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1Social AdvertisingQuarterly Report Socialbakers Quarterly Ads Benchmark Reveals News Feed Ads Dominate CTRs and Share of Spend # SOCIAL MEDIALIKE # SHARE

21. IntroductionSocial advertising continues to grow at a rapid rate, with the majority ofthat growth coming from Facebook. Now, 92% of social marketers reportthat they are using Facebook for advertising.Facebook is a powerful advertising platform, but there are some who stilldebate its value for brands. Although a lot of writing focuses on claimsthat Facebook’s organic reach is declining in favour of paid ads on theplatform, most brands find that Facebook advertising is highly efficientand generates long term ROI.This report will take a look at Facebook advertising in detail to showcasewhat has changed from Q2 2013 through Q1 2014.In this report you will learn Which Facebook ad placements and types work the best Average KPIs by industry Average KPIs by region Forecast on Facebook Q1 quarterly earnings for advertising

31.1 MethodologyWe’ve pulled together data from the Socialbakers Ad Analytics tool, industry data, and Facebookquarterly reports to present our quarterly Facebook advertising report.Data has been analysed from April 2013 - March 2014 for verticals, and April 2013 - February 2014for all other sections. We have looked at more than 2,000 advertising accounts and aggregated theirperformance (impressions, spend, clicks) into ad types, placements, regions, and verticals.1.2 KPI DefinitionsClick-Through Rate (CTR) Number of clicks divided by number of impressions per ad. Example: If theCTR of an ad is 1%, that means that 1% of everyone who saw the ad clicked.Cost per Click (CPC) Total cost divided by number of clicks per ad.Cost per Impression (CPM) Total cost divided by number of impressions per ad, multiplied by 1000.Example: A business may have bought 10,000 impressions at a CPM of $5, meaning they spent $50.2. Ad PlacementsDetermining the right ad placements is crucial for increasing the effectiveness of your ads. Why?Certain types of ads perform better in general - such as ads in News Feed- while others work betterbased on the content that is distributed.Here is a quick list of the six different types of ad placements that advertisers can choose from whensetting up an Ad Set:All Facebook - Will create variations Desktop - Will create 2 variationsfor every type of ad placement (News Feed Desktop and Right-Hand Side)News Feed (Desktop and Mobile) News Feed (Desktop)News Feed (Mobile) Right- Hand Side

42.1 Here, we look at CTR and the breakdown of ad placement effectiveness: 0,03 % All Facebook0,025 % Desktop News Feed (Desktop and Mobile) 0,02 % News Feed (Desktop)0,015 % News Feed (Mobile) Right-hand Column 0,01 %0,005 % 0 2013_Q2 2013_Q3 2013_Q4 2014_Q1As one would expect due to time spent in News Feed, CTRs on the News Feed are much higherthan the right-hand column, and mobile ads dominate desktop ads in terms of clickthrough rate.News Feed ads are growing quarter-on-quarter, with mobile increasing it’s dominance from Q3 2013through to Q1 2014.2.2Below, you can see how advertisers adjusted their ad placement preferences by taking a look at thequarter-over-quarter spend. Note the decline in the “All Facebook” placement:All Facebook 100 %Desktop 90 %News Feed (Desktop and Mobile) 80 %News Feed (Desktop) 70 %News Feed (Mobile) 60 %Right-hand Column 50 % 40 % 30 % 2013_Q2 2013_Q3 2013_Q4 2014_Q1 20 % 10 % 0This shift in ad placement spend shows the changing attitudes of advertisers. Interestingly, mobileNews Feed lost share slightly to News Feed on desktop and mobile, although this may be due toadvertisers’ increasing their post boosting efforts, with the default targeting option being to targetboth desktop and mobile.

52.3 Next, we look at CPC and CPM of each ad placement CPC0,25 % All Facebook 0,2 % Desktop News Feed (Desktop and Mobile)0,15 % News Feed (Desktop) 0,1 % News Feed (Mobile) Right-hand Column0,05 % 0 2013_Q2 2013_Q3 2013_Q4 2014_Q1 CPM3,5 % All Facebook 3% Desktop News Feed (Desktop and Mobile)2,5 % News Feed (Desktop) 2% News Feed (Mobile) Right-hand Column1,5 % 1%0,5 % 0 2013_Q2 2013_Q3 2013_Q4 2014_Q1The graphs show that CPCs and CPMs are News Feed mobile placements have seen anmuch lower on ads that are targeted to “All upward trend in terms of CPM since Q2 2013,Facebook,” with the most expensive being however, they have declined slightly this quar-News Feed placements. The reason these are ter. The right-hand column ads have seen aoften more expensive in terms of CPC and CPM marked decrease in terms of CPC over the pastis due to higher competition - more posts are year as their competitiveness begins to decline.promoted in fewer ad slots available comparedto the right-hand column placements.

