E-commerce ad competition reaches new heights: 39% rise in CPM for the UK

New report on Facebook advertising trends reveals that strategies to improve click throughs are crucial to e-commerce brand success.

Competition remained fierce for e-commerce businesses at the start of 2022, with increases in cost per thousand impressions (CPM) growing globally both over the year and the quarter in Q1 2022, according to the latest reporting on Facebook advertising trends.

CPM levels by the end of last quarter were reported to hit Black Friday levels in many regions, but competition intensified in the UK, which saw a 39% increase in CPM compared to Q1 2021, and a 14% rise quarter-on-quarter. 

The increase, which comes despite the removal of COVID restrictions in the UK, indicates a resilience in online shopping habits. However, engagement also significantly increased, softening impacts of the CPM rises, according to the findings from e-commerce creative and social media agency Nest. 

The latest research, from its latest quarterly report on Facebook and Instagram advertising trends and performance metrics for e-commerce brands, concluded that a strategy for driving improved CTR was crucial for brands to succeed, with expectations that CPM will remain high in Q2. 

Click through rates rose 15% globally over the quarter, bolstered by a 45% rise in the US, and meant that cost per click (CPC) was driven down (-19%) in all regions. 

Facebook advertising trends: metric breakdowns

Cost per thousand impressions (CPM) stayed at high levels in the quarter, and rose in all regions year-on-year. The UK saw the highest increase in CPM, at 39%, but other regions saw CPM rise by more than 20% marking what Nest termed a “consistent trend” for rising demand.

Across all regions cost per click (CPC) fell in the quarter but rose year-on-year by 15%, while click through rates (CTR) grew by 12% in Q1 2022 compared with the same period in 2021. Nest said: “This shows that improvement in CTR is softening the impact of rising CPMs, showing how important focus on performance is.”

‘Social proof’ ads strong performers

The report found that creative has emerged as the main optimisation ‘lever’ for paid social in recent years. In Q1 2022, ‘sale’ and ‘discount’ messaging consistently achieved high engagement, but ‘social proof’ ads also performed strongly, with an 11% higher than average CTR.

 ‘Social proof’ refers to content that reinforces a user's positive perception through comments and reviews from other customers. 

Dynamic product ads on Facebook were found to contribute most heavily to engagement levels, with CTR increasing 7% quarter-on-quarter and 13% year-on-year. However, Nest found that in Q1 2022, there was lower competition in demographic and interest-based targeting, with CPM at 49% lower compared to lookalike targeting. 

The report said: “Despite a competitive first quarter, the consistent rise in CTR - and its impact on CPC - shows that there is still much that ecommerce brands can influence to achieve strong results in this environment. 

“With some uncertainty in the economy expected this year, advertisers should ensure they have a best-in-class set-up in place to be prepared. Producing high performing creative is the most important lever to pull in order to win customers during competitive periods.”

View the full report from Nest Commerce here.