy concerns. The latter issue appears to be gaining steam in the political realm.

Earlier today, former Facebook privacy chief Chris Kelly distanced himself from his former employer while releasing a statement in connection with his run for California Attorney General. Kelly, who helped oversee the ill-fated Beacon ad system that became a privacy brouhaha, said he’d hold the social site accountable if it broke state laws.

“Facebook’s recent changes to its privacy policy and practices with regard to data sharing occurred after I left the company,” he said in a statement. “When I am Attorney General, Facebook, like every company, will have to comply with its obligations to adhere to the law, provide truthful information to consumers and to keep its promises about their privacy rights.”

Follow Christopher Heine on Twitter at @ChrisClickZ.

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