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“How much do Facebook Ads really cost?” is a question I’m commonly asked by clients and business owners.
It’s a burning question for many people. Facebook and other online advertising platforms have made it easier, now more than ever, for anyone to start running ads.
Truthfully, it all depends on a range of factors related to your business and industry.
Anyone could easily run an ad and only spend a few dollars a day, or create a dynamic campaign that spends thousands. It all comes back to how much you want to spend.
In this article I will break down how your Facebook Ad costs are determined, and how you can set a budget for your business.
Facebook defines the cost of your ads based on two key factors, the overall amount spent and the cost per result.
The overall amount spent is based on your campaign budget. It is how much money you want to spend on a specific Facebook Ads campaign.
For example, if you only want to spend $100 on advertising, on Facebook per month, you could set that for your campaign.
On the other hand, your cost per result is how much it will cost to achieve a certain outcome from your campaign.
A result could involve clicking on your ad, downloading your app, a conversion on your website, or several other actions you can set based on the types of campaign you run.
The cost per result is also determined by your bid strategy. This is where you can set which results you want Facebook to try and optimise for your campaign.
For example, if you want to optimise for link clicks, Facebook will try to show your ad to people most likely to click your link on your ad.
With so many people advertising on Facebook each day, one of the great things that comes from it is data on benchmarks.
Understanding the benchmarks for different actions across different industries is useful, for comparing the performance of your own ad campaigns.
WordStream has done an incredible job compiling some results, that I’ll share about the costs of different metrics.
For example, the average cost-per-click – how much it will cost to get someone to click on your Facebook ad, is said to be $1.72 USD.
However you should also use benchmarks to get more clarity about costs in your industry.
For businesses in the apparel industry, your average cost-per-click is only $0.45, while this jumps up to $3.77 for businesses in the finance or insurance industry.
We can even look at data showing the average cost-per-conversion, which is how much it might cost us to get a conversion or sale on our site.
The reason for these differences is typically because of the way people use a social media platform such as Facebook, and the mindset they’re in at the time.
It’s unlikely that the average person on Facebook is on there thinking about their finances. As a result, there is more cost involved getting someone to click on your ad in that space.
Someone who is hanging out on Facebook is more likely to be looking for entertainment or ways to curb their boredom. This is why apparel is an easier product option to connect with someone at that time.
Now that you have an understanding of the average cost, which you’re likely to pay for different results in your industry, let’s look at what factors influence your cost.
There are many factors at play, but I want to give you some idea about what can affect your costs.
Market demand is based on the demand to reach your target audience. This really means how many other people are trying to reach the same audiences you are.
The more people that are advertising to a market means there are more people bidding for a result, which drives up the cost of getting that result.
Also think about when demand might increase and when ad costs might go up. For example, more companies may advertise over holiday periods or events such as Christmas.
Facebook offers us a range of different campaign objectives. This helps us run campaigns, that try to find the best people, based on what we want to do.
Different objectives will cost different amounts, just based on the result you’re trying to achieve. It may cost less to run a campaign that has an objective for increased engagement, than it is for an objective working to increase sales on your website.
Your Target Audience
There are only a limited number of people to advertise to on Facebook. Based on how many people you’re targeting and how responsive they are, the costs to reach them may vary.
Audiences that are more receptive to ads are typically cheaper to advertise to, but likely also come with more competition.
Your Ad Placement
Facebook has expanded the number of ways you can advertise to your audience. There are a range of places to be seen, from Facebook Newsfeeds, to Instagram, to Stories, to Marketplace, and many more.
However each of these have different costs, due to how likely someone is to interact with an ad in that placement, and how many other people are using that placement type.
Your Relevance Score
Facebook uses a metric known as a Relevance Score, to assess how relevant your ad is to the audience you’re targeting. The more people who interact with your ad, the more relevant Facebook determines it to be.
So how can you improve the relevance?
The most important thing when running Facebook Ads is that you need to be setting targets and measuring your results.
Too many business owners pour money into Facebook Advertising, without ever setting a target they want to hit. They simply just pray that they get some sales.
Use the benchmarks, we discussed earlier, to help you figure out your numbers.
Let’s say you’re a local gym in the fitness industry, and your average cost-per-click is $1.90, your average conversion rate is 14.29%, and your average cost-per-conversion is $13.29.
Now, let’s say for every membership you sell the value of that customer over the lifetime of your business is on average $500.
This is all just hypothetical, but we can see that our example business could spend an average of $13.29 to acquire a customer worth an average of $500 to their business.
Now you can use the benchmarks and targets you’ve set for your business and industry, and go out and test them.
Put some money towards running an advertising campaign, and see if your cost-per-conversion is on par with the average.
I promise you this is a much better way of having confidence in your advertising, rather than just blowing your ad spend and not knowing what you’re trying to achieve.
Now that you have an understanding, of the average numbers for your business and what it’ll cost to reach a conversion, work backwards.
Let’s say we want to make an extra $5,000 in revenue this year, and each membership equals $200 per year.
This means we need to sell 25 memberships this year to hit our goal.
We know that a conversion, which is one sale from Facebook, is costing us an average of $13.29.
Let’s multiple $13.29 by the 25 sales we need, which equals an ad spend of $332.25 for our business.
Now please remember, we’re using an average cost-per-conversion benchmark, which will be influenced by many of the factors we talked about before.
Your cost-per-conversion could very well be higher or lower. It’s just a benchmark to help guide our decisions.
Let’s say as a business, we rounded it up and set a budget of $500 to invest in Facebook Ads to try to reach a return of $5,000 in sold memberships.
If we set the right objectives, created the right campaigns and targeted the right audience, (or worked with an agency who could help do this), then you have a good chance of hitting those figures.
This is a clear and results-driven approach to setting a budget. You’re not just picking a random number out of your head and setting up an ad.
Instead, you use the costs, metrics and data available to make informed decisions about your budget and what you’re willing to spend on advertising.
As you can see, Facebook Ads don’t need to remain a mystery for your business. By understanding the costs involved, you can start to create more profitable campaigns.
Manexo Media works with businesses every week to walk through these numbers and create highly engaging campaigns for their target audience.
We take pride in being transparent about the costs involved and what a business like yours is likely to spend.
This way, we can create ad campaigns that are meaningful to both your audience and your business, while making sure they are profitable at the same time.
If you’d like to work with an agency that understands how to correctly run Facebook Advertising for your business and industry, visit our Get Started page and fill out the form. We look forward to helping you soon.