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So you’re thinking about using Facebook ads, but you’re unsure how much you should budget for them? We get it! Facebook ads are a complex subject, so let us help you understand them and the costs a bit better.
Creating ads doesn’t have to be frustrating. If you’re stuck trying to figure out how to run Facebook ads at a low cost, you probably want to keep reading. Creating goal-oriented ads while achieving positive results is something that you CAN accomplish. Use this article to release your frustration and allow you to see the light at the end of the funnel…get it?
In this article, we will break down what really determines the cost of a Facebook ad and reveal tips on how you can lower them! Who doesn’t love saving money wherever you can?
Why You Should Invest in Facebook Ads
Facebook advertising has many benefits, the most important one being the ability to target your desired audience directly. If you know your customers, you can use Facebook advertising to help your business grow. Facebook allows you to advertise to users by interests, location, age, behaviour and more!
So…How Much Do Facebook Ads Cost?
The cost of Facebook advertising can range from approximately $0.40 to $12.00 per click. Now, this depends on many factors, and realistically, it totally depends on what ad you are trying to run.
Before you assume that this article will give you exact numbers on how much every ad costs, let me break the news to you… Every ad has a different price depending on a variety of factors, and can fluctuate between industries. In other words, an exact price breakdown just isn’t possible.
Facebook Ads By the Numbers
Here are some average numbers so that you can start to plan your ad ideas and budgeting accordingly:
- The average conversion rate on Facebook is 9.21% (WordStream)
- The average cost-per-action on Facebook is $18.68. (WordStream)
- The average click through rate on Facebook is 0.9% (WordStream)
- The average cost-per-click (CPC) on Facebook is $1.72 (WordStream)
7 Key Variables That Determines Facebook Ad Costs
With a general understanding of how much Facebook advertising costs, it’s time to see what determines those prices. Although the determining factors vary, these 7 key variables are what generally affect Facebook ad costs the most.
Facebook’s audience has a significant impact on your advertising costs. Your audience is a group of people that you want to reach with your ad. This can be narrowed down to demographics, locations, age, gender, interests and more. By targeting specific groups, you can receive the most out of your ads.
Creating relevant ads for your target audience is necessary, although it may increase your costs depending on who your audience is. For example, if you are targeting 25-34-year-olds, you have the opportunity to reach 58.3 million people. Now, you would not run an ad to every single person in your targeted age range (as that is too broad); but you may start there and begin to narrow down on your audience. It’s essential to target custom audiences as you not only want clicks, but you want complete actions taken from your ads, such as purchases.
Competition can influence your Facebook ad costs significantly. This is because your advertising costs can increase or decrease depending on the number of competitors you have and what their budgets are. On average, if you have a lower level of competition, the less your ads will cost, and if you have a higher level of competition, the more they will cost.
3. Ad Bid
Bidding strategies are provided through Facebook and will impact the cost of your Facebook ads. Facebook offers two bid strategies that play a part in determining your costs. These are:
- Manual bidding (cost cap, bid cap or target cost):
This strategy will allow you to determine how much you are willing to spend when advertising. Cost cap and bid cap bidding are available for all campaign types; however, you must meet requirements to use target cost (minimum ROAS) bidding. These manually bidding options have pros and cons, but it really comes down to your advertising goals.
- Automatic bidding (lowest cost):
This strategy is designed to help you reach the lowest-cost opportunities while aiming to use your entire budget. The lowest cost bidding is more efficient, and you can see some lower cost per result than with manually bidding, but you do tend to see more fluctuation in costs with this bidding strategy.
Ad bidding plays a large part in the Facebook Auction, which we cover later in this article. Keep reading to see how you can reduce your costs with the auction feature.
4. Ad Objective
There are currently 11 ad objectives that can be placed within three categories: Awareness, Consideration and Conversions. The more valuable your goal is, the more your ad will cost. Depending on what action you want your audience to perform will depend on how much you will spend. For example, if you want your audience to load a landing page, you will see a higher cost than if you wanted the audience to watch a video or engage with your ad. Any objective that leads your consumer to convert or make a purchase (higher revenue and value from the ad) will cost you a prettier penny.
Let’s dive into these three ad objective categories.
