Table of Contents
- Introduction
- Why Is Facebook Advertising Worth Its Cost?
- Facebook Advertising Cost (By Benchmark)
- Understanding The Facebook Ads Auction System
- Factors That Influence Facebook Ads Cost
- Keeping Ad Costs Low And ROI High
- To Wrap Up – It’s Important To Start
Introduction
In most cases, the cost of advertising on Facebook is just as much as an advertiser can afford.
Meaning, if you can only afford to spend $5 a day on advertising on Facebook, the undertaking will not cost you more than $150 a month. This isn’t made-up information, it comes straight from Facebook’s landing page dedicated to the subject.
Be that as it may, it doesn’t really provide us insight into the real cost of Facebook advertising.
That’s because “how much does Facebook advertising cost?” is a complex question. Like the answers to most other complex questions, the true answer is “it depends”. It depends on a variety of factors like:
- Cost metric being tracked
- Campaign objectives
- Targeting settings
- Seasonality
- Quality of ad
- Placement
…and a few other factors.
These factors don’t really influence the actual cost of Facebook advertising. Instead, they dictate how far every dollar you spend on Facebook advertising will take you. They also dictate how much should be the ‘ideal’ budget for advertising your business and achieving your objectives surrounding advertising.
All this talk about advertising on Facebook gives rise to another question.
Why even bother?
Clearly, Facebook advertising is a complex undertaking. It requires advertisers to get used to a completely new (but awesome) advertising platform. Facebook’s updates also introduce dramatic changes in the ability to effectively target the right group of people. The pricing is a mystery.
So, why, despite all this, is Facebook advertising worth your time?
Before we get into the details of the true cost of Facebook advertising, let’s look at why paying that cost makes sense from a business perspective.
Why Is Facebook Advertising Worth Its Cost?
There are many reasons why well over 7 million people and businesses choose Facebook to advertise their products and services. Some of the most prominent ones are:
Facebook Is (Still) The Biggest Social Media Platform
Facebook boasts a user base of over 2.8 billion active users. That’s an enormous number. In fact, among social media platforms, Facebook currently caters to the biggest audience. To put things into perspective, Instagram, another incredibly popular social media platform, has only 1.3 billion users.
While that is still a huge user base, it’s less than half the size of Facebook’s user base. And the amazing thing is, Facebook advertisers get access to the audiences of both Facebook and Instagram.
One of the arguments that proponents of other social media platforms and advertising platforms give is that young audiences don’t prefer using Facebook anymore. However, the reality is that Facebook’s audience is pretty well distributed between age groups. Data published by Pew Research presents these facts:
- 86% of people aged between 18 and 29 use Facebook regularly.
- 77% of people aged between 30 and 49 use Facebook regularly.
- 51% of people aged between 50 and 65 use Facebook regularly.
- 34% of people aged 65+ use Facebook regularly.
Meaning, regardless of the nature of business and the product or service being offered, there is a handsome chance that the target audience is available for targeting through Facebook’s advertising platform.
Budget Flexibility
As mentioned earlier, the actual cost of Facebook advertising is almost never more than their budget. Facebook allows advertisers to manage their budget in two different and convenient ways. Daily Budgets allows advertisers to dictate how much money will be spent on a particular campaign on a daily basis. On the other hand, Lifetime Budget settings allows advertisers to dictate the budgets of entire campaigns with a start and an end date.
Targeting Flexibility
Facebook allows advertisers to precisely target the group of people that are most likely to purchase the product or service being advertised. From allowing advertisers to target specific age groups to allowing them to show their ads to users in specific geographic areas, Facebook’s ad targeting capabilities are absolutely cutting edge.
These incredible targeting capabilities don’t just allow advertisers to secure more sales, it also makes the entire undertaking of Facebook advertising more affordable.
Bottom line, the Facebook advertising platform is impactful and affordable. For smart advertisers, that’s a combination for success. Now that we’ve understood the advantages of Facebook as an advertising platform, let’s get down to the meat of this article: the cost of advertising on Facebook.
