How much does Facebook Advertising cost is the most common question people ask.
‘It depends‘ is my answer!
‘It depends’ is the catchall, get out of jail free, no answer answer! #SorryNotSorry
Yet, it depends is absolutely true.
It depends because buying ads on Facebook is not like buying can of coke from your local 7-11! . Purchasing ads space on Facebook depends upon like 12 different factors – all interconnected and related. These 12+ factors vary from one advertiser to another and directly affects and influences how much you’re going to pay.
Lets dive in, get wet, enjoy the swim in tropical blue waters and then we’ll set the record straight on how much to budget
pay for Facebook Ads.
The fastest way to lose your shirt when running Facebook Ads is to guess and hope!
Yep, traditional advertising have their ‘rate cards’, JCDecaux has their billboard costs. T.V. has their 15, 30 sec, ads costs. Facebook does not have a ‘rate card’.
The Facebook ads cost is based, broadly, on whether you bid for CPM, or CPA.
CPM, cost per mille, is you paying €X to put an ad in front of 1000 people. CPA, cost per action, mean paying €X per link click, webinar registration, email signup, or purchase etc. One impression being an ad served to one person.
Ok? Makes sense so far? Good.
Let us start with the base Facebook funnel. As you know you should have many funnels in your business (which is a different post ). The base Facebook funnel is one such funnel.
The base funnel has three stages: Awareness, Consideration, Conversion.
Facebook Advert Costs depend on Stage of the Funnel…
As the picture shows the awareness is at the top, consideration in middle and conversions at bottom.
The three stages of the funnel are reenforced by Facebook as the campaign objectives are ‘bucketed’ along the same three steps:
The offer, to each of the cold, warm, and hot audience, must sync with peoples expectations and ‘problem un/aware’ states.
Even more importantly, people must go through the ‘know you, like you, and trust you before they buy from you’ stages. People view and click ads with the ‘WIIFM’ mindset.
Note: audience sizes decrease in volume from awareness, consideration, and conversion. The consideration and conversion audiences stages are nominally Facebook custom or engagement audiences — built from the Facebook pixel fires or video views.
(Download) FREE PDF: Irresistible Facebook Ads Cheat-sheet …
3 PDF pages showing thumb-stopping images types, Hooks to hook the brain, and text to get the click.
Tl;dr – Budget €1 for every 100 website visitors
Practical answer is set a budget of €1 for every 100 website visitors.
Add your email list numbers together with your website visitor list for retargeting. So if you have 2,000 / month website visitors add 1,000 email subscribers = 3,000 total sessions * €1 for every 100 = €30 budget.
The €1 for every 100 visitors sound arbitrary, especially since gym memberships, restaurants, and info-products are different verticals, but it is not.
The €1 for every 100 is a starting point. Monitor your results and always, always, always apply the ‘wash, rinse, and repeat’ cycles.
If the €1 / 100 is giving profit then increase the retargeting budget until your marginal revenues equals your marginal costs.
What is more interesting is Facebook advertising is an amplifier of all your other marketing activities, email, SEO, Google ad words, and content marketing.
As the amplifier you’ll get more of what’s working. Visibility, leads, phone call, sales etc.
…Retarget website visitors to ‘Fund the Machine’
The €1 / 100 visitor is the retargeting budget. The use of it is to ‘fund your Facebook ads machine’ and to bootstrap more spending.
Remarket to hot audiences. Hot audiences are people who visited your add to cart, but not your checkout page; visited your product pages, but not your add to cart; people who visited your offer pages, but did not land on thank you page.
As a smart marketeer you noticed we began the budget calculations at the bottom of the funnel and not the top. This is because hot audience are cash in hand buyers and we want to convert them first!
Consider if your product pages or landing pages are converting at high numbers, if not than your must fix that first. Otherwise you are wasting money. Am I right? Yes, I am.
Fix your offer, product pages, and funnels – before you turn on Facebook Ads.
Recap: set retargeting budgets first and use €1 / 100 visitors to begin.
Now multiple the €1 / 100 visitors by 3 for your engagement (consideration) audience budget.
- One third of this engagement budget is for lookalike audiences development. Did you install the Facebook Pixel mentioned earlier? Good, from the pixeled audiences Facebook allows us to create clone audience. Clone audience are based off of seed audience. E.g. if you have audience of customers, Facebook can find groups of people (100k’s – millions!) with the exact same characteristics as your customers. You’d run these audience in through the top of your funnel, as if they were cold audience – which they are.