If you choose awareness as your objective, you are simply generating interest for your product or service. For example, if you are a store and are about to launch a new product or service, you may use the awareness objective to highlight your new products and bring awareness to your store. This will start planting seeds in your audience’s head and get them to begin thinking about your shop.
Whereas awareness plants the seeds, consideration gets the plant growing. This objective gets people thinking about your business and makes them want to know more. For example, if your store has compelling content that describes what makes them unique, users will want to learn more.
This is the objective that encourages users interested in your business to purchase your product or service. For example, if your store has a sale, you would want to drive more online purchases to the sale items. Conversion would be the best category as it is going to deliver to more people likely to make that purchase.
5. Ad Placement
Deciding where your ads are placed can also affect your advertising costs. With Facebook Ads, you can place ads throughout Facebook, Instagram, and Whatsapp. Outside of the typical in-feed placements, you may see these ads appear in Messenger, Marketplace, stories, Facebook’s right column, Instagram explore and even throughout articles and videos.
Costs vary with each placement; this depends on a few aspects but primarily comes down to ad space available, how engaged users are with the placement and how likely it is to drive results. Typically, we see that running ads on Instagram placements is more expensive than Facebook placements. Running an ad to the audience network will be significantly cheaper than running an ad on the Facebook feed.
6. Ad Quality & Relevance
The quality of your ads and how relevant they are to your audience can significantly affect your ad costs. High-quality and highly relevant ads perform best as Facebook prioritizes better experiences for users. Along with relevancy, many factors determine the quality of ads, including:
- Feedback from users – are they engaging with the ad, or are they scrolling past or even clicking “this isn’t relevant to me”?
- Quality of the ad – Are your headlines and copy engaging, do you have low quality images or videos being delivered?
- Conversions rate – are users actually taking the action you want them to take?
Not only do high-quality ranking ads perform better, but they also cost less. If you are unsure whether or not your ad is high or low-quality, along with the points above, here are some attributes that may signal to Facebook that you have low-quality ads:
- Engagement bait
- Withholding information
- Exaggerated or misleading headlines
Once your ads have been running and collecting data, you will be able to see your quality ranking at your ads level in Business Manager.
Seasons can significantly affect your ad costs. When you create your budget, you need to think of the lifetime budget you have. Ad costs typically increase by 100-200% in Q4, and you can see costs starting to creep up in Q3 as well. This is due to the large increase of advertising for Black Friday, Cyber Monday and Christmas. When you create your budgets, take a look at holidays or trends on the horizon to ensure you are spending your budget in the right place, specifically at the right time. If you don’t need to be running ads during Q4, consider saving your budget and running more ads during Q1 & Q2.
3 Ways to Lower Facebook Ad Costs
When it comes to Facebook ads, there are many different ways to reduce your costs. With multiple tips and tricks, here are three that may benefit you the most.
1. Choose the Best Ad Campaign Type
When you begin creating your ads, it’s important to consider your goals. If you know your goals, it’s easier to choose the correct ad objective—awareness, consideration, or conversion. Essentially, these three objectives are what you want your ad to accomplish, meaning getting users to click and go to your website or purchase a specific product, for example.
If you choose awareness as your objective, there are two objectives within it that must align with your ad goals:
- Brand awareness – Increases user awareness of your brand.
- Reach – Promotes your ad to as many people as possible .
If you choose consideration as your objective, there are six objectives within it that your company must be trying to achieve:
- Traffic – Sends people from Facebook to your website or the destination of your choosing.
- Engagement – Reaches more people that are likely to like, comment or share. This can also include offers from your page.
- App Installs – Directs people to a source where they can download your app.
- Video Views – Shares relevant videos with people who are most likely to view them.
- Lead Generation – Collects information from people that are interested in your project. This includes email addresses or phone numbers.
- Messages – Connects with users via messenger or direct message on Instagram or WhatsApp.
If you choose conversion as your objective, there are three objectives within it that need to match up with your ultimate ad goals:
- Conversions – Encourages people to take specific actions, including, downloading an app, purchasing items, filling out a form, etc.
- Catalogue Sales – Promotes products from your store’s online inventory.
- Store Traffic – Promotes physical traffic to your store.
As your business grows or innovates, your objectives will likely change or alter to target different actions.