Facebook Advertising Cost (By Benchmark)
While there is no fixed number that can be used to describe the cost of advertising on Facebook, there are benchmarks that can help answer the question. Let’s look at each of the benchmarks, and the numbers associated with them.
Facebook Advertising Cost In Terms Of Cost Per Click (CPC)
According to Adespresso, advertisers have to spend an average of $0.97 for a click on a Facebook ad. This cost is an average across industries and ad campaign objectives available on Facebook. In other words, this number may vary dramatically when the CPC of ads for specific industries is viewed and when different objectives are considered.
A good example of this can be observed when looking at the average CPC of high competition industries like insurance and finance. For some of such industries, the average CPC is as high as $3.77.
Similarly, the average CPC varies dramatically for different campaign objectives. The range of this variation is between $0.25 to $3.30, with objectives like Traffic and Catalogue Sales sitting at the lower end of the spectrum and Brand Awareness at the top.
Facebook Advertising Cost In Terms Of Cost Per Thousand Impressions (CPM)
The average cost of showing a Facebook ad to a thousand users is $11.54. However, it pays to remember that this number will vary dramatically for many industries that are highly competitive. In fact, just the CPC, the CPM also varies for different campaign objectives. For different campaign objectives, the average CPM ranges between $2 and $30.97.
Facebook Advertising Cost In Terms Of Cost Per Engagement (CPE)
As the name suggests, advertisers that opt for CPE pricing only pay Facebook when someone engages with the ad. This engagement can be in the form of a click, or a like, or a comment, or even a share. From the CPE perspective, Facebook ads are supremely affordable, with average CPE, across industries, at just $0.11.
So now we know the true cost of Facebook advertising.
If you still can’t shake that nagging, confusing feeling, you aren’t alone. While CPC, CPM, and CPE are truly insightful metrics, unless you are a seasoned advertiser on Facebook, these numbers may still lack the kind of insight you may be looking for.
Not to forget, besides the variation in CPC, CPM, and CPE for different industries and campaign objectives, there are a number of other factors that influence the cost of Facebook advertising.
In the upcoming sections, we will learn more about how Facebook advertising works and what other factors influence the actual cost that a business pays to advertise their products or services on Facebook.
Let’s begin by understanding the basics of how Facebook ads work.
Understanding The Facebook Ads Auction System
Getting an understanding of how Facebook ads system works will help you better understand the cost aspect of the entire undertaking.
On Facebook, one cannot simply create an ad, choose a placement, throw money at the platform and start running or showing their ads to the intended audience.
This is because as mentioned earlier, there are over 7 million advertisers on Facebook. In order to continue enjoying the interest of these advertisers, Facebook as a platform must create an engaging and delightful experience for their users. Only then, can Facebook retain it’s user base and only when the user base is retained, can advertisers target these users with their ads.
For this entire thing to work, Facebook must walk a thin line. On one hand, Facebook must show ads to keep their revenues growing and on the other, the platform cannot bombard users with too many ads as that may lead to frustration among users and ultimately, a lower user count.
To solve this problem, the Facebook ads auction system exists. This means, every advertiser must place a bid on their desired ad placement to be able to show their ads. THe advertiser with with highest bid usually gets to show their ads to the users.
With that said, there are two things about the Facebook ad auction system that advertisers must understand:
The Competition
One of the reasons Facebook is able to cater to so many different advertisers is because not all of them are targeting the same audience. Meaning, only a fraction of the 7 million advertisers are targeting the exact same audience and bidding for the exact same ad placements.
However, business owners must understand that they are not just competing for ad space with their real world competitors. The reality is that most business owners are competing with a variety of different businesses for ad space.
