The gaming/Facebook love affair is showing no signs of cooling off.
CPMs among gaming advertisers on Facebook were up 548% year over year in Q3 2014, according to Facebook ad partner Nanigans in its most recent benchmark report. To put that into perspective, e-commerce advertisers saw a 255% year-over-year increase in CPMs.
On average, CPMs on Facebook desktop and mobile increased by 80% between Q2 and Q3 among Nanigans customers – which include eBay, Rue La La, Rosetta Stone and gaming behemoth Zynga – to $2.98. That’s up from $1.95 last quarter.
Mobile, as expected, is a major driver behind the growth, said Cheryl Morris, director of market development at Nanigans.
“It’s no secret that consumer time spent is increasingly shifting to mobile,” Morris told AdExchanger. “Gaming companies have followed suit in investing more heavily in developing games [and] on user acquisition and reengagement for them.”
But cost isn’t the only metric on the rise in the gaming industry. Nanigans also noted concurrent increases in click-through rate – a 298% year-over-year growth – and in cost-per-click, which rose slightly from last quarter to $0.55.
In other words, costs are up, but engagement is there, too. That jibes with data from VivaKi’s most recent AOD benchmark report, which found that mobile is 2.3 times more engaging than desktop, resulting in lower cost-per-engagement on mobile (about $0.55) versus desktop ($1.09).
Gaming companies are clearly pouring cash into the Facebook ecosystem. But Nanigans VP of west accounts Sambou Makalou, who heads up the company’s gaming division, said the CPM increase is partially a result of a simple law of economics – supply and demand.
“Demand is outstripping supply growth right now, so prices are going up,” Makalou said. “Facebook has been pretty judicious about not going too crazy with ads in the news feed, so there are fairly limited ways to grow their inventory. Really, it’s just like trying to get tickets to a Giants game.”
Makalou sees the current CPM as relatively affordable, all things considered. It’s logical to spend more on targeting customers with higher lifetime value (LTV) potential, and right now, Facebook is where those people play – literally. Gaming companies are more than willing to shell out cash up front if they know they’ll see a return down the line, Morris said.
“[Gaming companies] represent some of the best-in-class performance advertising talent in the world, which makes sense when you think about how these companies monetize their games,” Morris said. “Most offer their games for free and monetize through in-app purchases, which means they live and die by the lifetime value of their users as compared to the cost of acquiring them. Online acquisition and remarketing is a top strategic imperative as a result, much like e-commerce and other Internet verticals, and Facebook continues to deliver great lifetime value and ROI for them.”
It’s a trend that Jesse Pujji, CEO and co-founder of mobile ad buying platform and Facebook preferred marketing developer partner Ampush, has also observed.
“In Q3, LTV and user quality increased, while CPIs [cost-per-install] were relatively steady, [which] drove a significant increase in spend for most of our gaming customers,” Pujji said. “We’re seeing most of our mobile gaming customers shift spend towards mobile native platforms like Facebook and away from the exchanges.”
Although gaming companies are all about digging deep for high-performing mobile ads on Facebook, Facebook itself wants to show that its mobile ad revenue comes from more than just the gaming guys. During Facebook’s Q2 2014 earnings call, COO Sheryl Sandberg somewhat pointedly said, “Sometimes people think mobile app installs ads are the great majority of revenue. They’re not. Mobile ad revenue is broad-based. We have large-brand advertisers, small SMBs and developers.”
Facebook’s Q3 2014 earnings call is scheduled for Tuesday, Oct. 28, at 5 p.m. ET.