62.4 Ad Placement TakeawayIn terms of ad placement, the key takeaway for advertisers is that News Feed Ads are starting to domi-nate in terms of ad spend and CTRs, and as a result CPCs and CPMs are higher for these prized slots.2.5 SuggestionWe recommend that advertisers focus their attention on News Feed. This is a more competitive environ-ment for a reason - the potential here is bigger. News Feed Ads attract higher levels of user interactiondue to their prominence.3. Advertising TypeWe’ve also studied ad types, includingApp ads Page Like adsEvent ads Page Like sponsored storiesMobile app install ads Page post sponsored storiesSponsored Stories

73.1 The first data point shows the CTR of each of these ad types0,025 %0,02 %0,015 %0,01 %0,005 % 0 2013_Q1 2013_Q2 2013_Q3 2013_Q4 2014_Q1*App Ad Mobile App Install Ad Page like Ad Page Post Sponsored StoryEvent Ad Open Graph Sponsored Story Page Like Sponsored StoryThe CTR on mobile app install ads has dropped greatly over the last year, but they are still higher thanmost. At present, Page post sponsored stories are seeing the highest CTRs. App and event ads havea very small CTR compared to the other formats.3.2Share of spend has increased on Page post sponsored stories with the increase of these types of adsas more mobile inventory has opened up over time.100 % App Ad 90 % Event Ad 80 % Mobile App Install Ad 70 % Open Graph Sponsored Story 60 % Page Like Ad 50 % Page Like Sponsored Story 40 % Page Post Sponsored Story 30 % 20 % 10 % 0 2013_Q1 2013_Q2 2013_Q3 2013_Q4 2014_Q1

83.3In terms of CPC and CPM for various ad types, Page post sponsored stories (which are predomi-nantly News Feed Ads) have the lowest CPC of any of the ad types, but higher CPMs than all but themobile app install ads. CPC0,3 %0,25 %0,2 %0,15 %0,1 %0,05 % 0 2013_Q1 2013_Q2 2013_Q3 2013_Q4 2014_Q1 CPM3,5 % 2013_Q1 2013_Q2 2013_Q3 2013_Q4 2014_Q1 3% Mobile App Install Ad Page like Ad Page Post Sponsored Story2,5 % Open Graph Sponsored Story Page Like Sponsored Story 2%1,5 % 1%0,5 % 0App AdEvent AdMobile app install ads had the highest CPM and CPC across the board, although this decreasedin the latest results. CPC and CPMs stayed at relatively similar levels between Q1 2013 and Q1 2014.

93.4 Takeaway Ad Types post sponsored stories at present have the highest CTR, the highest share of spend, and the lowestSponsored stories are being removed from the CPM and CPCs. Despite the removal of the formatadvertising system as Facebook is streamlining its of sponsored stories, ads with social context willadvertising offerings (Page post and Page Like ads still exist across all ad variants as noted above.already automatically have the best social contextadded), and we feel this is a positive thing. Page3.5 SuggestionAs with the placement section, this leads to the recommendation that advertisers should focus theirattentions on News Feed as these placements are more cost effective and achieve higher response rates.4. RegionWe’ve looked at the world of Facebook advertising on a regional basis, covering 5 defined regions Europe JAPAC LATAM North America Rest of the WorldWe’ve studied the differences in CTRs, CPCs, CPMs, and the share of spend between these regionsto show differences between them.4.1 First, we looked at CTR by region0,006 % Europe0,005 % JAPAC0,004 % LATAM0,003 % North America0,002 % Rest of the World0,001 %0 2013_Q2 2013_Q3 2013_Q4 2014_Q1Our data shows that all regions, particularly JAPAC, are increasing in terms of CTR, with the excep-tion of North America which is on a steady decline. North America is Facebook’s most mature marketin terms of advertising and is seeing increased competition and higher spend levels.

