Why Facebook’s New Model To Charge Click Based Campaigns Is Good News For Direct Response Advertisers

Facebook is no more considering engagement actions such as comments, likes, shares for cost per click calculations. It will solely focus on “link clicks”

How Facebook Calculates CPC

Facebook has good news for advertisers who consider that success of an ad is bidding for the correct business objective. To make the performance advertisers happy Facebook is changing the way it has been calculating cost-per-click. According to Facebook, advertisers that want to drive app installs or traffic to their websites, the cost-per-click (CPC) will no longer take into account engagement actions such as comments, likes and shares. The calculation will focus solely on so-called “link clicks”.

Facebook further states that the latest update is intended to help advertisers better understand how their ads perform against their objective. In the coming weeks, this change will take effect in Ads Manager and Power Editor as well.

This means brands will be able to track users once they move from a Facebook ad and are taken to a third-party site or app. The link click price calculation will also cover when a user clicks a call-to-action button, which include ‘buy now’ and app installation buttons. This further includes Facebook canvas apps and clicks to view a video on another website such as YouTube.

However marketers will still be able to choose to target ads and bid for engagement clicks by choosing other optimization options, but those actions just won’t be tracked in the new CPC calculation.

While this is good news for performance advertisers to pay only for clicks that lead to their website if that’s the marketing objective they have in mind, but at the same time the change in calculation could mean fewer clicks at higher CPC.

Under the old pricing structure, Facebook’s technology tried to aim the ads at anyone who might click on it, whether they click on the social links or ad links. But under the new pricing structure, Facebook’s technology will try to aim the ads only at people likely to click on the ad links. If the person clicks on the ad, then Facebook makes money, and the bet pays off. If they don’t click, then Facebook loses out on revenue.

Hence, this separation of performance and engagement metrics by Facebook will mean that the social network might inflate its costs for link clicks at an accelerated rate. Otherwise Facebook will have to face the brunt like Twitter had to after adopting this ad mechanism last year. The change from Twitter was cited as one of the reasons for a dip in revenue in its first quarter of 2015.

There still isn’t clarity when the roll out would be made public and it depends on how you buy Facebook ads but the change will initially effect the engagement metrics of advertisers. Campaigns will likely generate fewer clicks at higher CPCs once engagement clicks are removed from the equation. But for performance advertisers, the new numbers should be a truer reflection of how their campaigns are meeting business performance objectives.

Clearly this is a welcome news to direct-response advertisers, a group more concerned with ad clicks and product sales than ad impressions and brand awareness. These are the types of advertisers that would rather have 100 people click on their ad than have 1,000 people see it. This update might mean that its click-charging change will increase which already happens to be increasingly expensive piece of real estate for advertisers to rent but direct response advertisers won’t mind.

This group also happens to be buying most of the digital ads available today in US.