- On third of engagement budget for further interest / behaviour targeting. Segmenting by products they like, or life stage events, competitors pages, and other targeting criteria.
- Last of the one third is for remarketing for further engagement or nurturing. Suggest the €1 / 100 visitors level to further educate, not to sell. Use customer stories, educate on issues they care about, show how active you are in the community. Think nurturing.
So if we are at €30 for retargeting than 3x = €90 for engagement audience. This is layering budgets and results, €30 for retargeting and €90 for engagement. Total €120.
However, this is only a starting number! Adjust the numbers up or down based on profitability, relevance score and your available content assets.
Awareness in the market
Moving up the funnel to the awareness stage. This is getting cold audience aware of your brand.
Video, at the moment, is the lowest cost method of building audiences. Dirt cheap.
3 second video views are sub €0.01. Meaning for €10 you can get 1000 video views. And for €100 you can get 10,000 video views. These audiences are then ripe for retargeting with nurturing content or offers.
The more you spend on awareness the bigger audiences you have for consideration, conversion.
If you’ve set up your funnel correctly then your engagement remarketing flows into your conversions campaigns.
This way you can link all stages of your campaign together and assess the profitability and drop offs and adjust budgets accordingly.
With a funnel and remarketing setup you can then easily setup budgets.
Where exactly do you set set up and control your ad spend:
This -> Control and set your Ads budget like this:
Facebook advertising can be very fruitful, but also expensive when not done properly…
I did say there is no right or wrong answer on how much ‘Facebook advertising cost’ and ‘it depends’ was my stupid answer.
We did work through a budgeting method above.
Here’s the thing though:
The short answer is Facebook advertising costs exactly what you want to pay and not one red cent more.
Yep! You decide your daily or life time budget. Facebook will not spend one red cent over that amount.
If you go to the Ads Manager (or Power Editor) hit new campaign button, and in the Budget and Scheduling section is where you set your ‘daily’ or ‘lifetime’ budget.
- Daily is how much you want to spend per day.
- Lifetime budget is the weekly or monthly budget for your campaign.
E.g. select daily budget and enter €100 / day and set and end date and Facebook will only spend the 100 a day.
So, the ads platform is smarter than both you and me combined … consider this qualifier from Facebook:
when your ads have more opportunities to get results, Facebook may spend more money… (to get the results you’ve asked for)
If you are boosting post from your Facebook page set the budget here:
From your Facebook page
From your Facebook Page choose budget via the blue boost button and set a daily amount: Remember you are biding on impression, CPM, not CPA.
Recap: choose to buy ads on a impressions, CPM or actions, CPA basis.
Set your budgets in the Budget and Scheduling section, (Ads Manager or Power editor) or Budget and Duration during a boost via your Facebook page.
*PSA* Have you installed the Facebook Pixel?
Yes! Good, do a happy dance!
No! Oh my. Job #1, do it now!!
The Facebook Pixel is a small amount of software code given to us for free, from Facebook, to install on our websites. This small bit of magic code tracks every website visitor arriving on our websites and puts them anonymously into virtual ‘bucket’ for us to retarget with ads.
Retargeting allow us to make offers to those 99% of people. 99% of people leaving = lost money.
What do Facebook ads cost in the real world?
Actual and Real Cost of Facebook Advertising
Below are actual for Facebook advertising. The numbers are only as a starting point. As always your mileage will vary.
- In the USA the average CPM (across all industries) is $4 (from Wordstream)
- The average CPA (across all industries) is $18.68
- The average CTR (across all industries) is 0.9%
- The average CPC (across all industries) is $1.72
- The average Conversion Rate (across all industries) is $9.21
(Click image to see a larger size)
Past is Prologue – Advertisers by the numbers
Facebook Ads are popular! 4 million advertisers use Facebook Ads in 2017 (and counting) up from 2 million in 2016.
These 4 million pages are spread all over the world. Vietnam, Indonesia, Greece, Ukraine and Philippines – not just English language countries. These 4 million advertisers helped Facebook earn $23.31 billion in 2016. Gulp.
People are queuing to advertise on Facebook! Yet, one does not simply hand over a stack of cash to the Facebook bank and expect a 5x return in 2 week!
