Sundays are usually the best moment to sit back in a comfy sofa, grab a good fiction book and a cup of tea and then, after a few pages, drift off into a well deserved nap.
For some reason, earlier today, instead of a vintage paper book, I opened my Instagram feed and started counting the frequency of paid ads vs. organic posts (accounts I follow + some suggestions suggested by the Instagram algorithm), as if I was counting sheep to fall asleep.
I was shocked to discover how many ads I was being served... 👀
How often will you see ads on Instagram and Facebook?
On average, I'm being served a paid ad once every 4 posts.
The cruise speed is as follows: 3 organic posts, then a paid ad, 3 organic posts, then a paid ad, and so on.
25% of the content I consume in my Instagram / Facebook mobile feed is paid advertising.
To be honest, I rarely pay attention to those creatives but for the sake of this experiment, I stopped scrolling on each one of them.
When will you see the first paid ad in your Facebook or Instagram feed?
If you refresh Facebook.com (on desktop) and browse the feed from the home tab (the little house icon), the second post will be a paid ad (sponsored). The pattern is the same on mobile.
On Instagram, I see almost no advertising on desktop (good to know) but if I open the Instagram app on mobile, I experience the same pattern: the second post is a paid ad, then I get 4 organic posts (Instagram is offering you more organic stuff early in the session), then 1 paid ad (sponsored post), then 3 organic posts, then 1 paid ad, then 4 organic posts (sparing us again), then 1 paid ad, then we're off for a permanent pattern of 25% ads / 75% organic posts.
Beyond the 16th post displayed in a brand new session, you're on a high sugar diet of 25 ads every 100 posts. Fortunately, those ads are far less interruptive than their TV or radio counterparts (remember watching a National Geographic documentary about Ancient Aliens on a US TV channel?). If those square-shaped creatives don't catch your attention, you can simply ignore them (which most people do) and keep on browsing the organic publications.
You can easily imagine how much money is being generated by such an advertising pressure.
Here's the evolution of Meta's (formerly FB) revenue from 2009 to 2021 (117B USD). Source: Statista.com.
What is the impact of the advertising competition on CPM?
The cost per 1000 impressions (CPM) has been constantly rising due to the increased competition in the feed (more demand for scarce supply = more money). We could argue that at this stage it would be very hard for Meta to deliver more than 25 ads out of 100 posts. That's the current efficient frontier to extract the maximum ARPU while optimizing the LTV.
Diving into the archives of Google, I've found that the average Facebook CPM (across all ad formats) was roughly 17 cents in 2009 (25 cents in 2010), whereas the blended average of Facebook CPM across all industries is $14.40 in 2022 according to Revealbot.
That's a 85x CPM increase in 13 years.
FYI, there were 150 million users on Facebook in 2009 vs. 2.85 billion in 2022.
That's 19x more eyeballs consuming 85x more expensive ads.
This trend has had a material positive impact on the ARPU growth. Here's the evolution of Meta's (formerly FB) average revenue per user (ARPU) from 2012 to 2021. Source: Statista.com.
FB is now generating 8x more money per user than in 2011. That's the price we pay as free users for being served 25 ads out of 100 posts ;-)
What is the proportion of retargeting in the ads served by Instagram and Facebook?
I would say that the proportion of retargeting depends on your specific browsing patterns.
If - like me - you're spending most of your daytime hours on the web, you'll get a very high proportion of retargeting ads (which are expected to deliver higher conversion rates).
If you're less active in the metaverse (or if you're not accepting cookies), you'll get a higher proportion of classic ads, targeting your personal profile (age, sex, location, liked accounts, posts and other preferences).