Earnings reports released in April show that Facebook nearly doubled its Q1 earnings compared to last year. Revenue from advertising was up 146% compared to 2020 while daily active users only increased 8%.
The increase was driven largely by an uptick in ad prices, according to the CFO outlook commentary on the earnings report: “We are pleased with the strength of our advertising revenue growth in the first quarter of 2021, which was driven by a 30% year-over-year increase in the average price per ad and a 12% increase in the number of ads delivered.” For the digital marketer, an uptick in Facebook ad price means an higher cost/purchase and higher cost/lead (or lower ROAS depending on your KPIs).
The COVID-19 Impact
When comparing your organization’s numbers YoY (year-over-year), it’s critical you account for how COVID-19 impacted your business. Organizations that focused on E-Commerce more than likely saw a huge, unsustainable, increase in sales that was artificially aided by COVID-19. After an initial decrease when COVID-19 lockdowns began, digital advertising increased. Quarantine, plus working and schooling from home, meant even more time in front of screens and more opportunity for advertisers to reach their audiences. This can be seen in Facebook’s Q1 reporting as it also meant an increase in competition for ad visibility and, hence, an increase in ad prices.
How This Impacts the Digital Marketer Going Forward
“We expect second quarter 2021 year-over-year total revenue growth to remain stable or modestly accelerate relative to the growth rate in the first quarter of 2021 as we lap slower growth related to the pandemic during the second quarter of 2020,” Facebook’s CFO said in the announcement. The increase in ad prices will likely continue to bolster these predicted revenue increases. This coupled with the recent iOS 14 changes, digital marketers can expect higher cost/purchases and a lower ROAS.
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