Don’t expect to simply buy a slot in the news feed, or make a sale, for that matter either, Kemosabe. Oh no.
Not only that, but convincing a cold audience to a) notice your ad, b) click through to your landing page, c) hand over their credit card details and pay €2999 for your exclusive weekend retreat is not gonna happen – well not at first.
The gates to business success and Facebook ads mastery is found from inside the ads manager and power editor, but, success requires more effort then ponying up some cash to open the doors. Facebook advertising is not that simple.
First, how does Facebook advertising platform work?
The Facebook Ads is an Auction
The ads auction is designed to maximize value both for advertisers and for the people who use Facebook. – Facebook
The Facebook advertising platform is an auction. Yep, a hammer and gavel and all that. However, the highest bidder is not guaranteed to win the auction.
Because the platform is an auction is part of the reason there is not a set answer to “how much does Facebook Advertising cost?”
How does Facebook define user value?
“Every time there is an opportunity to show a person an ad we run an auction to determine how we can deliver the most value for both parties. Why is it important to optimize for consumers? We know that showing people high quality, relevant ads contributes to their willingness to engage with advertisers in future.”
“If an advertiser knows their audience well and produces strong targeting and creative, they are more likely to have a higher user value because people will want to see their ads. If the user value is a large, positive number, the total bid the ad brings to the auction will be higher than an ad with the same advertiser value and a lower user value.”
The Factors Influencing the Cost of Facebook Ads
The biggest factors directly influence the cost of Facebook Ads are:
If both of us target the same audience then one of us wins. If you, me and 3 others bid to access the same audience, one of the three win (gross simplification of the ads auction).
However, competition for any one audience group is broader than any one vertical. The common misconception for beginner advertisers is “I’m only in competition with my direct competitors”. This is false on many levels.
If, for example, you sold dog food/equipment. You would normally think you main competition for ad space are the other brands that sell dog food/equipment. This isn’t true. Yes, I am a customer for dog food/equipment as I love dogs. I also like people food, home improvement, GOT, computers, and photography. So yes you are in direct competition with dog food/equipment brand but, also multiple other marketer who want access to me. Makes sense?
Bidding in the auction puts you in competition with every brand who wants to reach the similar audiences.
By increasing other factors (see below) and creating a high quality ads (more later) you’ll be able to stand out in the auction and news-feed. Yes, the audience group is an important part of the cost, but not the only factor.
The amount you pay for your audience (which won’t be obvious or stated anywhere) will vary even between your own campaigns, as your audience for different ad types will change.
The base rule to follow is test audiences for cost and conversions.
Quality of your ad
Quality of your ad and relevancy score can skyrocket or drop – bigly :).
Low relevancy score and low click through rates tell Facebook people don’t like your ad – and Facebook obliges appropriately by throttling deliver of your ad.
Mark Z stated goal is to keep the news feed a positive and happy place. If that is done then people will return and stay for longer … if your ad has low relevancy and low click through then the news feed is not a happy place and your cost as ‘a penalty’ goes up.
Ad relevancy is score on a simple 1-10 scale and akin to the check engine light in your car. The check engine light indicates something is not ok but, does it mean you must stop driving? Not necessarily.
Relevancy score is the cumulative negative and positive reactions to your ad. The score is a measure of how relevant your ads is to your audience. Selling retirement services to 18-24 year old is not going to work and you’ll get low scores.
A high relevancy score does not mean high conversions – your hook, copy and imagery contributes to getting people to click.
A high relevancy score, a 7+, gives lower CPM and your ad will continue being served.
Mind – an ad needs 500 impression for an initial relevancy score – then the score is updated in real time and can change up or down as more people see your ad.
Independent of the ad relevancy score ask if sales and conversions are in an acceptable range to continue running the ad set. If yes, monitor the score and proceed.
Further, relevancy score is different for different audiences and stages of your funnel.
I am a member of many FB ad buyers groups and the views on the relevancy score is divided. Some ecom guys/gals ignore it, some monitor it like a hungry hawk spying a mouse in a field.
Without exception a high score = low CPM, and a low score = higher CPM – every time.
Monitor your ads relevancy score and CTR daily and stop and fix every ads that has low numbers or is not producing ROI.
Click through rate
Click-through rate is the number of clicks on your ad divided by the number of impressions. E.g. 20 clicks, 1000 impressions = 0.02CTR or 2%.
