As a Facebook advertiser, you must understand the seasonality of competition and CPM measures the cost per 1,000 impressions. It's a good metric to evaluate competition level and costs to reach your audience. (Cost Per 1,000 Impressions). This one metric — often ignored — can turn an ad with a high conversion rate into a poor performer.
If you advertise all year long, know that it’s going to be much tougher this time of year. It doesn’t mean you can’t advertise profitably. But you need to be aware of the landscape and how it impacts your performance.
The Seasonality of CPM
CPM — the cost to show your ad to your desired audience — is driven by several factors. You’re competing with millions of other advertisers in the Facebook ads Facebook uses an ad auction to determine the best ad to show to a person at a given point in time. The winner of the auction is the ad with the highest total value, based on bid, estimated action rates, and ad quality.. The price is driven up in that auction due to things like ad quality, audience size, and competition.
Competition, of course, is the primary factor that gets amplified during the holidays. Some brands only advertise during the holidays. Others increase their spend during this time.
The infusion of ad dollars results in less inventory and more competition to reach the same people. The result is an increased cost just to reach those people.
The Impact of Increased CPM
Imagine this: You’re running ads in October. Those ads are profitable. Two months later, your cost per conversion skyrockets. But little else changes.
You’re getting the same conversion rate. But you’re reaching fewer people for the same A budget is an amount you're willing to spend on your Facebook campaigns or ad sets on a daily or lifetime basis.. And the result is that you’re getting fewer daily conversions.
Why? The CPM went up.
During the holidays, CPM has been known to double, triple, or even quadruple. When that happens, assuming you aren’t able to improve your conversion rate, you can expect your cost per conversion to double, triple, or even quadruple.
Of course, that increase in CPM was during “normal” years. We’re in uncharted territory now in these weird times. Last year, quarantines resulted in a rush to go online. It’s possible you won’t see the CPMs you saw this time last year.
But you absolutely should see an increase when compared to earlier in this year.
You Can Still Be Profitable
I realize this all sounds awful, but don’t lose hope. You can still be profitable during the holidays!
The truth is that there’s a reason there’s more competition during this time. People are more likely to spend during the holidays, so that conversion rate you’ve been getting until now should improve.
You counter an increased CPM with an increased conversion rate.
People love deals, so offer those discounts and sales now. Position your products as gifts, if you can.
The main thing to understand is that it will be very difficult to succeed if you continue to do things the same way during the holidays as you have all year long. It’s going to get harder. It’s going to cost more simply to reach the audience you’ve been reaching.
It’s a Challenge
First, it’s entirely possible that you can’t take advantage of the holidays and the increase in CPM will result in poorly performing ads. Maybe you’re in a difficult industry that struggles to fit into a gift-giving season. No deals, no discounts, no difference in your product or service.
It’s possible that you may need to pull back or even turn off ads during this time. There’s no shame in it. Keep an eye on what’s working and what’s not, and understand what you’re up against.
Ultimately, see the holidays as a challenge to outwork other advertisers. You know what you’re doing. Some are simply seasonal, and they’ll struggle to hit the ground sprinting without priming up an audience all year long.
The holidays are a challenge, but it’s a challenge you can win. Good luck!
Have you been seeing an increase in CPM during the holidays?
Let me know in the comments below!