Why is it so? Let’s understand with a simple example. Let’s say you are selling a pregnancy pillow in California. Naturally, you will be targeting pregnant women in California. However, for ad placements that will be shown to relevant accounts, you are not just competing with other businesses selling pregnancy pillows. You will be competing for the same ad real estate with other businesses like those offering pregnancy medical consultation, those offering pregnancy care, and even businesses that are selling other products that are relevant to pregnant women.
The Cost
The next thing advertisers must understand is how the cost of ads is decided. As mentioned in the above section, Facebook uses a bidding system to decide which users get to see ads from which advertisers.
However, there is a (positive) catch involved. Let’s say you have placed a bid of $5 for a click. Now, let’s assume that the next closest bid is $1.20. In this case, you will not only win the bid, but will also only need to pay $1.21 for a click, instead of $5.
With that said, it pays to remember that Facebook bid costs can fluctuate dramatically within a matter of days. There may be cases when at the start of the week, you may be paying $1.21 for a click and by the end of the week, that cost has gone up beyond the $3 mark. This means, brands using Facebook ads must monitor their budget closely at all times.
Speaking of controlling the budget, knowledge of the factors that influence the actual CPC/CPM/CPE you get for your Facebook ad campaigns is worth its weight in gold.
Factors That Influence Facebook Ads Cost
In this section, we will learn how different choices you make when setting up your ad campaigns can influence the cost of Facebook ads. This knowledge, when applied correctly, will not just help you ensure control over the cost of Facebook ads, it will also enable you to design campaigns that deliver a higher ROI.
Seasonality
It has been long established that the cost per click for Facebook ads, across industries and campaign objectives, is higher in the last parts of the third and fourth quarters of the year. This is because of the festive season and the increased ecommerce activity during that time.
Ecommerce businesses should expect to increase their ad spend during these times, and around major “sale days” like the Black Friday. At the same time, businesses that don’t fall into the eCommerce category should switch to manual bidding control and perhaps limit their advertising to make the most of their advertising dollars.
Campaign Objective
Facebook allows advertisers to select from a range of objectives at the time of setting up a campaign. These campaign objectives directly tie into a three step conversion funnel.
Those who aren’t familiar with the standard three-step conversion funnel, it consists of awareness, consideration/nurturing, and conversion/purchase stages.
In the awareness stage, the objective is to make the right prospects aware about the brand or the product being advertised. Objectives like website traffic, video views, and engagement are relevant at this stage. Since most of the user actions that these campaign objectives are optimized for rarely result in a conversion or sale, when you choose these campaign objectives, the costs are lower.
Next up is the nurturing stage where the objective is to build trust and familiarity with the prospect. The other objective is to establish why the product/service being advertised is perfect for them. Retargeting ads with custom conversion objectives work the best at this stage. This is also the stage where a lot of prospects convert to customers. That’s why the cost of advertising for these objectives is usually higher.
The case of the purchase stage is also similar. Here, the marketing objective is to finally convince a warm prospect to convert and purchase the product or service being advertised. That’s why, chasing these objectives is usually more expensive than optimizing for top-of-the-funnel objectives.
For the most efficient use of advertising budget, it is recommended that brands employ a full funnel strategy. Meaning, creating a campaign that allows you to simultaneously target all the stages of the conversion funnel.
Audience Targeting
The ability to laser target specific audiences is perhaps the most attractive feature of Facebook advertising. However, this feature comes with a price tag. Meaning, if you want to target a highly-specific niche, you must be prepared to pay a high cost per click.
In other words, the broader your targeting is and the larger your target audience is, the more affordable each click will be.
If you think about it, the audience size actually ties in to the campaign objectives you are trying to achieve. If, for instance, you are optimizing your campaign for more traffic, you may want to target a more generalized audience that broadly fits your buyer persona.
On the other hand, the audience size will be much smaller and the attributes will be more specific for a campaign being optimized for a custom conversion event. In many cases, retargeting audiences and lookalike audiences are used for conversion campaigns.
Retargeting audience is made up of people that have already visited your website or interacted with your ads. Since it is a very specific set of people, the cost per click is usually higher.