A high CTR mean the ad copy, text and hook is getting attention and people are wanting to ‘learn more’ or whatever the CTA on your ads suggests.
Facebook will use the high CTR as affirmation of a ‘good ad’ and will serve your ads to more people for less money. Remember, if you’ve optimized for CPC then you will spend more money – because your ad is working!! You’ll only spend up to your daily or lifetime budget that we set earlier.
Relevancy score is your audience finding your ad not offensive.
High CRT is your audience captivated enough to want to learn more.
The time of year
The time of year as a factor not crazy if you think about it. The peak times of the year for advertisers are the sports finals days/weeks like the Super Bowl, World series, and shopping events like Black Friday, November, December. Big brands often push massive volumes of money into Facebook ads. The upshot for you an me is prices go up.
If you are not in retail then best to schedule your campaigns before and after these events. Or factor in the increased advertising costs during those periods.
Yes, age, gender, martial status and more all effect your ad costs. Testing is the only way to find the best converting demo for your audience.
Ad Placement – where do you want people to see your ad
Recall the 4 million advertisers from above. And Facebook stated publicly that by Q4, 2017 the news-feed placements will be at maximum load. This is code for no free space available.
The opposite has happen. As the number of advertisers increased inventory reduced and more options have be created to a) satisfy the demand of advertisers and b) help Facebook revenue growth at the level stock market and investors demand.
The mobile and desktop news-feed are the most in demand placements – because that is where most eyeball are, but there are many other placement options: Instagram, video, audience network and Messenger.
Advertising Campaign Objective
This post discusses all the Facebook Advertising campaign objectives available.
Yes, cost are different for the different campaign objectives.
Do Bidding Options Affect Cost?
Now the best part: the cost per result will depend on audience size or as Facebook say, it will be the ads that provide:
” …positive, relevant experiences for people”
these ads will see the best cost per result. Provide a positive, relevant experience and your ads will be a success.
Let me state from the get go the Facebook platform is confusing. Not on purpose but, because of the huge variety of options available. When you set up campaigns, Facebook defaults to the bidding option based on your objective.
E.g. if your objective is clicks to website, then the recommended bidding is pay per impression – which is the best way to accomplish the clicks to website objective.
We have four choices:
- clicks to website and pay per impression
- Daily unique reach
- clicks to website and pay per link click
The default is the recommended choice.
CPA and ROAS (& ROI) are the only numbers that matter
Here is why CPA is the most important number.
If you sell a product for €100 with a 25% margin. Then somewhere between €1-25 is acceptable acquisition cost for an email address or customer.
Yes, a silly simple example but, still valid.
In your travels around the internet and FB groups you will hear people quote different costs acquire an email address of customer. These number range from a unbelievable €1-2, to a realistic €5-10, or 20. Take all these numbers with grain of salt as their business is not your business, their strategy and execution is not yours.
Your goal is not to reduce your CPA to €1-2, or 3 because you will only get low end customers at that price. Your goal should be to pay as much as possible, below your max CPA to acquire email addresses and customers.
What is more is you must determine your own maximum acquisition cost. Then stick with this number and buy customer at that price point. Here is
the important lesson: she who can spend the most to acquire a customer wins. Every time! Every. Single. Time.
Think about it!
If I spend €19 to acquire a customer and you can only bid €11, than I win all the customer and you don’t. Every time! Every. Single. Time.
Right? Right. Sobering. And. Reality. Find your number.
ROI and ROAS
ROI optimizes to a business strategy, while ROAS optimizes to a tactic (Facebook Ads). Ok? Right? ROI, ROAS are different, yet, related.
ROI = profits-costs x 100 / costs
ROAS = revenue from ad campaign / cost of ad campaign
ROI measures the profit generated by ads relative to the cost of those ads. It’s a business-centrist metric most effective at measuring how ads contribute to an organization’s bottom line.
In contrast, ROAS measures gross revenue generated for every dollar spent on advertising. It is an advertiser-centrist metric that gauges the effectiveness of online advertising campaigns.
How much does Facebook Advertising Cost?
It depends was my initial unapologetic tongue in cheek answer and the costs of Facebook ads does depend upon many variables.
Even more precise was the retargeting €1 / 100 website visitors number. We then tripled, 3X, the €1 /100 for our consideration audiences and suggested a 3-4X the €1 / 100 number for the awareness audiences.
Your turn. Questions?