• by Mark Walsh  @markfwal, January 16, 2012

The cost of advertising on Facebook keeps climbing. Average CPM rates increased 8% and cost-per-click (CPC) rates rose 1% in the fourth quarter of 2011, compared to the prior quarter, across five major markets (U.S., U.K., France, Germany and Canada). That’s per TBG Digital on Facebook advertising, based on a total of 326 billion Facebook ad impressions in the year’s final quarter.

In the U.S., CPC rates rose even faster, at 10%. U.S. cost per clicks shot up during the holidays, when rates spiked 55.7% between Nov. 21 and Dec. 17. “This could point to demand increasing as more brands are advertising on Facebook and supply plateauing as U.S. user growth slows,” noted the TBG report.

CPM rates across all five markets increased 23% between the first and the fourth quarter.

During the same period, click-through rates have increased 18%, suggesting that advertisers are building better ad creative that piques users’ interest, while also getting more out of the available targeting options. Click rates had an average increase of only 7% between the third and fourth quarter, however -- pulled down by an 18% decrease in Germany and a 2% drop in the U.S.

Of the 18 ad categories measured, the top five -- finance, food and drink, games, retail and entertainment -- accounted for almost 70% of total impressions served in the fourth quarter. Among the leading segments, finance was the top-gainer, growing its share from 12% to 18% during the quarter. Telecom, which finished just outside the top five, saw impressions jump 21%.

When it comes to click-through rates, food and drink were leading categories, followed by body and fitness, retail, home and garden, nonprofit.

Among the 15 categories highlighted in the TBG study, finance had the lowest click rate. At the same time, finance accounts for more than 60% of impressions in campaigns that send users off Facebook to another site.

For its part, Facebook would prefer that users would stay on the social networking site. A second-quarter study by TBG found that the company charged a 29% lower CPC for ads that kept traffic within the Facebook environment, rather then sending it off-site.

In the fourth quarter, rates for campaigns that sent users to an advertiser's Facebook page or to a branded app within Facebook were an even better deal, at CPC rates 45% less than those driving to outside sites.

A separate report released by Efficient Frontier Friday showed that spending on Facebook reached 2.7% of biddable online advertising in the fourth quarter. It is expected to double marketers’ fan bases by the end of 2012. The report also predicts that spending on the social network will reach 5% of all online ad dollars by year’s end. As advertisers improve their ability to acquire and engage fans, brands will continue to funnel incremental spending to Facebook.

Market research firm eMarketer has predicted Facebook's U.S. display ad revenue will grow 81% to $2.2 billion this year, accounting for more than a fifth of all U.S. display ad dollars.