When it comes to digital marketing platforms, it doesn’t get much bigger than Facebook.
Those are some seriously big numbers.
Facebook also offers advertisers a variety of engaging ad formats and advanced audience targeting tactics. Sounds promising so far.
But before you dive head-first into a new ad campaign, it’s important to understand how much Facebook ads cost.
Let’s run through the fundamentals of Facebook advertising, clarify how much a campaign might cost, and outline how you can make the most of your Facebook ad budget.
What are Facebook ads?
Facebook ads come in a variety of different forms. They can be delivered as image assets, video assets, Carousels (containing various images) and several other formats.
The majority of Facebook ads appear in-feed and can be targeted towards specific audience segments.
Advertisers can build target audiences based on standard demographic information, but more advanced data segments are also available.
For example, Custom Audiences can be built based on user data, targeting valuable shoppers who have recently completed a purchase or visited an e-commerce website.
Are Facebook ads worth the investment?
For most businesses, Facebook ads are absolutely worth the investment.
It’s important to understand the Facebook pricing model before launching an ad campaign, but the vast majority of advertisers can achieve impressive results on the platform.
Here are three reasons why Facebook ads are a solid investment.
1. The scale is mind-blowing
The Facebook audience is enormous.
There are currently 2.9 billion monthly users active on the platform, providing advertisers with a colossal audience to target and convert.
The chart below visualises the number of monthly users active on Facebook, and how the user base has expanded over time.
Not only does this mean that your advertising campaigns can deliver exceptional reach, but you’re also highly likely to find valuable prospects within this enormous audience.
The size of the platform allows advertisers to comfortably scale up their ad campaigns and increase revenue over time.
2. The targeting options are powerful
Effective targeting is crucial to driving cost-efficient conversions.
Fortunately, Facebook provides you with an excellent selection of targeting tactics.
Advertisers can utilise standard demographic audiences, based on locations, interests and behaviours. However, Facebook also enables advertisers to build more advanced audiences that can deliver better results.
Brands can create Custom Audiences using data from the Facebook pixel – for instance, audiences based on site visits, ad engagement or app activity.
As these audiences are built around real user data, they can perform incredibly well. By using Lookalike Audiences advertisers can also expand these segments even further.
3. You have control over Facebook ad spend
Facebook allows advertisers to maintain full control over their spending.
Campaigns are generally low-cost, making them accessible for the vast majority of e-commerce brands.
It’s possible to experiment with smaller budgets and scale up investment as the results become clear. This is a huge bonus for new advertisers looking to gather learnings before increasing their expenditure.
How do Facebook ads work?
Facebook ads work through an auction dynamic, where advertisers compete to serve their ads to target audiences.
Behind every ad space on the platform, there’s an auction taking place in real-time.
Getting to grips with the auction mechanic will help you to increase your chances of success, and more importantly, help to lower your Facebook advertising costs.
Let’s look at the auction system in more detail, shall we?
How does the auction system work?
When businesses run ads on Facebook, they’ll start by defining a target audience.
To serve their ads to this audience, they’ll need to compete in the auction against other advertisers who are also targeting these users.
The same users can also fall into different target audiences, so competition can be very high depending on your desired prospects.
How is the auction winner decided?
Winning the Facebook auction isn’t just about the size of your budget, which is great news for smaller advertisers.
The platform tries to focus on quality rather than quantity, rewarding brands who are delivering engaging and interesting advertising.
Three core factors contribute to success in the Facebook auction:
Bid: the amount an advertiser is willing to pay in order to achieve their desired outcome.
Estimated action rates: an estimate of how likely a user is to engage with or convert from an advert.
Ad quality: a measure of the quality of your advert. This is based on user feedback (i.e. from users viewing or hiding the ad) and platform assessments of the ad content.
Estimated action rates and ad quality scores combine to create ad relevance diagnostics.
This is essentially the ultimate measure of your ad quality, and it’s key to monitor these diagnostics to understand auction performance.
