Facebook remains the single most effective social media advertising platform out here & advertisers know this and would not allow it to breathe an inch away from their ads.
They have continued holding to it as their darling platform when choosing a platform to promote their products.
The platform caters to businesses that want to form an authentic relationship with their audience. It allows advertisers to create and distribute content seamlessly to their users. And it allows sales and customer services reps to connect with consumers interested in a brand.
These ads can be consumed via the News Feed, chat with friends via Facebook Messenger, Facebook marketplace, and the Right-Hand Column (RHC) in the desktop environment.
So there is much competition for attention on the platform which necessitates the ever-changing uptick in the costs of adverting on the platform. That’s not to say you need a million-dollar Facebook ad budget to drive traffic, leads, and sales through the app.
This article prepares you for how much you should budget for Facebook ads.
Table of Contents
8 Factors That Determine the Facebook Ads Cost
#1. Your Bid
A bid represents what you’re willing to pay to achieve your desired result from someone in your target audience. Note that your bid is not the cost of your chosen optimization event.
When you create a Facebook ad, you’re joining a huge, global auction, competing with other advertisers for ad space on Facebook.
Your bid amount will reflect your level of interest that Facebook should show your ads ahead of your competitors. So the higher your bid, the higher the possibility that your ad will be shown.
Your bid strategy choice tells how you wish Facebook should bid for you in ad auctions. The right bid strategy can help you get measurable business outcomes. When choosing a bid strategy, it’s important to identify how you measure success for your business. Then choose the option that matches your business goals.
Facebook offers 3 types of bidding: spend-based, goal-based, and manual.
#1. Spend-based bidding
Focus on spending your full budget to get the most results out of your ad campaigns.
For spend-based bidding, you can either use lowest-cost bidding or highest-value bidding.
#1. Lowest cost bidding: If you use the lowest cost bid strategy (automatic bidding), Facebook bids to get the lowest possible cost per optimization event.
The set budget will be spent at the end of the day or throughout the entire schedule.
When to use lowest bidding
#1. When you want to maximize delivery and conversions you can get from your budget.
#2. When you are not aiming for specific goals to measure or define the success of your ad campaign.
#3. When you are ready to spend your whole budget.
#2 Highest value: When you use the highest value, you aim to spend your budget and bid for the highest possible purchase value.
They then use this prediction to bid for your highest-value customers. You’ll need to optimize your ad set for conversion value to use this bid strategy.
This strategy is best to use when:
#1. You want to spend your budget in full while focusing on getting higher-value purchases.
#2. You Want to maximize the value of conversions, not just increase the number of conversions.
To use the highest value bid strategy, you must have a functional pixel or SDK set up to track conversion events. You must also meet the eligibility requirements for value optimization.
#2. Goal-based bidding
A goal-based bidding strategy is used when you have a defined goal you target to achieve with your ad campaign.
For goal-based bidding, you have two options: to use a cost cap or minimum ROAS.
#1. Cost cap: Cost cap maximizes cost efficiency by getting you the most results, such as purchases or installs, at or below your set maximum cost per optimization event.
It simplifies campaign management and helps you focus on scaling the volume of results while controlling costs.
The benefit of a cost cap is that it controls your final cost. The advantage of this is that you may pay more for an individual click, but the final cost per action should be lower.
When to use cost cap:
#1. When you need to maximize conversion volume while controlling your cost.
#1. The learning phase may take longer with a cost cap than other bid strategies.
#2. During the learning phase, costs may go above your cap. Once an ad set has exited the learning phase, delivery should stabilize and they will target to optimize your campaign according to the cost cap you specify, but it is not guaranteed. You may see costs exceed the cap you set.
#3. You cannot use the cost cap with all optimization.
#4. Spending may be slower with a cost cap than when using the lowest-cost bidding strategy.
#2. Minimum ROAS: When you use minimum ROAS, it allows you to target a minimum return on ad spend for each bid. You’ll need to optimize your ad set for the purchase value to use this bid strategy.
For instance, if you intend your budget of USD 200 to result in at least USD 210 in purchases, you’d set your ROAS control at 2.100.
When to use Minimum ROAS:
#1. When you intend to meet or exceed a specific return on ad spend.
#2. Need more control over the purchase value that you generate from ads than what is possible with the highest-value bid strategy.
#1. If you care more about spending your budget in full than always meeting or exceeding a specific ROAS, you choose the highest value bidding strategy to achieve that.
#2. During the learning phase, your ROAS may not be up to the minimum you specify.
#3. Once an ad set has exited the learning phase, we will aim to meet the minimum ROAS that you specify, but this is not a promise.
#4. If your minimum ROAS value is set too high for Facebook to meet, the delivery may sometimes stop and your budget may not be spent in full.
The Difference between Minimum ROAS and Highest Value
With minimum ROAS, there’s less guarantee of spending your budget in full. This is because Facebook might not be able to constantly meet your required minimum ROAS value.
While highest value tells the platform to try to spend your entire budget by the end of the ad set’s schedule while maximizing the amount of value you get from purchases
#3. Manual bidding
A bidding method that lets you set your maximum cost-per-click (CPC) for your ads. This differs from automated bid strategies, which set bid amounts for you.
