Why are Facebook ads more expensive during the holidays?

The winter holiday season is, without doubt, the busiest time of the year for advertisers. Now more than ever customers are more willing to buy online as they look for the best deals for Christmas and New Year's, so there are plenty of opportunities to reach them with relevant and highly-targeted campaigns.

But along with the boost in sales and the increased number of conversions comes the inevitably higher cost of Facebook ads. In 2015 Facebook analyzed the seasonal fluctuations in ad costs and noted a 100% increase in CPMs in throughout November and December. Q4 has proven to be the most challenging financial quarter year on year, as CPM figures doubled the yearly average. So why do the costs go up as the user engagement skyrockets?

Here are four factors that influence the costs of Facebook ads during the holiday season, and what you can do to keep your campaigns running smoothly.

INCREASED COMPETITION

This is completely logical. Whenever you run an ad on Facebook, you are competing with many different advertisers trying to reach the same audience as you. During the holiday season, the competition soars dramatically and you need to be prepared to raise your bid in order to remain competitive in auctions. You can monitor all changes in auction competition by accessing the Delivery Insights in Ads Manager.

And while an increased competition means higher ad costs for everyone, you need to keep in mind that most of it comes from seasonal advertisers who have not been actively advertising on Facebook throughout the year and are dipping their toes in at the busiest time of the year. If you want your campaigns to be successful, this is not the time to test things out - you need to have an exceptionally good strategy in place that you have built upon throughout the year and target engaged users who know and trust you.

It's no surprise that many advertisers start thinking about their holiday campaigns as early as August or September. It is never too early to plan your social media strategy and the more time you invest in it, the better results you will see. Grow your audience throughout the year and let the Facebook pixel do the hard work for you - the more you advertise, the more Facebook will learn about what works for you, what audiences are converting well and who to show your ads to in order to get you the best results.

A SHIFT IN CUSTOMER BEHAVIOUR

Here's a hard truth - people don't like Facebook ads and they definitely don't log on to the platform to see what new ads you've been running recently. Unlike AdWords where people are specifically looking for something when they see an ad, Facebook ads are based on behaviour rather than intent. Any ad run on Facebook is a disruption in the user's experience. You need to show empathy and understand that most people won't welcome your ads with open arms and would get annoyed pretty quickly if you overdo it.

There is a time during the year when people become more sympathetic towards your advertising and that is around Christmas. It's not just email opens and click-through rates across all platforms that see a positive upturn, there is also a significant shift in customer behaviour during the holiday season, as people become more receptive and even enthusiastic about ads. They know that there are so many brands vying for attention in their News Feed and they are willing to see more ads than usual in order to find the best seasonal deals for their Christmas shopping.

Now it's the perfect time to reach your audience with highly-targeted and visually compelling campaigns that would entice them to click through and learn more about your offer. Your audience is now more engaged than ever and in very high demand amongst advertisers. That is also likely to increase ad costs even on audiences that have performed well for you in past, because there are now more brands bidding for these highly engaged seasonal shoppers.

What can you do to get their attention? Use storytelling to convey positive emotions and win them over with unmissable offers that they simply won't find anywhere else. Entice them with thoughtful gift guides and seasonal discounts, promote an exclusive online offer or in-store event and create a sense of urgency with cut-off Christmas shipping dates.

But even when your customers are engaged and willing to shop, you shouldn’t focus your efforts entirely on selling. Christmas is just as stressful for your customers as it is for you, so bring some festive cheer with a heart-warming season’s greetings email, practical guides on hosting a Christmas dinner or even your own version of an Advent Calendar or 12 Days of Christmas.

BROAD TARGETING

During the holiday season Facebook advertisers tend to target more broadly in order to get their offer across to as many people as possible. What this ultimately means is that even untapped audiences will become more expensive due to high demand from other advertisers. You can defy this by using Custom and Lookalike Audiences to your advantage.

Unlike interest or demographic targeting, these types of audiences are behaviour-based and an incredibly powerful tool to use in your advertising strategy. You can segment your customer base to create specific audiences based on what action they've taken on your site or what landing page they have visited. These are people who already know you and have interracted with your brand before, so persuading them to convert would be much easier than with cold leads.

How can you use Custom Audiences to your advantage this holiday season? Start by targeting seasonal shoppers who have made a purchase with you around this time last year. You can set up a Custom Audience with these users and target them with an exclusive, personalized offer based on their purchase history. You can also use Custom Audiences to target people who are opening or clicking your marketing emails but not converting. Use visually compelling ads and a structured landing page that reinforces your message and highlights the benefits for the user.

If you are running multiple special offers in the lead up to Christmas, make sure to exclude your most recent customers from your targeting, particularly if the offer you're promoting is more enticing than the one they have used with their purchase. Or, if you're planning a once-in-a-lifetime promotion that you don't want your customers to miss, advertise it well in advance so people know what's coming. Nobody likes missing on a good deal, especially at Christmas, so build some early excitement around your offer and watch your conversion rate rise when the offer finally rolls around.

STRATEGIC SPENDING

Be wary of incresing your budget too quickly to get more sales. If you have only started advertising now, chances are the results you're getting are slightly more expensive than the yearly average. If you have major holiday campaigns coming up in November and December, start building upon your strategy and run pre-holiday ads at the end of the summer. You might think it's too early, but this way you'll be much better prepared to scale your campaigns during the holiday season and your costs won't be affected since you've already build trust with the Facebook algorithm.

Remember, the more people see your campaigns and the more engagement they get, the less expensive Facebook will make them over time. Even brand new campaigns have a better chance of getting good conversions at a reasonable price if your ads have a history of performing better with your target audience.

Finally, make sure all your campaigns are optimized for mobile use. Earlier this year Facebook reported that as much of 88% of their advertising revenue comes from mobile ads. Allocate plenty of budget to mobile ads and invest time in running multiple ad variations, formats and strategies until you find the ones that convert best. As far as the format is concerned, multi-product ads, sequencing ads and video ads tend to perform best at this time of the year.

If there's one thing you should definitely take from this post, it's that it's worth spending the entire year building upon your Facebook advertising strategy and creating an online community of highly engaged users who will be more open to buy from you than other brands during the holiday season. If you've been good with Facebook advertising this year, Christmas is the time when you will see all your efforts pay off.