Conversion rates have dropped 25% in the past 3 weeks! – Our Strategic Facebook Recommendations! (Week 9)

May 21, 2020 | Industry News

We are continuing to monitor Facebook Advertising during this challenging time and have seen some interesting new trends emerging. It’s time for our seventh edition of “Latest Pricing Trends and Strategic Recommendations on Facebook During the COVID-19”

Executive Summary (Full Details Below)

Customers are enjoying more alternatives to online shopping. You can see in our data that there is a lower level of engagement, as reflected by both a drop in click-through-rates and a drop in on-site conversion, which has led to a significant increase in costs. We think this is because customers have had greater access to traditional retail during the past 2 weeks.

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Summary of Changes

  • CPMs rising ~5% per week and are now roughly at their pre-covid prices.
  • CTRs dropping 0.1% per week, showing that people are interested in interacting with ads.
  • CPCs rising 5-10% per week, because of rising CPM and lowering CTR
  • Conversion rates have dropped ~25% in the past 3 weeks.
  • Cost per Purchase has been drastically increasing. Prospecting & retention are seeing sharp cost increases so far in May.

What Does it Mean?

  • CPM has bottomed and is now rising steadily. People are slightly decreasing the amount of time on Facebook and ad budgets for brands are stabilizing to increasing.
  • Customer interest is falling noticeably. There is a fall in both CTR & onsite conversion. We think this is because people now have offline purchasing options that are opening up to them.

What Will Happen Next? 

  • CPMs should continue to rise steadily and smoothly.
  • As stores reopen, people will have more in-person purchasing options. We expect this will cause conversion rates to continue to fall.
  • We may be in for an unpleasant, high-cost period for everything but retention.

Strategies to Adapt: 

  •  Continue adjusting spend between your campaigns.
    • The relative cost of prospecting, retargeting & retention have changed suddenly in the past 3 weeks.
    • We have suggested moving 30% of your budget between campaigns in the past 3 weeks. If you are not doing this then you are missing out.
  • Test 5-10% lookalikes and “Broad Targeting”.
    • Currently, we are seeing great performance from 3-10% lookalikes.
    • We are seeing sometimes brilliant performance from broad targeting.
      • We recommend testing both quickly!
  • Use “Dynamic Creative Optimization” to test large quantities of creative before rollout.
    • Currently, there has been a major upgrade to DCO.
    • We have only been able to test it a few times since the upgrade, but early results are that it works much better than its predecessor.
    • We think this is a powerful tool for testing large quantities of creative quickly.
      • We are still testing this as it’s very new.
  • Use “Page Engagement Interests” to generate new ideas for interest audience testing.
    • Find what your current customers are into:
      • Go to “Facebook Audience Insights”.
      • In the top left, choose “People Connected to Page”.
      • Then choose your page.
      • On the right choose “Page Likes”.
      • Look on the bottom to see a list of other pages that your customers are into.
    • Test those page likes as new interest audiences.

Detail: What is ad performance like right now? 

Cost Per 1k Impressions (CPM):

Facebook CPMs are rising steadily by 5% per week, and are now about at their pre-covid prices.

  • What are we seeing?
    • CPMs dropped 40% in the early days of the crisis.
    • But starting ~3/22, CPM have been rising 5% per week.
    • Ad costs are almost 100% of the way back to their pre-covid levels!

Click-Through Rate (CTR):

Facebook CTRs have been flat for the past few weeks.

  • What are we seeing?
    • Retention, across all accounts, was inexplicably strong in early April, and is now reverting back to where it was.

Cost Per Click (CPC):

With CPMs rising and CTRs flat, CPCs are now rising by 5% per week.

  • What are we seeing?
    • Early on, we saw CPCs drop aggressively due to the falling CPMs.
    • Recently, CPCs have been rising as CPM’s increase with flat CTRs.

On-Site Conversion: 

Conversion rates have been falling rapidly in the past 2 weeks, and are now down more than 20% since early April.

  • What are we seeing?
    • Conversion rates rose in late March and early April.
    • Conversion rates are down ~25% in the past 3 weeks.

Cost per Purchase: 

With rising CPC & dropping conversion, there is a significant cost increase happening across all campaign types right now.

  • What are we seeing?
    • Prospecting & retention are seeing sharp cost increases so far in May.
    • Retention costs are rising from a very low base.

How can we improve performance?

Strategies to Adapt: 

Tip #1: Continue adjusting spend between your campaigns.

  • The relative cost of prospecting, retargeting & retention have changed suddenly in the past 3 weeks.
  • We have suggested that you moved 30% of your budget between campaigns during the past 3 weeks. If you are not doing this then you are missing out.

Tip #2: Test 5-10% lookalikes and “Broad Targeting”.

Historically:

  • We saw great performance from interest targeting and from 1-2% lookalikes.
  • We saw weak performance from broad targeting (despite what Facebook is saying) and Lookalikes in the 3-10% range.

Currently

  • We are seeing great performance from 3-10% lookalikes.
  • We are seeing brilliant performance from broad targeting some of the time.
    • We recommend testing both quickly!

Tip #3: Use “Dynamic Creative Optimization” to test large quantities of creative before rollout.

Historically:

  • Facebook has had a tool for a few years called “Dynamic Creative Optimization” (DCO).
  • This lets you create ONE ad with tons of different creative options, and Facebook will test various combinations to find the best ones.
  • This had been widely known to be broken for the past 2 years, and no one was using it. 
    • We had tested previous versions thoroughly, and witnessed it making insane, non-significant decisions with no data behind it.

Currently:

  • There has been a major upgrade to DCO.
  • We have only been able to test it a few times since the upgrade, but early results suggest that it works much better than its predecessor.
  • We think this is a powerful tool for testing large quantities of creative quickly.
  • We are still testing this as it’s very new.

Tip #4: Use “Page Engagement Interests” to generate new ideas for interest audience testing.

Find what your current customers are into:

  • Go to “Facebook Audience Insights”.
  • In the top left, choose “People Connected to Page”.
  • Then choose your page.
  • On the right choose “Page Likes”.
  • Look on the bottom to see a list of other pages that your customers are into.

Test those page likes as new interest audiences.

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