Tradeswell Research: Is Facebook Advertising Losing Its Effectiveness?

This article is part of our Tradeswell Research series. We’re sharing findings from our data and research and turning them into actionable insights that ecommerce brands can use to make better business decisions that drive profit and enhance the customer experience.

With 2.9 billion monthly active users, it’s no wonder Facebook has three million businesses advertising on the platform. But since launching its Facebook Ads platform in 2007, several other players have entered the advertising landscape — including TikTok, Snap Chat, and Twitch to name a few.

At the same time, Facebook’s growth rate has steadily declined over the last couple of years, and it reported its first total user base decline in Q4 of 2021.

How have these factors affected advertising performance?

Tradeswell Research dove into Facebook advertising data from the 500+ brands using our platform to uncover trends in Facebook’s cost per engagement (CPE) and engagement rate since February 2020. Additionally, we broke down CPE and engagement by age group. 

CPE is how much advertisers pay for each ad click. Engagement rate is total ad clicks divided by impressions.

Note: Facebook advertising data includes data from both Facebook and Instagram platforms.

Facebook ads CPE and engagement rate reveal the platform’s effectiveness (or lack thereof)

We pulled monthly CPE and engagement rate data from February 2020 to April 2022 and found that CPE increased dramatically with a 414% growth rate while engagement decreased by nearly 46%. In comparison, TikTok’s Engagement rate increased 14.2% from 2021 to 2022.

Facebook Ads- CPE & Engagement Rate by Month

This confirms the many anecdotal claims in the advertising space that Facebook is no longer as effective in attracting and converting consumers.

When we broke down CPE and engagement rate by age group, we found a few key insights:

  • The most expensive age group to advertise to on Facebook is 35-44 year olds. This group has a higher prevalence of disposable income and children — making it a prime target for advertisers.
  • The 55-64 and 65+ age groups engage the most on Facebook, which results in a lower CPE. Over half of US adults 55 and over are retired, giving them ample time to scroll and interact on Facebook. 
  • 18-24 is the least engaged age group on Facebook but the second most inexpensive. Studies have found that this age group prefers TikTok and Snap Chat over Facebook, and they don’t have as much disposable income as older generations.

Facebook Ads- CPE & Engagement Rate by Age Range

Time to rethink your Facebook ad strategy

We recommend diversifying your advertising efforts and testing new channels. TikTok is the number one app for driving consumer spending, proving that it’s putting the right products in front of the right consumers and driving engagement. 

By spreading your advertising budget across channels, and consistently testing how results vary across demographics, you can identify new opportunities to capture your target audience and drive spending on your ecommerce site.

With that said, Facebook still has a large share of users and numerous ways to target those users for personalized advertising — so consider if it’s a necessary component of your advertising strategy.

If you’re using Facebook to target the 25-54 age group (the most expensive age group), we recommend testing new advertising creative on the platform. Facebook is highly competitive for advertisers, and only the most eye catching ads will capture consumers’ attention. Try video ads, vary your headlines, and always include a clear call-to-action.

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