Facebook Points the Way to a Performance-Based Ad Future

The rise and rise of digital advertising – already a $145 billion industry worldwide, according to eMarketer – increasingly presents marketers with a conundrum: as they push more of their ad budgets into digital, it’s necessary to prove the return on their investment. To show an ad campaign’s performance, in other words. Marketers are asking themselves, and their marketing partners, What is the performance of my campaign?

In recent years, there has been a clear shift in preference towards performance-based advertising solutions, in line with the overall growth of digital advertising. According to the IAB’s 2014 Internet Advertising Revenue Report, performance-based pricing models accounted for 66% of all digital ad campaigns in the U.S. Having reached an inflection point in mid-2006 when performance-based digital ad models surpassed advertising spend on branding campaigns, companies are increasingly shifting their advertising budgets to more advanced and complex forms of digital performance-based activities (such as programmatic ad buying).

One of the most challenging digital media channels in which to demonstrate performance, up until now, has been video. Largely devoid of a “pure” performance model (ie, the marketer pays only upon receiving a verified and measurable result), video advertising has thrived on an impression model. The CPM is alive and well in digital video ad campaigns.

Thankfully, performance-based pricing is starting to come to video advertising.

Last week, Facebook announced that it now offers marketers an option to pay for video ads only when the ad is viewed by a user for at least 10 seconds. This differs greatly from Facebook’s current video ad pricing model in which an advertiser pays for a video ad once it comes into view, even if the user only viewed the ad for a split second while aimlessly scrolling through his or her Newsfeed.

Now, marketers will have the option to pay either once a video ad displays on a Facebook’s user’s screen or mobile device or after an ad has been viewed for 10 seconds. The Wall Street Journal has more details on how Facebook will be rolling out this new video ad pricing model.

Facebook’s new cost-per-view video ad solution is just one of several performance-based ad products offered by the social network. Recently, Facebook announced the introduction of its Lead Ads product. According to TechCrunch, the Lead Ads unit will allow “a marketer [to] buy an ad [and ask for a user] to sign up for a newsletter or request a sales call.” With just a couple of taps of their mobile device, a user can auto-fill their email address, phone number, or other info they have registered with Facebook.

The introduction of Lead Ads is part of a much larger trend in which Facebook and other social networks have been building out more advanced ad targeting and customer acquisition solutions for advertisers. As more ad dollars flow into digital advertising, and consumers become increasingly savvy with how they interact with brands, Facebook is moving to where marketers’ are heading: delivering better performance for digital ad campaigns.

The pendulum has been swinging for some time from branding to performance. Now, with the introduction of both its cost-per-view video ad unit and Lead Ads product, Facebook has made it clear that it views the future of advertising as being a performance-based ecosystem.