How Much Does Facebook Advertising Cost? The Complete Guide to Facebook Ads Pricing

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1 Bu er Social Advertising How Much Does Facebook Advertising Cost? The Complete Guide to Facebook Ads Pricing Share with Bu er 111 SHARES 2 COMMENTS Written by Alfred Lua Jan 10, 2017 Last updated: Jan 10, minutes to read

2 We previously shared what $5 per day will buy you on Facebook Bu Ads, er Social but how much does Facebook advertising really cost? That s a tricky question! And the short answer is, it ll never cost you more than you have to spend. If you have a budget of $5 per day, Facebook Ads will never cost you more than $5 a day. However, there are a number of factors that will a ect how far your budget will stretch and the success you ll see for your money. Maybe a better approach with Facebook Ads could be to think about how you can make your budget deliver the best results for your business. And that s precisely where I d love to help you today. In order to help you understand exactly how to optimize your Facebook Ads spend for the best results, I dug into several Facebook resources and studies to identify some Facebook advertising benchmarks and along the way, I also discovered seven key factors that determine the cost of Facebook Ads, which I m excited to share with you. In this post, we ll give you everything you need to know about the cost of Facebook Ads and how to make your budget work for you. Ready to read on? Let s go

3 Bu er Social Benchmarks: How much does Facebook advertising cost? You might be curious about the exact cost of an impression, a click, or a conversion through Facebook ads. However, as many factors in uence the cost of Facebook advertising, there isn t an absolute answer to this question. Thankfully, Facebook Marketing Partners like AdEspresso, SalesForce, and Nanigans regularly analyze social media advertising spend. While the benchmarks will not tell you precisely how much your Facebook ad campaign will cost, they might be great reference points for your consideration. The team at AdEspresso seem to have the most up-to-date benchmarks at the moment. They studied over 100 million dollars of ad spend in 2016 Q3 and came up with a set of benchmarks for the current cost of Facebook advertising. Here are a few of their ndings (the currency is in U.S. dollars): The average Cost Per Click (CPC) is about $0.35 globally and about $0.28 in the U.S. The average cost per like is $0.23 in the U.S.

4 The average cost per like is $0.23 in the U.S. Bu er Social And here s the data from AdEspresso s study: Cost per click (CPC) by country Cost per Like by country

5 Bu er Social Cost per app install by country

6 Bu er Social Editor s note: We chose to highlight AdEspresso s data here as it was the most up-to-date study we found (data from Q3 2016), feel free to check out and compare the full reports by AdEspresso, SalesForce, and Nanigans. How does Facebook decide whether to show your ads? (And why the biggest budget doesn t always win) Now that we ve established some benchmarks on how much Facebook advertising costs, it might be helpful to understand how Facebook ads system works in other words, how Facebook decides which ads to show each of its users.

7 According to Facebook: Bu er Social When showing ads, we try to balance two things: Creating value for advertisers by helping them reach and get results from people in their target audiences Providing positive, relevant experiences for people using Facebook, Instagram or Audience Network The best way for us to do this is to hold an auction in which both interests are represented. That way, advertisers are reaching people receptive to their ads and users are seeing something they re interested in. This is di erent than a traditional auction because the winner isn t the ad with the highest monetary bid, but the ad that creates the most overall value. So, whenever there is an ad space available, Facebook will batch together all of the ads vying for that speci c space and auction the spot, with the winner of the auction having their ad shown to the end user. Billions of these auctions take place everyday. How does the Facebook ads auction process work? Unlike a traditional auction, Facebook advertising space is not won with the highest monetary bid. This is because Facebook wants to provide a positive, and importantly, relevant experience for all of its users. As such, the winner of an auction is decided by the overall value created by the ad for the targeted user.

