Facebook’s 2021 Q1 Earnings And Increased Ad Prices

Facebook released its 2021 Q1 earnings; they outperformed the forecast and beat Wall Street’s expectations. The growth was attributed to a 12% increase in the number of Ads shown, with a massive 30% increase in average price per Ad. Is the cost of digital advertising continuing to rise?

27 May, 2021
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(Source: Lapaas)


With over 8 million advertisers active on Facebook, it has become a trusted strategy for businesses. As Facebook released its 2021 Q1 earnings report, it outperformed the forecast – beating Wall Street’s earnings and revenue expectations.

The revenue growth was attributed to a 12% increase in the number of Ads shown, with a massive 30% increase in average price per Ad. The pandemic played a significant role in the rise of Ads, as digital marketing became the preferred, and practically only, strategy to continue business.

Is the rise of Facebook’s Ad prices a sign that digital advertising costs will continue to increase?


Facebook 2021 Q1 Earnings


2018 - 2021: Facebook Quarterly Average Revenue Per User
(Source: CNBC)


“We had a strong quarter as we helped people stay connected and businesses grow,” CEO Mark Zuckerberg said. “We will continue to invest aggressively to deliver new and meaningful experiences for years to come, including in newer areas like augmented and virtual reality, commerce, and the creator economy.”


Earnings:

$3.30 per share

Net Income:

$9.5 billion

Revenue:

$26.17 billion

Daily Active Users:

1.88 billion

Monthly Active Users:

2.85 billion

Average Revenue Per User:

$9.27


Stock Price

When Facebook released their 2021 Q1 earnings, the stock price rose up to 6% within just hours. Facebook’s earnings were the main contributing factor, but this might just signify that major digital advertising platforms will follow in their footsteps – increasing Ad costs.


Capital Expenditures

Facebook also reduced the expected capital expenditures for the year to around $19 billion to $21 billion, compared to $21 billion to $23 billion prior.


Rise Of Ad Costs


April 2020 - April 2021: Average Cost Per Thousand Impressions (CPM)
(Source: Revealbot)


There’s no surprise that the cost of Facebook advertising is rising, with the number of users actively increasing. Each year, businesses have to compete with over a million additional advertisers. While supply is going up, demand is staying the same – the main difference being that digital is making its way to the top as the preferred advertising strategy.

Forbes has forecasted that digital advertising expenditure will continue to grow greater than traditional advertising, with over 50% spend on digital. Even in 2018, the digital advertising cost increased at a rate close to 5x the inflation.


The Cost

A few of the top questions advertisers ask are “How much do Facebook Ads cost?” and “How much should I be spending on Facebook Ads?”. Each circumstance is different, so to put it straight, it does depend.

The change in Ad costs plays into the situation. Digital is the future of advertising, and the pandemic put that into perspective.

With the varying Facebook Ad costs and the potential rise of digital advertising costs overall, how do businesses move forward?


Bidding Model

Average Facebook Advertising Cost

Cost-Per-Click (CPC)

$0.97

Cost-Per-Thousand-Impressions (CPM)

$7.19

Cost-Per-Like (CPL)

$1.07

Cost-Per-Download (CPA)

$5.47


Paving A Sustainable Path

With Facebook 2021 Q1 earnings reaching greater than the forecasted figures and the varying Facebook Ad costs, Ad costs are predicted to increase.

The removal of third-party cookies may have been a factor in the rising cost of Facebook Ads. But it’s time to think about a sustainable way to move forward on the path of advertising.

Many marginal brands have relied on cheap acquisition to fuel continuous growth – those days are over.

It’s time for businesses to focus on their own data and build a genuine, sustainable business based on strategy, customer experience, and organic advocacy.