Lookalike audiences are audience sets of people that are similar to people that have either purchased from you, or visited your website, or interacted with your ads. Once again, this is a relatively small set of individuals and thus, the cost of you per click is higher.
Daily Budget
As mentioned earlier, Facebook allows you to choose between a daily budget or a lifetime budget. Out of the two, daily budgets are a more popular choice, perhaps because optimizing a daily budget allows for more flexibility.
Having a low daily budget can actually ramp up the overall cost of advertising.
This is because when you start running a campaign, the Facebook algorithm needs time to ‘learn’ how Facebook users are interacting with your ads. During this time, the cost per click will be relatively higher than later stages. As the algorithm learns, it will be able to better optimize the ads for the intended audiences and ultimately achieve a higher click through rate (CTR). As your ads achieve a higher CTR, the algorithm will reward you with a lower cost per click.
With a low daily budget, this process will take a longer time to complete. As a result, the advertiser may end up paying an unusually higher cost per click for a longer duration of time. This is why most advertisers tend to have higher budgets during the initial days of launching a campaign.
Click-Through Rate (CTR)
It is also worth noting that when you get a low CTR, it is a sign that there is a disconnect between your target audience and your messaging. Unless you fix this issue and optimize your ad campaigns to achieve a higher CTR, you will have to pay a higher-than-usually cost per click.
The average CTR across industries is around 2%. However, many advertisers are able to achieve double digit conversions. So, it pays to be ambitious with your goals when dealing with Facebook ads.
Relevance Score
A higher relevance score means your ad is more likely to achieve a higher CTR. A higher CTR will mean a lower cost per click. A higher CTR also usually correlates with more sales and thus, a better ROI.
Ad Placement
Certain ad placements get more preference from advertisers than others. For instance, a news feed placement enjoys healthy competition. When more people are competing for the space, the bidding costs will be higher.
On the other hand, placements in Facebook’s audience networks are desired by a smaller group of advertisers, resulting in less competition. As a result, the average bid will usually be lower.
By now, you should have a fair understanding of why the answer to “what’s the cost of Facebook ads?” is difficult to answer. With so many variables at play, it is difficult to generalise the cost of advertising on Facebook.
However, that doesn’t mean you cannot control how much you spend or what kind of ROI you get out of your advertising investment.
Keeping Ad Costs Low And ROI High
Knowing the variables that influence ad costs also reveals another interesting fact about Facebook advertising.
Facebook is a social media platform first and then, an advertising platform. The social media side of things is why advertisers flock to Facebook and spend millions of dollars. Understanding this is important because it means that it is in Facebook’s best interest to continue delivering a delightful experience to their social media users.
Generally, delightful experiences and advertisements don’t mix well. However, not showing ads at all is not an option for Facebook. That’s where relevance of the ads becomes important. If Facebook is going to show ads and mess with its delightful user experience, the best way to minimize damage is to keep the ads relevant.
This means, it is also in Facebook’s best interest to reward the advertisers that understand this fact. Meaning, if you get the relationship between your messaging and targeting right, you will be rewarded by Facebook with lower cost per click.
When advertising is powered by awesome content, it feels less like advertising and instead of disrupting a delightful social media experience, it enhances it.
The amazing thing is, when you get the messaging and targeting right, you will be anyway showing your advertising to an audience that is most likely to purchase your product or service. This will improve the number of clicks that convert into sales and ultimately, result in more revenue and better ROI from Facebook ads.
So, to sum up, the best way to lower the cost of your Facebook ads campaigns and improve the ROI at the same time is to help Facebook create a great user experience with your ads.
There are a number of ways you can do that:
Employ A Funnel-Led Approach
Countless aspiring brands boost their Facebook and Instagram posts randomly and lose money and never return to trying Facebook ads. A lack of strategy will yield a lack of returns.