8 Facebook determines the potential value created by each ad by analyzing Bu er three Social factors: 1. Advertiser bid representing how interested you are in showing your ad. 2. Ad quality and relevance decided by how interested Facebook thinks a person will be in seeing your ad. 3. Estimated action rates calculated by how likely Facebook thinks a person will take the action you are optimizing for with your ad (for example visiting your website or downloading your app). Whenever there s ad real estate on Facebook up for auction, Facebook will combine the three factors into a total value and display the ad with the highest value. This means that you don t need to have the highest bid each time to have your ad shown if your ad is of higher quality and relevance than your competitors. After the auction is won, Facebook considers all the ads competing for that ad space and charges the winning ad the minimum amount that s required to win the auction (meaning you won t always be charged your maximum bid for ads on Facebook). 7 Factors that determine the cost of Facebook Ads 1. Your Bid: How interested you are in showing your ad When you create a Facebook Ad, you re basically joining a huge, global auction, competing with other advertisers for ad space on Facebook. Your bid amount represents how interested you are in showing your ad and the higher your bid, the more likely

9 your ad will be shown. When creating your Facebook, you can set Buyour er bid Social automatically or manually. Here s a quick breakdown of both options: Automatic bid: If you choose automatic, Facebook decides the bid amount for you. The bid is set so that Facebook would spend your entire ad budget with the goal of maximizing the result you want. If you are unsure how much to bid, Facebook recommends choosing this option. Manual bid: If you choose manual bid, you tell Facebook the maximum amount you d be willing to spend to achieve the result you want (e.g. $5 for a click). When you think about how much to bid, it s worth keeping in mind these couple of tips from AdEspresso: If you try to bid too low, your campaign may not get the exposure it deserves, and you won t reach your goals. Remember, you always get what you pay for. Don t worry about bidding a high amount. You ll still end up paying the lowest amount possible in the auction to get your ads delivered. 2. Ad Quality and Relevance: How interested a person will be in seeing your ad Facebook estimates the quality and relevance of your ad based on how it s performing. Facebook considers both positive (e.g. number of clicks, video views, or app installs)

10 and negative feedback (e.g. number of people who clicked I don t Buwant er Social to see this on your ad) to decide the quality and relevance of every advert. To help you understand how relevant your ad is to your target audience, Facebook provides a Relevance Score metric for each of your ads. When your ad s relevance score is high, Facebook will show your ad more than ads with lower relevance scores, and you will also pay less to reach more of your target audience. You can nd your ad s relevance score and level of positive and negative feedback in your Facebook Ads Manager. 3. Estimated Action Rates: How likely a person will act on your ad When deciding whether to show your ad to a person in your target audience, Facebook estimates how likely the person will take the action you are optimizing for with your ad (this is called Estimated Action Rate). For example, if you re running an ad for your marketing tool (like Bu er) that s optimized for website conversions, Facebook would show your ad to people it deems likely to sign up for a product like yours. Facebook determines this based on the previous actions of the person in your target audience ( how many times has she signed up for a product through a Facebook ad? ) and your ad s previous

11 performance ( how many website conversions has your ad received Buso er far? ). Social If your Estimated Action Rate is low, my hunch is that the cost of your Facebook ads will be high. To make sure your ad wins some ad auctions and is shown to your target audience, Facebook might have to compensate your ad s low Estimated Action Rate by increasing your bid (if you have chosen automatic bid). According to Facebook, To help us make our estimations as accurate as possible, we recommend setting your budget and bid high enough to get at least a few of the results you want per day (especially for results that take place o -site like website conversions and mobile app events). 4. Your Audience Targeting: Who and how many people you are trying to reach Who you target and how many people you target will in uence your Facebook advertising cost. This is due to the level of competition to reach a particular audience. When more marketers are targeting a speci c audience, it becomes more expensive to reach them. To test this out, I ran a quick experiment by creating two ad sets that are identical except for the audience location I set one for Chiang Mai, Thailand and the other for San Francisco, U.S. The suggested bid when I chose manual bid was $0.29 per click for Chiang Mai and $4.18 per click for San Francisco,

12 meaning it s more than 14 times more expensive to target an audience Bu er in Social San Francisco than Chiang Mai: Apart from location, the following audience details may also a ect the cost of your ads: Age

13 Gender Bu er Social Languages More speci c demographics, interests, or behaviors Connections (with your Facebook Page, app, or event) I d recommend experimenting with various audiences in order to nd one that works best for your Facebook Ads campaigns. 5. Time of The Year: How many people are buying Facebook ads When the number of advertisers targeting an audience increases, so does the cost of ads, as Ana Gotter explained on AdEspresso, There are peak times in the year when advertisers are ocking to Facebook Ads in droves even more than normal. During these peak times, there will be more competition for ads, and you ll pay more as a result. SocialCode also studied the CPM of Facebook ads during the holiday season in 2014 and found that costs increased across di erent bid types and ad placements.