Manual CPC bidding gives you control to set the maximum amount that you could pay for each click on your ads.
Bid cap: Set the maximum bid across auctions, rather than allow Facebook to bid dynamically based on your cost or value goals. A bid cap is meant for advertisers who have a strong understanding of predicted conversion rates and can calculate the right bid.
#2 Ad Quality and performance
To help you understand how relevant your ad is to your target audience, Facebook provides a Relevance Score metric for each of your ads.
High relevance is correlated with high performance, but it’s not always the reason for high performance. As such, use ad relevance diagnostics to diagnose underperforming ads – not to optimize advertisements that are already meeting your advertising objectives.
Achieving high ad relevance diagnostics rankings should not be your primary goal as that doesn’t automatically guarantee an increase in results.
However 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.
When an Ad is not Meeting your Advertising Goals
When diagnosing an ad that isn’t meeting your advertising goals, review ad relevance diagnostics to determine whether adjustments to your creative assets, post-click experience, or audience targeting could improve performance.
Reviewing the diagnostics together gives you more insights than reviewing each diagnostic individually.
#3. Estimated Action Rates
Roughly guess how likely a person will act upon seeing 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.
An estimate of whether a particular person engages with or converts from a particular ad (in other words, the probability that showing an ad to a person leads to that desired outcome of the advertiser)
If your Estimated Action Rate is low, I guess that the cost of your Facebook ads will be high. To ensure your ad wins some ad auctions and is shown to your target audience, Facebook might have to compensate for your ad’s low Estimated Action Rate by increasing your bid (if you have chosen the lowest-cost bidding).
#4. Who and How Many Target Audiences
Naturally, as the size of the audience increases, so does the total cost of ads. The broader your customer net, the more firms, of different types, you compete with you for advertising slots will influence your Facebook ad cost.
This is due to the level of competition to reach a particular audience. When more marketers are targeting a specific audience, that set audience is considered a hot cake in the market, making it more expensive to reach them.
Also, the location, age, gender, and language of your audience may affect the cost of your ads.
#5. Time of the Year
The time of the year is another huge determinant of ad costs. When the number of advertisers targeting an audience increases, so does the cost of ads.
For example, if you plan your ad campaigns to feature during New Year’s Eve, New Year’s Day, Thanksgiving Day, Black Friday, Cyber Monday, Christmas, or post-Holiday Sales, your ad cost may be higher because many other advertisers are on queue to leverage the holiday and put their products in faces of those who need to them.
So if you’re planning campaigns around these dates or other big events, it’s important to think about how the amount of competition may affect the cost of your ads.
Placements are where you choose to run your ads on or off Facebook. You can run your ads across Facebook, Instagram, Messenger, marketplace, and Audience Network. Where you place your face ads influence the cost of the ad.
Facebook allows you the freedom to choose where you want your ad to appear
Quick fact: You don’t need to set up an Instagram account for your business to select the Instagram placement. Your Facebook Page can serve as the voice of your ad on Instagram.
While this sounds great, it might be worth considering if your target audience is active on Instagram or if your advertising aligns with your Instagram strategy.
#7. Optimization of Ad Delivery
Based on the optimization that you choose, the delivery system uses machine learning to improve each ad’s performance.
Your optimization choice is the desired outcome that our system bids on in the ad auction. For example, if you optimize for link clicks, your ads are targeted to people in your audience who are most likely to click the ads’ links.
To use some optimizations, you may need to set up a Facebook pixel or app SDK. These tools allow you to pass back web or app event data to Facebook.
Bear in mind that some optimization events may require more budget than others. It’s therefore important to consider your optimization choice when selecting your budget and bid strategy.
#8. Different Bidding Options
When you set a bid for your ads, you have a pool of options to select from. These include:
#1. Cost per Like (CPL): How many advertising dollars must be spent to get a Facebook member to “Like” a particular Facebook page?
#2. Cost per Click (CPC): you pay each time somebody clicks on your ad, regardless of what they do once they have clicked.
#3. Cost per 1000 Impressions (CPM): The cost per thousand impressions (CPM, cost per mille) is the total amount an advertiser pays for 1,000 impressions on their page.
#4. Cost Per Action (CPA): The cost of advertising divided by the number of actions taken.
How Do You Track Metrics in Facebook Ads?
The metrics you want to track will show up as soon as your ad is live in your Facebook Analytics dashboard.
To begin with, go to Ads Manager to create a campaign. Once done, select your objectives for the campaign.
When your ad is live, you can track all your metrics with your Facebook Analytics dashboard. You’ll see that each ad has different metrics that you can track to understand how well you’re performing and make decisions based on that.
Hopefully, this article would’ve given you an idea of the cost of advertising on Facebook and the costs determining factors.
Facebook ads cost is such a broad and important topic, and despite the article having taken a long road to get to this point, I still think we have only scratched the surface.
However, in this little brief, we have touched on the most important basic knowledge you need to plan a successful Facebook ads campaign with key knowledge of the costs involved.
We have shown you that you’re always in charge of yourself and your budget while placing ads on Facebook and that you reserve the power to pay for only the actions you want.