The buyer’s journey or the conversion funnel is backed by scientific research. The advent of the Internet has changed the way we shop. At the same time, the Internet’s ability to collect user data and human beings’ ability to analyze that data has helped us understand the modern buyer’s journey to purchase.
Even Facebook’s algorithms respond exceedingly well to a funnel-based strategy. When you start with brand awareness related objectives, you give Facebook’s algorithms to understand how your selected audience is reacting to your ads and the messaging within them.
By the time you transition to or add conversion led campaigns and direct budgets towards these campaigns, Facebook has had time to ‘learn’ about your audience. This allows the algorithm to optimize your ads better, resulting in a higher CTR.
This strategy also allows you, as an advertiser, to learn more about your audience and employ more accurate targeting settings and craft better messaging.
With that said, sometimes, some brands, especially in the eCommerce market, may be able to achieve great results without employing the funnel-based approach and directly advertising with a conversion objective.
This is usually true for brands selling low cost products that may be bought on impulse. There are many examples of brands reporting amazing sales numbers with single touch customers.
However, if you are selling a service or product that solves a problem or adds value in any manner, there is a good chance that the funnel-based approach to Facebook advertising is best for you.
Don’t Get Lost With The Controls
The Facebook advertising platform is hands down one of the most cutting-edge ad platforms ever created. It offers advertisers an unmatched amount of control and an incredible set of features.
While most of the features offered by the platform are useful, it is important for advertisers to not let the abundance of choice divert their focus from what’s important.
For instance, a lot of advertisers end up paying a higher cost per click because of their bias towards certain ad placements. What they fail to realize is that regardless of where the ad appears, the audience is more or less the same. This means that these advertisers are paying a higher cost for showing the same ad to the same people, just in a different place.
Now, this doesn’t mean that placement doesn’t matter. However, it may be better to let Facebook decide the best placement for your advertisements. When you choose automatic placements, it gives Facebook all the freedom it needs to figure out the best placement for your combination of ad messaging and audience targeting. In other words, you get the best placements for your ads based on actual user data.
As time passes, you will have enough data to make informed decisions, free of bias, about the placements of your ads.
Never Stop Testing
There is no perfect advertising campaign. Not on Facebook, and not on any other platform. There is always scope for improvement. Advertisers that understand and accept these facts are the ones that succeed with digital advertising.
This is because digital advertising platforms, and especially Facebook, gives advertisers the data and the tools they need to consistently improve the ROI of their campaigns. With enough analysis and creativity, advertisers can consistently drive down the cost they pay per click and improve their conversion rates.
The best way to optimize your ads is with A/B testing. In simple terms, A/B testing is the practice of testing two different ads, usually with one different variable. Once a ‘winner’ is identified, which is usually the ad set that delivers better conversions, it is tested against another ad set, with a different variation. This process is repeated indefinitely, as there are virtually countless variations that one can test.
In other words, Facebook advertising is not a ‘set it and forget it’ kind of undertaking. To make the most of every advertising dollar, to maximise the ROI, advertisers must commit to consistent optimization. This optimization may include making changes to the audience attributes being targeted. However, it should not be limited to targeting settings. It is strongly recommended that brands and advertisers also consistently experiment with different ad media and messages.
Find The Right Balance
Many experienced advertisers that are just starting out with Facebook ads have a decent grasp over who they want to target and what kind of messaging works for their audience. While this experience is surely advantageous, advertisers must be careful to maintain a balance.
Initially, it is recommended that advertisers let the Facebook algorithm enjoy some freedom by selecting automatic settings for some aspects of audience targeting, and for placements. It is also a good idea to test automated bidding and budget settings.
By doing this, you will allow the Facebook algorithm to conduct truly unbiased tests and figure out which audiences are responding positively to your ads. This doesn’t just allow the Facebook algorithm to adapt quickly and efficiently, it also gives you access to unadulterated data about how your intended audiences are interacting with your marketing messages.
Using this data in conjunction with the knowledge you already have can give you the edge you need to beat the competition and achieve those double digit conversion numbers.
