Facebook doesn’t charge flat advertising rates. Instead, advertisers bid to compete for space in target audiences’ feeds. There’s no minimum monthly spend, but the trick is to bid high enough to make ad buys worthwhile. Start by setting a daily budget (you can run campaigns continuously or specify start and end dates), then bid against other advertisers or allow Facebook to optimize your bid for you.
After 500 impressions, ads are given a Relevance Score based on bid size, ad quality, relevance to the intended audience, and the likelihood of conversion. As an ad’s relevance score climbs due to user responses, the cost to advertise goes down. Advertisers whose ads score highest and beat out competing ads are charged based not on their own bids, but on all bid amounts received.
Based on 2014 data from Moz, to reach 1,000 people on Facebook, advertisers paid $0.25 on average—slightly less than it costs to advertise on LinkedIn and Google AdWords, and far less than traditional media channels.
Facebook offers a range of pricing models to suit advertisers’ goals. Costs will depend on a variety of factors (which we’ll cover in the next section), but the key to an efficient spend is to optimize both ad buys and ad creative.
Advertisers pay for each click an ad receives. This is the default option on Facebook and a good place to start since you’ll pay only when viewers are interested enough to take the desired action. According to Hootsuite, in Q4 2017, the average CPC in the U.S. was $1.10. In Q4 2018, the average was $1.86. Depending on your campaign objective, CPC can fall anywhere within a range of a few cents to a dollar or more.
Advertisers pay for 1,000 impressions, or each time an ad appears 1,000 times. If your goal is brand awareness, this is a good option. The average CPM in Q3 2016 was $7.19. If you begin with CPC and you’re seeing strong click-through rates, it may be worth switching to this model. If impressions go up and clicks go down, you can always revert back to CPC.
Under this model, advertisers bid for video views. CPV fits if view duration (i.e., exposure to your message) is your top priority. Related metrics advertisers can use to track campaign results include 3-second video views, 10-second video views, and video watches at 100%.
With CPA, you’ll pay for conversions, or any action taken on your website after clicking the ad (e.g., following your blog, downloading content, or RSVPing for an event.) CPA tends to be higher because conversions are much rarer than either clicks or impressions, but it also produces more qualified leads.
Advertisers pay for every Facebook page like that results from a user clicking an ad. This pricing model is one of the lower-cost models available, and it’s ideal for businesses looking to grow their Facebook following so their content can appear in followers’ news feeds at no charge. In Q4 2016, the average cost in the U.S. was $0.20.
Average CPI is all over the map. It varies widely by country, from $0.44 to $5.40 (as of Q4 2016). CPI in the U.S. falls near the median ($2.28). Advertisers can expect CPI to range anywhere from $0.25 to $100, depending partly on the nature of the app. For example, a casino gaming app will cost more than an e-commerce app with broader appeal.
To budget appropriately for maximum return on ad spend (ROAS), it’s important to understand the variables that can influence Facebook ad costs. This will help you avoid wasting time and money on haphazard bidding, audience selection, and placement in an effort to get the equation right.
Creating an ad campaign in Facebook Ads Manager begins with choosing a marketing objective in one of three categories: Awareness, Consideration, and Conversion. Average ad costs largely depend on the likelihood an ad will meet its objective.
In 2017, according to Hootsuite, impressions took the top spot among these five objectives:
Facebook offers both manual and automatic bidding. Manual bidding allows you to set a bid cap, but you might not be charged the entire amount if it’s high enough to be competitive. If you select automatic bidding, Facebook may spend your entire budgeted amount, but you’ll also see better results for your ad spend. Facebook has a $1 minimum daily budget, but the odds favor advertisers willing to pay more for their ads.
The broader the target audience, or the more demand there is to reach an audience (older users and women, for example), the higher the advertising cost. The cost can also vary based on location, interests, languages, existing connections with a brand (a Facebook page like, for example), and other demographic and behavioral factors.
Poor quality ads (poor visuals, too much text, etc.) not only fail to perform well but also damage brands and degrade the Facebook user experience. If Facebook deems an ad low quality, it will charge more for the ad to discourage its use.
Advertisers can pay to place ads in 13 different locations including the desktop and/or mobile news feed, desktop right-hand column, Instagram mobile news feed, Messenger, and the Audience Network (outside the platform). Limiting ad placement to a single location can result in a higher average cost. Instagram ads tend to cost more, but they also see higher engagement rates.
Facebook can help deliver strong returns by optimizing campaigns for various pricing models. If a conversion is a goal, Facebook will target people who are likeliest to act based on their particular characteristics and past activity. If you’ve chosen CPM, Facebook will deliver impressions up to once a day per person to give the ad the broadest possible reach.