2. Define Your Audience
The more niche or specific your target audience is, the less it will cost you! Although you may reach more people with a broad audience, you may find that you have lower click-through rates and conversion rates. Targeting your audience based on their specific demographics or relevant experiences can reduce your costs and provide you with successful ad campaigns. When creating an audience, you want to ensure you are finding the most relevant audience to your brand.
3. Create an Ad Funnel
Facebook ad funnel is a conversion strategy that can help convert Facebook users into loyal customers. The funnel works in a straightforward yet highly effective way.
- At the top of the funnel (TOFU), we are trying to reach our “cold audience”, this is where you can begin planting that seed in your audience’s brain. We are just looking to get the brand name out to the audience.
- Next, we have the middle of our funnel (MOFU); this is where we would look at remarketing to our “warm audience.” We want this audience to learn more about our brand and some of our offerings. At this step, we want to add some information that the audience may not know yet or some selling points (free shipping, sustainable and environmentally friendly, etc.) to grab their attention.
- Finally, we have the bottom of the funnel (BOFU). This is where we want our users to complete our desired goal; here, we are targeting our “hot” audience—users who are so close to converting or completing the goal but just need that extra little push.
Ad funnels can look different for every brand and their goals. When creating a brand funnel, you may not use a campaign objective from every category. But, it is more about introducing yourself to your audience and slowly providing them with more information until you feel they have had enough interactions with your brand to complete your desired goal. When we talk about desired goals for a campaign, it can look different for every brand and their overall marketing/business goals. For an e-commerce company, the desired BOFU goal is typically going to be a purchase conversion, whereas, for a new brand, their BOFU goal may be to gain more followers or build an email list.
Ad funnels can help reduce costs to your campaigns by ensuring that you’re reaching the right target market at every step of the funnel. This is where ad and audience relevance really come into play. Creating a funnel allows you to find and test your cold audiences using less costly objectives. For example, let’s send an ad to a cold audience using the catalogue sales objective (promoting products from our online shop). We are most likely going to see a way lower conversion rate and a higher cost per conversion than we would if we were targeting someone who has made it all the way through our funnel and has a few products in their shopping cart. Facebook is going to reward my business with lower costs for delivering my ad to people who are ready to make that purchase.
Facebook Ad Auction
Facebook Ad Auction is basically a hard-working, behind-the-scenes promoter.
Upon creating a Facebook ad, you begin competing with other similar advertisers in goals to win the battle and have your ad promoted. In order to see who will win the ad space, Facebook will rank ads chosen for your audience and find the most likely one to maximize value for both advertisers and people. These ads are ranked on three factors:
- Bid – the ad amount you bid.
- Estimated action rates – the likelihood of users completing your desired outcome (click-through rate, conversion rate, view rate, etc.).
- User Value – Ad quality and how relevant your ad is to the target audience .
Once your ad goes into auction, you will be the winner if it is ranked with the highest total value. Meaning, your ad will be shown to your target audience rather than your competitor’s ad. Although many different factors play into Facebook Ad Auction, it’s essential to focus on creating high-quality campaigns to ensure you aren’t spending more money than necessary.
iOS 14 Warning!
Since we’re on the topic of Facebook Ads, we have a precaution to share with you as well!
The iOS 14 updates can impact advertising costs on the Facebook platform. If you haven’t pivoted your strategy since the iOS 14 updates, you might see a significant increase in your costs and a decrease in your return on advertising spend (ROAS). It’s essential to update your strategy and implement conversions API to bring your ad costs back down (or even make them better than pre-iOS 14 levels).
Make the Most of Facebook Ads
Budgeting for your ads plays a critical role in determining how your ad will perform. Although you always want the lowest costs, spending the lowest amount of money may make your ad useless. On average, each cost per click costs $1.72, which means that your budget needs to reflect your industry while providing a competitive advantage. Note that this number is an average of all industries, and yours may vary. Budgeting more money for ads can provide you with more flexibility and higher impression rates.
Overall, Facebook ads are useful in gaining more visibility to your brand and boosting traffic to your website. Facebook is a great platform to start creating customizable and effective ads that allow you to gain strong marketing results.
At Konstruct, our PPC Specialists excel in Facebook Ads. If you’re struggling with creating accurate advertisements at a reasonable cost that land every time; contact us. We have helped dozens of businesses with their Facebook ads, and we are ready to help you as well. Let us help you succeed and stay on budget!