CPMs and CPCs Spiking While Your CTRs Are Slipping? You’re Not Alone

— July 11, 2017

Are you freaking out because all you see are your CPM’s and CPC’s going up and your CTR’s going down?

It’s time to take a deep breath – you’re not alone. Plus, we’ve even got ways for you to get through it.

First, let’s get to the truth of the matter: this is the name of the game for a variety of brands during the height of summer and the start of Q3.

We ran the numbers on more than $ 100 million worth of ad spend on Facebook’s mobile and desktop news feeds and Instagram so we could explain and review these seasonality changes for you.

What to know what we found? Read on.

CPM

Looking first at 2016, we saw a 6% jump in CPM from May to June. After that, we saw a 2% increase in July and an 8% increase in August.

2017 hasn’t been much different, with a 9% bump in CPMs from May to June.

What’s the reason?

Because everything is related to each other.

Oh, that’s not in-depth enough? Ok, here’s the deeper reason why: everyone wants the same piece of the pie. Since CTRs are declining and CPCs are spiking, everyone is trying to do all they can to get in front of the limited number of customers who are willing to make a purchase or become a lead during this time.

With more advertisers going after a smaller pool of purchasers, that creates the competition that leads to higher CPMs. It’s the same reason that CPMs will continue to rise moving into the 4th quarter.

That may not be the news you wanted to hear, but as competition ramps up for the holiday season and even more advertisers come into the market, many will be going after the same audiences as you.

Luckily though, right now is when you’ll feel the brunt of high CPMs. Further into the 3rd quarter and through the 4th, you should see an increase in CTRs and conversions, which will balance out those higher costs.

CTR

Currently moving in the opposite direction than the CPM trend, it’s highly likely you’re seeing a decline in CTRs.

Analyzing our own client data revealed that June delivered the lowest CTRs for any month in 2016. There was a small bump in July, but then CTRs really took off in August, October, and November of last year.

So far, 2017 has taken a similar path. June came in with the lowest CTRs of 2017 so far. But similar to what we saw last year, we’re expecting a large increase towards the middle and end of Q3 and moving into Q4.

If you’re wondering why CTRs are decreasing, think about what you’re doing in the summer months.

Are you out by the lake/pool/ocean as often as possible or are you sitting inside on social media? When the weather is warm and friends and families are hosting cookouts, you’re (hopefully) not spending your time scrolling and looking at Facebook or Instagram ads.

Not to mention, at least on the e-commerce side, there aren’t any “micro” holidays (i.e. Father’s Day, Mother’s Day, Graduation, etc) during the 3rd quarter, so there’s a lack of sales momentum to compel people to purchase.

Thankfully though, this drop in CTRs has likely already hit its lowest point, and you should see a continued increase throughout the rest of the third quarter.

CPC

In 2016 (and likely 2017) the highest CPC of the year was in June. And while that may seem painful since your CTRs likely slipped in June as well and your CPMs are rising, there’s still some good news to be found.

After hitting its peak in 2016, CPCs fell for 4 consecutive months beginning in July. Basically, every month leading up to the craziness of the holidays saw a continual decrease for CPCs.

This is excellent because we expect CPCs to go down for the remainder of this quarter, allowing you to test audiences and creative more cost effectively than before.

If June was a tough month for you with CPCs, it should get better from here.

3 SURVIVAL TIPS

So what can you do about this high-cost, low-click environment?

(1) Stop Panicking

Realize that you are not alone and that this trend is actually common. When you’re deep in the weeds of your own spending and advertising, you can forget the forest for the trees.

You aren’t the only ones seeing these speed bumps and it’s actually perfectly normal for this time of year.

Instead of freaking out, you can use this time wisely – which leads me to my second point.

(2) Use This Time To Test Different Audience Types

Currently, CPMs are the highest for running lookalike audiences (LALs). And while LALs do result in fairly consistent conversion rates, they aren’t the only audiences you can target.

Testing out new audiences using Keywords or Interest sets can keep you from going over budget with your ad spend.

CPMs are lower for Interest sets (though they have been on the rise as well) and lowest for Keywords. So if you’re looking to spend less, testing using these two options will help.

(3) Prepare for Q4 By Testing A Little Bit Of Everything

You may think I’m crazy for suggesting this, but hear me out. Except for June (which has already passed), the worst is over when it comes to CTRs and CPCs.

There’s nothing you can really do about CPMs as they will continue to rise, which is why I suggested the new audience targeting above.

But with CTRs and CPCs, you can use this low time for testing in preparation for Q4.

Because of the massive amount of competition that arrives with the holiday season, CPCs will inevitably increase in the 4th quarter. Thankfully, CTRs and conversions usually do as well, so it all balances it out.

Yet, now is the time to try testing your creative and copy and iterating off of your current high-performing ads.

Since performance is generally down during this time, you won’t be wasting money to try out new things. And if you hit upon a winner now, you’ll know what works when you plan your 4th quarter.

Not to mention, you end up saving money in the long run, since you won’t have to be testing as much in the high-cost market of Q4. You’ll have already tested and found winners that you can translate into successful ads during the holidays.

 

 

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