Running quality ads that are genuinely engaging for customers is vital for success.
How much does Facebook advertising cost?
Now that you’re familiar with the Facebook ad auction system, let’s take a look at some Facebook advertising cost averages.
Firstly, it’s important to understand that there are different pricing models available on Facebook. It all depends on your desired outcome and campaign objective.
Below is a summary of the different bidding models and the Facebook ad cost averages associated with ad delivery:
Cost Per Click (CPC): £0.72
Cost Per Thousand Impressions (CPM): £5.30
Cost Per Like (CPL): £0.79
Cost Per Install (CPI): £4.03
It’s very important to remember that these are just average costs for Facebook ads.
In reality, Facebook ads costs will constantly fluctuate, so be prepared for this when managing a campaign.
Your Facebook advertising costs will be influenced by several different variables.
Which factors determine Facebook ad costs?
Let’s dive into some of the key factors that can influence your Facebook advertising costs.
When you’re setting up a new ad campaign on Facebook, you’ll need to decide on your objective.
In other words, the desired outcomes that you’ll be paying for.
There are three main categories to choose from – Awareness, Consideration and Conversion.
Within each of these three categories is a selection of more specific objectives. For example, within Consideration, you can choose to focus on driving website traffic or increasing video views.
You can explore each ad objective in more detail here.
Most of the time, ‘higher value’ Conversion objectives will be more expensive because they generate immediate revenue.
This includes goals like completed purchases and app installs.
Focusing exclusively on these goals will usually result in higher Facebook advertising costs because conversions are valuable to businesses.
That’s why it’s important to balance your approach across the sales funnel.
Improving top-funnel brand awareness is generally less expensive, but helps to build and nurture an audience of warm prospects who may convert later down the line.
However, driving immediate sales is also an important part of a profitable paid social strategy. The key is to maintain an efficient ROI when focusing on direct conversions.
Your target audience also plays a major role in determining Facebook ad costs.
If you’re pursuing an audience that many of your competitors are also chasing, this will drive up the level of competition, meaning a higher average Facebook ads cost. It’s a case of supply and demand.
It’s also important to balance quality and quantity.
Targeting a broader audience means that there are plenty of users available. Your ad delivery costs may be lower, but generic audiences are less likely to convert from your ads.
On the other hand, defining a more specific audience may improve the likelihood of a conversion, but there’s a smaller pool of users to target. Which equals higher Facebook ad costs.
As a general rule, it’s always advisable to pursue users who are more likely to convert, even if this means a more niche audience.
You just need to closely monitor performance to ensure that you’re maintaining a positive ROAS and targeting the most profitable audiences.
Different industries will generally experience different costs for Facebook advertising.
Industries like finance and insurance are notoriously expensive because conversions can be incredibly profitable. These purchases are infrequent, and therefore more valuable.
On the other hand, industries like clothing and retail are usually much more affordable for advertisers.
These are more regular purchases, and there’s a huge audience of potential buyers to target.
Although there isn’t much you can do to avoid industry-related costs, it’s always best to focus on regular optimisations to maintain efficient spend.
Unsurprisingly, your Facebook advertising budget will also impact the costs and effectiveness of your campaign.
Although you don’t need to break the bank to get started with Facebook ads, you do need enough budget to afford effective bids.
A low campaign budget will heavily restrict your maximum bids, which puts you at an immediate disadvantage in the auction.
You’ll likely struggle to achieve your desired outcomes because your bids won’t be competitive, and your campaign will quickly run out of funding.
A larger daily budget affords you more bidding flexibility.
You can find some more guidance on Facebook minimum budgets here.
What about my ad bids?
A big part of managing your Facebook spend is choosing a suitable bidding strategy.
Different bid strategies are aimed towards achieving different outcomes.
For example, you may want to prioritise maintaining a specific cost-per-action, or you might prefer to focus on maximising the number of conversions delivered.