So, how liberal can you be with your audience targeting settings? In all honesty, there is no correct answer to that question.
However, striving for an audience size between 2 million and 40 million is a good starting point for most industries and niches. As you continue testing and unlocking more insights about your audience, you should become more accurate with your bets on who you should be targeting with specific ads.
Don’t Overlook Audience Overlap
If you want to target multiple buyer personas, there is a good chance that many of the attributes of different buyer personas are overlapping. In other words, many times, a single individual may fall into multiple target audience categories. This can create a serious problem in the case of Facebook ads.
Why is this a problem particularly on Facebook? Because with the staggering number of targeting options offered by the platform, targeting setups may result in the same users being targeted by multiple ads.
And why is targeting the same users with multiple ads an issue?
First of all, it leads to a wastage of your ad budget. Think about it, when you choose your targeting options and set your budget, do you intend to show the same users ads meant for different stages of the buyer’s journey/conversion funnel? If not, showing them multiple ads simply means you are paying for views and clicks that may not deliver the intended results.
Besides the obvious cost-related issues, overlapping audiences create a couple of other issues as well:
Compromised Authenticity Of Data
Let’s say a user sees multiple ads and at one point, converts into a customer. At this point, the Facebook algorithm will report them as a part of the audience that was most recently targeted by that ad before the conversion happened. But how can you be sure that the ad that they saw last was indeed the one that pushed them to make a purchase?
Without overlap, you can trust that the numbers and information you are seeing tell the true story of what transpired before a user decided to purchase from you.
Potential To Irritate The User
As mentioned earlier, ads and delightful experiences don’t mix. However, over years of being bombarded with unsolicited ads, users have grown somewhat accustomed to seeing a limited number when they are using social media platforms. Now, think from the perspective of a social media user, if you see 10 ads in a period of time, and all 10 are from the same brand, how would you feel?
While some schools of marketing psychology may suggest that such an interaction will lead to a better brand recall value and more interest, there is also an equal chance that the repeated interruptions by the same brand may lead to the development of negative feelings toward the brand.
Fortunately, even Facebook realises that there are serious issues associated with audience overlap. To help advertisers avoid targeting overlapping audiences, Facebook has empowered them with a tool to check overlap in their audiences. You can learn more about this tool here.
To Wrap Up – It’s Important To Start
Before I wrap this article up, here’s a summary of what was covered:
The average cost per click for Facebook ads, across industries $0.97. However, depending on the targeting settings, the placement choice, the budget choices, the chosen campaign objectives and the industry, this cost may vary dramatically. Employing a funnel-based strategy and consciously using the tools offered by the Facebook advertising platform to your advantage can help you keep your CTR high and your CPC low.
With that said, at the end, I would like to come back to one piece of advice shared earlier in this guide- about having a high daily budget initially.
While there is no denying that spending more up front on a Facebook ad campaign is certainly advantageous in the long run, it doesn’t, in any way, mean that businesses that can’t afford to shell out hundreds or thousands of dollars on Facebook ads should not use them.
Considering the average cost per click of $0.97, by spending just $30 in a month (a dollar everyday), you can drive almost 31 targeted users to your website. That’s 30+ more users than your current traffic numbers. If you are able to secure some conversions, you can see that as a sign to amp up your advertising budget for Facebook. Letting yourself get discouraged by thinking that you cannot afford Facebook ads at all is simply missing a great opportunity.
One of the most lucrative advantages of Facebook ads is that any business or individual can use them to drive traffic to their website (or anywhere else) without needing to spend large amounts of money. So my final advice to you is to use this fact to your advantage and get started with Facebook ads.
I hope that this guide will provide you with all the clarity and some of the motivation to get started with Facebook ads. If you want to start generating a positive and handsome ROI from your Facebook ads budget right off the bat, the experts at Digital Web Solutions will be more than happy to help.
If you have more questions about the true cost of Facebook ads, get in touch with us or drop your queries in the comment section below.
