Will Facebook Ads CPM Costs Increase This Holiday Season?

As advertisers prepare for the holidays, there’s a bit of anxiety about what to expect. The past few years have been anything but normal, so it’s not easy to predict what advertisers should expect this year. In particular, will Facebook ads CPMCPM measures the cost per 1,000 impressions. It's a good metric to evaluate competition level and costs to reach your audience. More costs increase?

There is good reason to hope, based on current trends, that any seasonal cost increases may be subtle. And that could be critical for advertisers who have struggled to generate consistent, profitable results since the iOS-related changes of early 2021.

Let’s discuss how CPM impacts Facebook advertising results and the trends that we are seeing so far…

Why CPM Matters

CPM (Cost Per 1,000 ImpressionsImpressions are the number of times your ads were displayed to your target audience. Impressions aren't counted if it is detected they came from bots. More) is essentially the cost to show your ads. While it isn’t a primary metric to obsess over, it certainly can impact the success of your campaignsThe campaign is the foundation of your Facebook ad. This is where you'll set an advertising objective, which defines what you want your ad to achieve. More.

For example, you could have two ad setsAn ad set is a Facebook ads grouping where settings like targeting, scheduling, optimization, and placement are determined. More, both getting the same number of clicks and conversion rate. But, if it costs twice as much to reachReach measures the number of Accounts Center Accounts (formerly users) that saw your ads at least once. You can have one account reached with multiple impressions. More people in one ad set, it may be the difference between a profitable and failing campaign.

There are many reasons for high and low CPMs, but one is competition. The more advertising dollars in the system, the higher the auctionFacebook uses an ad auction to determine the best ad to show to a person at a given point in time. The winner of the auction is the ad with the highest total value, based on bid, estimated action rates, and ad quality. More goes. It’s more difficult to reach your ideal audienceThis is the group of people who can potentially see your ads. You help influence this by adjusting age, gender, location, detailed targeting (interests and behaviors), custom audiences, and more. More since there are more advertisers trying to reach them.

That doesn’t mean that you can’t overcome high CPMs to find success. While the holidays tend to result in higher CPMs, this is also the period of time consumers are eager to spend money. Combined with brands willing to offer special deals and you can absolutely find success this time of the year.

That said, the seasonality of CPM can be difficult for brands, especially those who aren’t in the e-commerce and gift spaces. Prior to 2020, seasonal CPMs often doubled, tripled, and even more. That could make advertising costs unreasonable, and you may consider lowering budgetA budget is an amount you're willing to spend on your Facebook campaigns or ad sets on a daily or lifetime basis. More or shutting off advertising entirely in those cases.

But, we shouldn’t assume that CPMs will have that potentially crippling effect this year. As noted, the past few “weird” years haven’t led to spiking CPMs the way we’ve expected them in the past.

So, what will happen this year?

Average Price Per Ad

You probably know that Meta’s Q3 Earnings Report came out recently, and it wasn’t particularly in the company’s favor. Growth has slowed, resulting in layoffs.

But, one of the more curious revelations was a continued drop in Average Price Per Ad.

Meta doesn’t call this CPM, but I think we can draw at least loose connections to that metric. The cost of advertising is clearly falling, and that drop is increasing with each quarter. The third quarter Average Price Per Ad was 18% lower than the same quarter in 2021.

This could certainly be a sign, barring a startling reversal, that advertising costs during the holidays won’t be overwhelming in 2022.

Within Marketing Pulse

Another resource that I use to monitor CPM costs is the Within Marketing Pulse. The website provides a dashboard to show how their clients (some $500 Million in advertising) are spending their advertising dollars.

First, it’s interesting that they are showing Facebook advertising spend up 37% year over year, as of November 13.

You might assume that would result in increased CPM, but that’s not what they are reporting.

Facebook CPM is down a staggering 49% compared to the same date last year, and it’s been down for at least the entire last month.

If you’re curious, the red line is Instagram CPM, which has followed much more closely to the 0-line compared to last year. But, it’s still been mostly down lately.

This is Good News… Right??

So, sure. These are good signs that CPM costs may not get out of hand this holiday season.

The problem, of course, is that many advertisers have struggled the past year or so, regardless of CPM costs. In fact, I’d bet that if you polled advertisers right now, they’d believe that CPM costs are higher now than they’ve ever been before.

There’s a clear disconnect there. Maybe advertisers haven’t always paid attention to CPM. They need a reason for why ads aren’t performing like they once did. Rising CPM could be an easy target.

That said, this could be a very good holiday season for brands that are set up for holiday success. If you are in retail and offer big sales, this could be a profitable season for you if CPM costs stay down.

Don’t Forget: 28-Day Click

This may seem somewhat random, but it’s relevant.

As you are monitoring your results this holiday season, make certain that you are making use of the new 28-day click attribution window. You can only view this when comparing attributionAttribution is how Meta gives credit to an ad for a conversion. Your Attribution Setting determines how your ad will be delivered and the reporting attribution window. The default Attribution Setting is 7-day click and 1-day view, which means that anyone who converts within 7 days of clicking or 1 day of viewing your ad will be counted as a conversion. More settings.

Why does this matter? Well, because you are bound to see more conversionsA conversion is counted whenever a website visitor performs an action that fires a standard event, custom event, or custom conversion. Examples of conversions include purchases, leads, content views, add to cart, and registrations. More this way. It could significantly impact your view (and the view of clients) regarding the impact of your advertising.

Not everyone has this yet, but hopefully you do!