Unless you have a very specific CPA or ROAS in mind, automated bidding can be a smart option. The Facebook algorithm is fuelled by mountains of advertiser data, making it pretty effective at managing your bids.
The placement of your Facebook ads (i.e. where they appear) will also influence the cost.
Your Facebook ads can appear in seven different environments:
- Facebook desktop newsfeed
- Facebook right column
- Facebook Messenger
- Facebook Stories
- Instagram Stories
- Audience Network
Both Instagram and Instagram Stories placements are generally more expensive than Facebook placements.
However, adding Instagram to your strategy can help you to drive incremental reach and connect with new audiences, so it can be a worthwhile addition.
The Facebook Audience Network extends your ads beyond the social media platform and into other mobile apps. Audience Network placements are often cheaper than Facebook and Instagram, but you can easily remove them if you’d prefer to stay within the social platform.
CPC (Cost Per Click)
If you’re running a campaign on a CPC pricing model, it’s important to monitor how your Facebook ad costs are changing over the course of a campaign.
As part of the Facebook auction system, you’ll only ever pay a penny more than the nearest competitor bid.
Even if your max CPC bid is set to £2 and the highest competitor bid is £1.50, you’ll only pay £1.51 for this ad placement.
However, your average cost per click can fluctuate significantly depending on target audiences and competitor activity.
This will have a direct impact on your campaign costs.
Be sure to keep an eye on your average CPC to gauge if you need to make any adjustments.
Competitor activity will contribute directly to your Facebook ads cost.
After all, you’re actively competing in auctions for ad space, and your competitors are equally keen to pinch those placements.
If your competitors are ramping up their bids and running high quality creative assets, that can spell trouble for your performance.
That’s why it’s vital to constantly optimise your campaigns in the Facebook Ads Manager by adjusting your bids and fixing any ad relevance issues.
The timing of your ads can also make a big difference to your Facebook advertising costs.
Chaotic shopping seasons (e.g. Black Friday, Christmas) can lead to massive fluctuations in ad costs, as platforms are packed with high-spending competitors.
However, that doesn’t mean you need to avoid advertising on Facebook during these busy periods. You’ll just need to focus on the tactics and audiences driving efficient conversions.
On a smaller scale, costs can also fluctuate on certain days of the week, or in certain hours of the day. Many advertisers may be more active during peak times (e.g. daytime and weekends) when more users are likely to be checking Facebook.
The Facebook algorithm likes to support high-quality ads in auctions – not just advertisers with big budgets.
Facebook ad relevance diagnostics assign a quality score to your ads that dictate how they’ll perform in future auctions. The diagnostics are based on:
Quality ranking: the quality of your assets when compared to competitors.
Engagement rate ranking: the expected engagement rate of your assets when compared to competitors.
Conversion rate ranking: the expected conversion rate of your assets when compared to competitors.
If your ads are receiving positive feedback from users, driving high levels of engagement and securing conversions, you’re likely to see superior performance in auctions.
You’ll also generally pay a lower cost for these placements, because the Facebook platform rewards advertisers running relevant ad campaigns.
Estimated Action Rates
This is another key metric that will influence the performance of your ads in the auction.
Facebook calculates your estimated action rates based on two key variables.
The first is the likelihood of the user to click or convert, based on their previous behaviours.
If a targeted user has clicked on similar ads in the past and completed a purchase, the estimated action rate will be more positive.
The second variable is the previous performance of your assets.
If your ads have been consistently driving clicks and conversions, this is another box ticked, and your estimated action rate is likely to be higher.
By targeting the right users with quality creative assets, you’re likely to achieve a higher estimated action rate. This equals better auction performance, and lower Facebook advertising costs.
Finally, campaign optimisations will have a significant impact on your costs.
If you allow your campaign and bids to run without any optimisation, you may end up wasting your budget on ineffective and expensive audiences.