10In terms of share of spend, Europe has increased over the last three quarters, with JAPAC and NorthAmerica decreasing. The graph shows aggregated spend versus the number of accounts advertisingin each area, meaning that the spend per account is lower in North America.100 % Europe 90 % JAPAC 80 % LATAM 70 % North America 60 % Rest of the World 50 % 40 % 30 % 20 % 10 % 0 2013_Q2 2013_Q3 2013_Q4 2014_Q1**Please note that above graph depicts the average spend per account, not the total spend per region.Data is also representative of Facebook Ad accounts that are connected with Socialbakers Ad Analytics,and therefore, the amount of spend per region is not fully representative of the entire Facebook population.4.3 Next, we look at the pricing of each placement by CPC and CPM CPC Europe JAPAC 0,4 LATAM North America0,35 Rest of the World 0,30,250,20,150,10,050 2013_Q3 2013_Q4 2014_Q1* 2013_Q2

11 CPM Europe JAPAC1,4 LATAM North America1,2 Rest of the World 10,80,60,4 2013_Q3 2013_Q4 2014_Q1*0,20 2013_Q2This data shows that CPCs and CPMs are much higher in North America, with both metrics more thandouble the next nearest region. LATAM is the lowest-cost region in terms of CPC and CPM.4.4If you’re in North America, consider running multi-variant A/B testing to increase the performance ofyour Facebook campaigns to ensure you stay ahead of your competition.5. IndustryFacebook advertising performance by vertical is a particularly interesting area, as it provides bench-marks for brands to their industry in general and shows how different industries perform in the socialadvertising environment.We’ve studied a number of verticals with a particular focus on Telecom FMCG Food Electronics Finance Retail (food) Alcohol Ecommerce Airlines Auto Fashion

125.1 CTR by industry CTR1,2000%1,0000%0,8000%0,6000%0,4000%0,2000% 0 2013_Q3 2013_Q4 2014_Q1 2013_Q2 Ecommerce Telecom FMCG Food Fashion Alcohol Retail Food Finance ElectronicsCTR is increasing in most of these verticals, presumably as they get smarter with their targeting andoptimisation efforts. Ecommerce brands get the highest CTR (and it continues to increase), with retailfood, electronics, and fashion brands all having similar CTRs. Auto and finance brands had the lowestCTR in this category.5.2 Share of spend100 % Telecom Fashion 90 % Retail Food Electronics 80 % FMCG Food Ecommerce 70 % Finance Alcohol 60 % 50 % 40 % 30 % 20 % 10 % 0 2013_Q2 2013_Q3 2013_Q4 2014_Q1

135.3In terms of CPC and CPM, the following results have been found. CPC 0,20,180,160,140,12 0,10,080,060,040,020 2013_Q2 2013_Q3 2013_Q4 2014_Q1 Telecom FMCG Food Fashion Ecommerce Retail Food Finance Electronics Alcohol CPM 1 2013_Q3 2013_Q4 2014_Q10,90,80,70,60,50,40,30,20,10 2013_Q2 Telecom FMCG Food Fashion Ecommerce Retail Food Finance Electronics AlcoholCPCs generally declined over time, particularly in the Electronics and Auto verticals. CPMs on the otherhand increased in Q1 2014 compared to Q4 2013. This again may be due to increased competition.Electronics saw the biggest CPM increase this quarter, with Finance and Auto seeing a small decline.

145.4 Takeaway IndustryThe key takeaway from this section is that some verticals are more competitive, and therefore moreexpensive to target than others. Some of the softer brands (Retail Food, for instance) achieve higher CTRsand lower CPCs, while Electronics brands are paying much more due to the higher-value items beingoffered, increased competition, and a more sales-led approach.5.5 SuggestionIf you’re in one of the more competitive verticals, consider how you can target in a different way than thecompetition to gain a competitive advantage. Also, be more creative with your content and boost it in NewsFeeds to achieve a larger share of voice in a slightly softer way.6. Key findings News Feed Ads dominate CTRs and share of spend Page post sponsored stories are a dominant ad type, largely due to their presence in News Feed North America dominates in terms of regions, although CTRs are higher in the other areas Verticals such as Electronics, Retail, and E-Commerce are particularly competitive

15Facebook advertising is going from strength to strength, and we expect this trendto continue through 2014. Facebook advertising is clearly something that is going tocontinue to grow in importance for marketers, and with increased competition it willbe paramount for marketers to use all the necessary tools to help optimize performance.Socialbakers has developed an advanced social measurement, management, andoptimization solution to increase the effectiveness of social advertising campaigns. For more, check out ads.socialbakers.com