First, the company says it will now support video in these ad units. “Video creative has proven to be an effective way to drive engagement in News Feed,” Facebook writes, and it makes sense for app ads since a video can be much more effective than screenshots and text for giving you a sense of the gameplay or user experience in an app. (Startups like Voxel and Agawi are trying to go beyond video by including interactive app demos in ads.)
Introducing video could also make the ads into bigger moneymakers for Facebook, since video advertisers usually pay a much higher CPM (cost per thousand impressions) than they do for other ad types. (I asked a Facebook spokesperson how video will affect the pricing, and I’ll update this post if I hear back. Update: The spokeserson told me, “These ads go into our auction just as any other ads. The type of creative (photo, video) doesn’t affect the pricing.”)
Facebook’s announcement blog post quotes John Clelland from DoubleDown Casino, an early tester of the video unit:
In our early tests, we found that using video in our mobile app ads resulted in increased install rates and decreased costs per install. We’ve seen tremendous success with mobile app ads and are looking forward to using video to make them even more engaging with rich media like video.
In addition, Facebook is also announcing that it will allow app advertisers to bid for ads on a cost-per-action basis, instead of having to pay based on clicks or impressions as they had before. Since the rationale behind the ads is to drive installs (and, thanks to new options, other actions like promoting a sale), Facebook is basically allowing advertisers to pay based on what they really care about.
The company says that internal tests showed that paying based on installs instead of clicks meant that advertisers were effectively paying 20 percent less for each install.
A few weeks ago, Facebook said these ads have driven 145 million installs this year.