Campaigns require constant optimisation, so be sure to stay in the loop with reports and make adjustments based on the data. Shift budgets towards more efficient tactics and monitor the performance of different audiences.
Optimising For ROAS (Return On Ad Spend)
Beyond looking at Facebook costs, it’s important to focus on your ROAS to ensure that you’re spending money effectively.
Luckily, calculating your Facebook ROAS is very simple.
Just divide the revenue delivered through Facebook ads by the amount you spent on them.
Although there are other metrics to take into consideration, if you can maintain a positive ROAS, you’re on the right track for a profitable campaign.
Your financial ROAS is a good indicator of your campaign efficiency, and the impact that advertising is having on your revenue.
By establishing how much revenue customers tend to generate once they land on your website (i.e. the average order value) you can calculate the conversion cost that you need to achieve for a positive financial ROAS.
For example, if the average order value from a Facebook prospect is £25, then you’ll know that any conversions costing over £25 are inefficient.
In reality, your conversion costs will need to be significantly lower than your average order values. That’s because you’ll need to factor in additional costs such as:
- Cost Of Goods Sold (i.e. manufacturing costs)
- Delivery costs
- Transaction fees
Understanding all of the costs associated with a sale is vital to calculating ROAS accurately and ensuring that you’re driving efficient conversions.
ROAS is a fairly basic calculation, but it can help to establish clear benchmarks to guide your campaign optimisations.
You can look at a similar calculation to determine a social ROAS.
For example, if you’ve put £50 behind the promotion of a Facebook post and it receives 25 interactions (e.g. likes, comments, shares) then each social interaction has effectively cost £2.
The efficiency depends on how valuable social interactions are to your brand.
If users are regularly sharing your posts and tagging friends, you can drive organic incremental reach to increase visibility, which can be a bonus for your campaign performance.
Managing your Facebook budget
Managing your Facebook budget can seem like a mammoth task.
But don’t panic.
It just requires a solid understanding of the Facebook pricing model and a consistent approach to optimisations.
Below are the key points to remember when managing your ad budget:
- Choose the right campaign objective (e.g. CPC, CPM) and use average costs as a rough guide.
- Select a suitable bidding strategy based on your goals, and don’t hesitate to utilise automated bidding.
- If you’re not seeing a positive performance in auctions, adjust your bidding strategy or check your ad relevance score.
- Calculate your return on investment to figure out which tactics and audiences are contributing to your business goals. Use this metric to inform your optimisations.
How to reduce your Facebook costs
There are several different ways to keep your Facebook expenditure down, but below are three strategies that can have an immediate (and noticeable) impact on your costs.
1. Utilise efficient audiences
By targeting high-converting Facebook audiences, you can reduce wasted spend and increase your cost-efficiency on the platform.
Custom Audiences can be incredibly effective at reducing CPAs.
By targeting hot prospects (i.e. site visitors or recent shoppers) you increase the chance of delivering conversions and maximise the impact of your spend.
2. Focus on quality ads
Facebook advertising is designed to reward high quality advertisers.
By running ads that generate interest, deliver clicks and secure conversions, you’re more likely to be viewed favourably by the almighty Facebook algorithm.
If you can achieve positive ad relevance, you’ll see improved performance in auctions and lower advertising costs.
3. Make sure to optimise
Often, reducing your Facebook advertising costs just comes down to making smart adjustments to your campaigns.
This might be removing an inefficient audience segment, increasing budget behind a successful asset, or tweaking your bid strategy.
All this takes is consistency. Be sure to regularly check your performance reports and constantly compare results against your ROAS benchmarks.
So, there you have it. A comprehensive guide to Facebook advertising costs.
Facebook can deliver exceptional results for your e-commerce brand, and it doesn’t require mountains of cash to launch a new campaign.
You just need to spend your budget wisely. Follow our guidance for effective spend management, and you’ll be racking up cost-efficient conversions in no time!
For help with your campaigns from an expert Facebook agency please get in touch.