Depending on the industry or product type, some ads will have more appeal to users than others. Those with a greater appeal will cost less on Facebook as a result. For example, an ad for an apparel retailer (average CPC: $0.45) will get far more responses than an ad for a life insurance company (average CPC: $3.77).
You can promote your business at no cost on Facebook by establishing a robust presence and networking through friends and Facebook groups. But, paying to advertise greatly expands your potential reach and allows you to target very specific types of users.
If the goal of an ad is simply brand awareness (no user action involved), advertisers can measure the ad’s impact via attribution—and thus the relative success of the campaign in meeting its objective.
If ROAS is high enough for ads designed to drive engagement, you can recoup the cost of placing ads by way of resulting new business.
ROAS = (# of new customers acquired from campaign x LTV of a new customer) – cost of ad campaign
Advertisers can use the Facebook Pixel tool to track conversions such as website signups, downloads, and sales, or use Facebook SDK to measure the success of app ads. Then they can calculate ROAS as a ratio: for example, for every $1 spent on a Facebook ad campaign, $5 worth of revenue was generated.
Surprisingly, no—at least not relative to static image ads.
Video captures interest, delivers information, and connects with users more quickly and effectively than image-only ads. Every day, 500 million Facebook users watch videos, which average 135% more organic reach than single-image ads. Across social media platforms, videos get shared 1200% more than static content.
In its analysis of data collected over the course of 173 BrandEffect studies, which included Facebook video ads, Nielsen found that video ads are particularly effective at boosting ad recall, brand awareness, and purchase consideration. Facebook users who watched 10 seconds or less of video accounted for 65–74% of total campaign value and even those who watched less than three seconds (or not at all) were affected by the ad.
All this audience engagement translates to a lower CPC for advertisers. The cost difference can be dramatic. In one advertiser’s video ad vs. image ad experiment, cost per lead for the video ad was $3.75—far lower than for the image ad ($14.22).
Don’t explode your budget in pursuit of campaign goals. Follow these guidelines to keep your ad costs in check.
Showing the same ad to users with a broad range of demographic profiles, interests, and/or histories with the brand can be counterproductive. Your ads will be much more effective if you target them to well-defined groups of users—for example, women ages 18-24 in the Pacific Northwest who have interacted with outdoor-interest Facebook groups and/or retailers but have no history with your brand. A more tailored ad will resonate better, thus driving up engagement rates and lowering ad costs.
Using Facebook’s audience targeting tool, you can create dozens of custom and lookalike audiences based on hundreds of different audience attributes. Or you can use third-party audience building tools and save hours of time.
Limiting what you’ll spend per click, view, action, etc., will give you greater control over your ad spend. You may sacrifice results, however, by not giving Facebook algorithms the flexibility to determine where and when ads should appear for maximum impact regardless of average cost.
If Facebook users are shown the same ad too many times, creative fatigue will set in and engagement will dry up. This applies not only to specific groups who never see a creative refresh but also to Facebook users who belong to multiple target audiences.
Facebook’s Audience Overlap tool will show you where those trouble spots are. Then you can prioritize your audience list by size or campaign goal, or use exclusion targeting, to minimize the impact.
Split testing of new creative concepts, and more often minor changes, is crucial to campaign success. Almost any element can be switched out to enhance ad performance. To ensure the best use of resources, we recommend refreshing successful ads 80 percent of the time. The remaining 20 percent should be spent developing new concepts.
This goes along with the importance of targeting your ads to specific audiences. For both custom and lookalike audiences, you can segment audiences by geographic location (or even type of location such as rural or urban), gender, age, ethnicity, income, family size, occupation, relationship status, lifestyle/interests, and more. You can even segment by how a product or service might benefit a particular audience. Custom audiences can also be targeted based on past brand activity and how recently the activity occurred.
For all the reasons stated above—more interest and engagement, greater impact, and lower cost—video ads should be a major emphasis of any Facebook ad campaign. You’ll create a more memorable user experience and get much more for your spend if you use a medium that allows for more creativity, breaks through the clutter, and easily distinguishes brands.
Thanks to Facebook advertising, startups with limited budgets have the same opportunity as established players to build awareness and propel growth. Regardless of the growth stage, all Facebook advertisers are focused on taking full advantage of the platform’s capabilities, tools, and potential value while controlling their advertising costs.
After $1 billion in social media ad buys and 300,000 videos created and deployed across Facebook, Instagram, and Google, we’ve fine-tuned the formula for running high-impact campaigns with minimal ad spend. If you’re looking for affordable world-class creative at scale, together with in-depth social advertising expertise, check out some of our case studies and testimonials. Or contact us today.