How much?do Facebook ads cost and how much budget should you allocate to Facebook ads??
In this article, we break down cost benchmarks, how to set your Facebook budget,?and?how the Facebook auction works. We also?delve into?other factors that influence the cost of?Facebook?ads, so you can plan accordingly.?
The Short Answer: Facebook Ad Cost Benchmarks?
Facebook?ad costs?differ greatly across industries?and?are influenced?by the?chosen?objective you optimize your campaign towards.?
Here are high-level?Facebook?ad?cost?benchmarks to give you a ballpark range?by objective:?
- When optimizing?for?traffic, expect to pay?between?$0.90?- $1.75?per click.?
- When optimizing?for?video views,?expect to pay?between?$0.02- $0.06?per?6 to?15 sec?video view.?
- When optimizing?for?engagement, expect to pay between $0.10?- $0.50 per?engagement.?
- When optimizing for?reach, expect to see a Cost Per Thousand Reached (CPM)?between $3 - $8.?
- When optimizing for?conversions, your CPA will vary.?
What Should Your Budget Be for?Facebook Ads???
When boosting posts, Facebook recommends a minimum daily budget of $10/day.?
When running ads, Facebook recommends setting your ad set budget to 50x your?optimization?goal. For example:?
- An advertiser is?optimizing their?campaign towards?Add?to?Carts.?
- On average, it costs?$1?for?a?customer?to?add an item to cart on?the?website.?
- There are?two ads sets?within the campaign?(one for lookalike audiences and one for general audiences).?
- The?campaign?budget should be set to?at least?$100/day?or $50/ad set.?This ensures that the system is collecting enough data to optimize towards?the?desired goal?across the ad sets.?
So how do you determine if you should spend?more or less on?Facebook?ads??Ultimately, your Facebook budget should be determined by?measuring?Cost Per Acquisition (CPA)?and?Return on Ad Spend?(ROAS).?A healthy?Return on?Ad Spend?is 4?to?1 on Facebook – meaning you will make $4?revenue?off?every $1 spent on your ads?(400%).??
Assigning a target Cost Per Acquisition for each conversion can be useful. An online university?may be willing to pay?$20?for every phone call, and $200 for every online application, because online applications are?10x more valuable to the business.?You can scale ?your budgets?as long as?you continue to stay profitable.?
How Does the Facebook Auction Work??
Facebook uses an auction to determine the best ad to show at any given time. Advertisers competing for the same target audience will show within the same auction. For example, if one advertiser targets hikers in Canada and another advertiser targets females interested in Hiking Equipment?in Toronto, they will qualify for the same auction.?
To determine the winner of the auction, Facebook measures bid, estimated action rates and ad quality for all eligible ads:?
Bid:?How much an advertiser is willing to pay for their desired outcome, which may be a click, an engagement,?a video view,?a form fill,?a purchase,?etc.?You can set a bid cap to limit how much you pay?for your desired action.?
Estimated Action Rates:?How likely your ad will drive the desired outcome. Facebook estimates the expected number of actions you will get on your ad.??
Ad Quality:?How relevant and useful your ads and landing page are to your target audience. Facebook will assign a quality ranking from 1-10 for each ad you run.?
The ad with the highest total value (the best combination of these three factors) will win the auction.?
What Other Factors Influence the Cost of Ads??
There are?a number of?other?variables which influence how much Facebook ads cost:?
1. Audience Targeting – How Narrow Is Your Audience??
The Facebook algorithm performs best when you combine many lists or interests into the same ad group.?This is a new approach – in previous years, many advertisers broke out dozens of?ad?sets to collect data about?individual?audiences.??
As a general rule:?
- Targeting multiple relevant?medium/high volume?interests into one ad set is better than targeting just one?small,?niche interest.?
- Targeting multiple high value custom audiences into one ad set?is?better than targeting just one.?
- Double layering (i.e.?layering?interests on top of a?lookalike audience) will drive up your Cost Per Clicks. Avoid?layering?audiences on top of each other?unless this is?necessary.?
- For?Remarketing audiences,?expect a higher?Cost Per Click (CPC),?as?this forces?your budget to be spent?on?a smaller?pool of people. However, your Remarketing?campaign?may?convert at a lower Cost Per Acquisition?(and perform better overall)?as?it is?targeting audiences?lower in the?funnel.?
You can checkmark?“Detailed Targeting Expansion”?in your ad set?to let Facebook reach people beyond your selected targeting?only when it will?drive performance.?
2. Seasonality & Time of?Day – How Busy Is the Auction??
CPCs tend to rise during key times of the year, including Valentine’s Day, Mother’s Day, Black Friday, Cyber?Monday?and the Holiday Season.?During high volume weeks, expect to pay more for your ads, as the auction is inundated with many advertisers.?
3. Competition – Who Else is Bidding on?Your Target Audience??
CPCs will rise when competitors are bidding on the same audiences as you.?Determining factors include age, gender, language, interests, and connections.??
Targeting younger age demos (age?14-18)?may?be more expensive than targeting older age demos, as this is a highly?sought-after?audience.?When setting your demographics, start by setting a wide range?(targeting?both genders, a large age range, etc.)?as the system will naturally optimize towards your chosen objective.?Later, you can zero in on the demographics that convert best.?
4. Placement – Where Are Your Ads Showing??
Is your business only showing ads on Instagram Stories? This will drive up your?cost, as you are forcing the budget to spend?on just one placement.?Facebook recommends setting your?placements to?“Automatic?Placements”,?as this allows the?system?to?spend optimally across Facebook, Instagram, the Audience Network, and Messenger.?
Now that you know how much Facebook ads cost, get in touch to learn more about how to use Facebook ads as part of your marketing strategy.