14 Bu er Social Facebook Marketing Partners, Ambush and Salesforce both found similar trends while studying data from di erent years (2013, 2014, and 2015). If you are thinking of advertising on Facebook during the holiday season, here are the key events to look out for: Thanksgiving Day Black Friday Cyber Monday Christmas Post-Holiday Sales New Year s Eve New Year s Day

15 If you re planning campaigns around these, or other big events, Buit s er important Social to think about how the amount of competition may a ect the cost of your ads. 6. Placement: Where your ads appear Placement describes where your ads are shown within Facebook s ecosystem. The various locations in which you can display ads include: Facebook s desktop News Feed Facebook s desktop right column Facebook s mobile News Feed Instagram s mobile News Feed Audience Network Messenger In advising how to maximize Facebook ads results, Facebook recommends that marketers allow Facebook to place their ads on Instagram and Audience Network as well

16 Facebook. Doing so, Facebook says, can reduce the average cost per Buresult er Social of your ad: Reach more people through Instagram and Audience Network Allowing us to show your ad on Instagram and the Audience Network as well as Facebook gives you more opportunities to reach the people you care about across devices. It can also reduce your average cost per result. At the ad level of ad creation, make sure you ve opted into both additional placements and that your ad s creative complies with the Instagram and Audience Network requirements. While this sounds great, it might be worth considering if your target audience active on Instagram or if advertising is aligned with your Instagram strategy. 7. Optimization of Ad Delivery: What your ad is optimized for When creating your ad, if you click on Show Advanced Options under Budget & Schedule, you will nd an option called Optimization for Ad Delivery. Your choice for optimization here can in uence who Facebook shows your ads to. For example, if you choose to optimize for clicks, Facebook will show your ad to people who are most likely to click the ad.

17 Bu er Social This can a ect the cost of your ad because actions taken on your ad will a ect your ad s relevance score and estimated action rate (see point two and three above). If your ad is not optimized for the result you want, Facebook might not show your ad to people who are most likely to act positively on your ad and you might even end up paying more for the results. AdEspresso did an experiment with the di erent optimization options and found that the choice of optimization can a ect the cost of result you are optimizing for. For example, if you want to optimize for clicks, you are usually better o choosing Link Clicks.

18 Bu er Social Why you should consider ROI, not only cost Instead of focusing purely on the cost of Facebook advertising, it might also be great to look at your return on investment as a key metric. ROI = (Return Investment) / Investment When it comes to Facebook Ads, there are two types of ROI to consider nancial ROI and social ROI: 1. Financial ROI This form of ROI weighs your investment in Facebook ads against business results such as revenue. If you are able to measure how much your customers tend to spend, you can determine if each conversion was worth the money spent. For example, paying $10 for a conversion might sound expensive. But if you know that a customer who was converted from a Facebook ad usually spends $50, the $10 is probably worthwhile as you get a ve times the return. Looking at ROI is also helpful when deciding whether you should advertise during price hikes. For instance, cost of Facebook advertising is usually higher during the holiday season. If your sales tend to increase (preferably more than the increase in cost) during this period, it might still be worth investing in Facebook ads. If your sales tend to slow down instead, it might be better to explore other options during this period.

19 2. Social ROI Bu er Social Another great type of ROI to consider is social ROI. On top of the revenue you might earn through Facebook ads, you might also generate some interactions on your ads. Social ROI considers the amount of social engagement (likes, comments, and shares) you get from your Facebook ads relative to your investment. It d be great to decide how much social engagement is worth to your brand. Here s a simpli ed way of calculating your social ROI: if you paid $50 to promote your Facebook post and it received 80 likes, 15 comments, and ve shares (100 interactions in total), each interaction costs you $0.50. Is that reasonable for you? P.S. If you re interested in reading more about social ROI, here s a more detailed guide on social media ROI. Additional resources The Complete Resource to Understanding Facebook Ads Cost 2016 Q3 Results! on AdExpresso by Ana Gotter (Ana shared 6 tips to reduce your Facebook advertising cost in thi post.) Facebook ads split testing 101 on AdEspresso by Massimo Chieruzzi Guide: Everything you need to know about getting conversions by Facebook Avoid under-delivery of your ads by Facebook Wow, so that was quite a long article on the cost of Facebook Ads. Thank you for staying with me throughout