Facebook news feed ads generate 49 times more clicks at 45% less cost (study)

Social has never performed as well as search for advertisers. That looks like it could be about to change, because Facebook’s new News Feed ads are absolutely killing it.

And the metrics are, frankly, mind-blowing.

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According to a new one billion-impression ad study by retargeting giant AdRoll, news feeds ads have a massive 21 times higher clickthrough rates than standard web retargeting ads and an incredible 49 times the clickthrough rate of Facebook’s right-hand side ads.

“A year ago we were having the discussion that Facebook doesn’t work, and GM is pulling its ads,” AdRoll president Adam Berke told me this morning. “Now we’re having the conversation on whether this rivals Google!”

News Feed ads sit, as the name suggests, right within the flow of the feed of social news that Facebook users come to the site for. Sold via Facebook Ad Exchange, the ad units enable brands to target consumers who have previously visited their sites — hence “retargeting” — which enables advertisers to merge the intent graph (what people want) with a social site (Facebook). They’re larger than Facebook’s right-hand-side ads, and they’re qualitatively different in very significant way.

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Also see: How Facebook went from sucking at mobile to killing at mobile in 12 short months

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“Facebook hit on a winning combination from a direct response perspective by fusing two things,” Berke says. “They combined the power of programmatic advertising with Facebook’s own secret sauce — this native environment which is very engaging.”

In other words, even though News Feed ads are sold programmatically via the Facebook Ad Exchange, they’re also social entities. News Feed ads are likeable, shareable, and commentable, and as such, they’re embedded into the fabric of what makes Facebook Facebook in a way that no other ads are. They benefit from viral effects, which means great ads will get great earned reach as well as paid, and they fit into the news feed in a very natural way.

Plus, Facebook only sells one of them per user per day.

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The combination of all that adds up to crazy metrics that you just don’t see in today’s highly competitive advertising landscape. While AdWords advertisers scrape and claw for a percentage increase here and a fraction better there, News Feed ads are providing almost 50 times the clicks per ad compared to Facebook’s right-hand side ads and 21 times the clicks of standard web retargeting ads. That translates to massively lower costs: 79 percent lower cost-per-click compared to web retargeted ads, and 54 percent less cost than Facebook’s right-hand ads.

That’s important, because Facebook needs to compete with other advertising channels such as search and e-mail that have resulted in higher-value customers in the past.

While the clicks are so high that conversions are slightly down, overall that translates into 77 percent lower cost-per-action compared to web retargeted ads and 45 percent lower cost than other Facebook ads. That’s pretty impressive data. But it’s what AdRoll was seeing right from the beginning in April when Facebook launched the new ad unit.

“It didn’t blow our mind because we had anecdotal feedback from advertisers about how they were performing,” Berke told me. “From day one our clients were telling us it was working.”

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As tempting as it is, the comparison to Google might be a little unfair, however. As Berke says, News Feed doesn’t have the scale of AdWords, and advertisers will still need to use multiple advertising methods to achieve the kind of reach they need. And if Facebook was tempted to increase the number of News Feed ads, the likelihood is that their effectiveness would diminish.

But by merging programmatic buying and social signals, Facebook has created a categorically new advertising world.

“It’s the first time we’ve seen those two big trends come together,” Berke told me. “And the fact that they came together in a very symbiotic way is really exciting.”

Now we know why Facebook put ads in the news feed. And now we have a clue how Facebook is going to monetize its massive web and mobile audience at something at least approaching Google-like levels.

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