How Much Does it Cost to Advertise on Facebook?

With over 2 billion active users a month, there’s no doubt that Facebook is a treasure for advertisers who want to reach out to people at an effective cost.

It is effectively cheaper than traditional ways of marketing and the results are more measurable.

According to Hootsuite, it costs $0.27 for a click in case of CPC [ Cost per click] and $7.19 for thousand impressions in case of CPM [Cost per thousand impressions]

But wait! Does it mean the next time you run a campaign on Facebook, the cost is going to be exactly this.

Never, the above numbers are a cost average taken while studying a $300 million spending in Facebook Ads.

So How Much is it going to cost when I run an ad on Facebook. Right?

It is determined by Facebook by a number of factors, to ensure good user experience as well as value for money for advertisers.

Firstly, you should know that Facebook always keeps you in control. It lets you decide the ceiling cost per click/cost per thousand impressions that you want to spend.

Let’s dive right into what determines the cost of a Facebook ad.

 

 

FACEBOOK AD COST FACTORS

Ad Objective

While running a Facebook ad, your objective would fall into one of the three general objectives, i.e. Awareness, Consideration, and Conversion

Depending on what your objective is, the cost will vary.

• Awareness:

Here the objective is to spread awareness through maximizing the reach of your ad

Say, If you have just started a new campaign on global warming, you just want the maximum number of people to see your ad.

• Consideration:

Here the objective is to make the user think about his need for your product/service and consider you as a potential solution.

Say, If you are a tech blogger, then you want to drive traffic into your blogs through your ad

• Conversion :

Here the objective is to make the user take an action like online sales or offline store visits.

If you are an e-commerce company, then your objective is to make people click on the ad and buy from your website.

These are some basic examples, Various advertisers would want various responses from users to reach any of these three objectives

Hence the performance indicators for various advertisers would be different.

For example, various performance indicators provided by Facebook for ads with the objective of Awareness are Brand awareness among people, local awareness for the brand, or the overall reach.

In case of an ad with the objective of consideration, the various performance indicators can be to drive traffic, to create engagement with users or to drive app installs, video views or to generate leads.

And for an ad with conversion objective, the performance indicators could be actual online sales, offline store visits.

Facebook decides between people to show your ad based on your ad objective.

i.e.If you are looking to drive online sales, Facebook will show it to users who tend to make a purchase if he/she clicks on an ad.

This is determined by Facebook using the historical activity data of the user.

Or if your aim is to increase awareness, then they will show it to all users who would be interested in the ad.

The cost will be the least for Awareness and the highest for conversion, as it is harder to make Conversion than to drive traffic than to spread awareness.

Facebook Ad Auction Factors

Since there are multiple advertisers competing to engage with the same audience, Facebook decides between the advertisers through the process of Auctioning.

But Unlike traditional auctioning, the highest bid is not the only thing required to win.

In order to succeed in an ad auction, your ad needs to be relevant and must be enhancing user experience. For this Facebook considers three things

1. Bid Amount

This is the amount you have agreed to pay according to your bidding strategy.

Types Of Bidding

• Automatic: In Automatic Bidding,you let Facebook do the bidding for you. Without knowing your competitors’ bid, it would be difficult for you to know the right bid amount.

Here Facebook helps you by doing it automatically to increase your chances of winning the auction.

• Manual: In Manual Bidding, you set a bid amount for a click that’s worth to you.

1. Ad Quality and Relevance

Ad Quality is basically how much your audience will like seeing your ad. So you need to make it interesting and engaging for the audience.

Ad Relevance is basically how much your audience are expected to engage with your ad or report/hide your ad.

More the chances of your audience engaging with your ad, higher will be your relevance score.

1. Estimated Action Rates

This is how much your ad is expected to receive the action it is made for.

Every ad is made to get a specific response from the target audience. It can either be to just read the ad or to click on it or to make a purchase.

Facebook decides how likely is it to receive that action through the previous online actions of the user the ad is trying to reach and the ad’s historical performance data.

 

 

HOW TO WIN THE FACEBOOK AD PLACEMENT AUCTION

Facebook scores the ad on each of these criteria and the one with the highest total score wins the auction.

Hence an ad with a low bid and high relevance to the audience can beat an ad that that has a higher bid and very low relevance to its targeted audience.

Audience

The cost will also vary depending upon the audience you want to target on.

Basically, the cost will be high if the target audience is very less in number and vice versa.

Targeting the wrong audience can also shoot up your ad cost.

For example, if you are a car dealer and want to advertise your cars to potential customers.

For this, if you target all men and women who have shown interest in cars. Then you can go wrong.

Because that audience would also contain people who have not yet started to earn but likes to check out pictures of the latest cars.

This will unnecessarily shoot up your cost and will decrease its visibility because fewer people are engaging with it.

Warning: there are 350 audience factors you need to fine-tune, mix and match, and optimize. Otherwise, you might end up paying too much to get very little results.

 

 

Ad Quality

Facebook’s policies are based on providing the end user a relevant and engaging experience in their platform.

The baseline is the more your target audience would want to see your ad, the less it would cost you show them the ad.

Hence you need to make it more attractive by designing pictures/videos etc that must intrigue your audience and make them want to know more about it.

You should also give them a reason to act on it. For example, e-commerce websites give discounts on items and put a countdown timer to trigger action from the user.

Remember, more the engagement rates from the users, cheaper it is going to show your ad more to your audience.

The Industry You Are In

Various industries have various return on investments

For example, a property builder would be ready to pay more for an ad than an e-retail company as the return from a conversion for the property builder is much higher than that for an e-retail company.

Hence the industry you belong to is also going to have an effect on the cost of the ad campaign you run.

According to fitsmallbusiness.com, Finance, and Insurance, Consumer Services, Home Improvement, Beauty, Automotive, Job Training were some of the industries with high ad cost on Facebook.

Retail, Apparel, Education are some industries that cost less to advertise on Facebook.

That’s Out Of Your Hands!

Apart from these main factors, there are some others that are out of your hands.

– Time spent by people on Facebook can also affect the cost of ads.

If more people spend more time on Facebook, it means Facebook has more space to show ads to the users. With more space to show, the cost of ad space that advertisers are competing for will drop

And when the time spent by people on Facebook decreases, the cost of running ads will go up.

-Special events, Specific days, some specific hours of the day will cost you more

Say, for example, the cost of an ad on days like Cyber Monday, Thanksgiving day, Black Friday, Christmas, New Year’s Eve, New year’s day, valentines day would cost you more than normal days, as there are more advertisers competing to show their ads at these times.

HOW TO GET THE BEST RETURN FROM FACEBOOK ADS

The art of enticing your target audience into your desired action is getting harder day by day because of the increasing competition and the ever-evolving nature of the platform.

If you are a tech savvy person and have the money and time to spend on learning creating effective Facebook ads, then there are numerous resources on the internet for you to learn.

You must be ready to try out various of the hundreds of targeting and other options that are right for you.

You must not be hesitant to trials and errors as that is the only way you will learn over time.

You will have a lot of fun in the process of doing it.

Or if you don’t have the time and interest to do it, then the best way would be to delegate the job to someone with experience. Contact us today so we can help you put together a winning Facebook Ads campaign that delivers solid ROI.