Is Facebook Advertising Worth The Price You Pay?

Facebook advertising has long had a reputation of being some of the most affordable advertising on the web, but a recent study by Efficient Frontier, a digital marketing firm, may indicate that this is changing.  According to the report Facebook is using its dominance and imposed a 40% cost-per-click increase in the first quarter.

One reason given for the increase is that advertisers are realizing Facebook’s “tremendous value.” “As advertisers are understanding this medium, they are allocating budgets, and it’s becoming increasingly competitive. They are willing to pay a lot more to get to the consumer,” according to Efficient Frontier’s Siddharth Shah. This is a huge opportunity for Facebook, and one that they are clearly trying to capitalize on. Even before the increase, Facebook reported $1.86 billion in advertising revenues, so it begs the question, why the increase? Is it simply to increase revenue or is Facebook trying to discourage small business advertising and serve bigger,more high profile companies?

It is obviously to soon to see what kind of effects this will have not only for Facebook, but for the small companies that have become accustomed to Facebook as a resource for affordable advertising.  Also, only time will tell whether advertisers will be willing to pay more for advertising on a platform whose ads perform half as well as more traditional banner ads.