Facebook Ads Cost: How Much Should You Be Spending?

Facebook Ads Cost: How Much Should You Be Spending?

As business owners, one of the most important things we do is promote our business. After all, if we don’t have customers, sooner or later we won’t have a business either. However, small businesses don’t need to spend the kind of money that larger brands do. Not only do they generally cover a smaller geographical area or niche, but budget issues necessitate a level of thriftiness.

With that said, one of the more effective ways to advertise is on social media, including Facebook. However, it’s important to spend the right amount of money. Are you spending too much on Facebook Ads? Or not enough? In this blog post, I’ll walk you through what to consider when budgeting for Facebook Ads, offer some actual Facebook Ads cost data to review, and provide some tips to help you stay within your budget. Keep reading to learn more!

10 Factors That Influence the Cost of Your Facebook Ads

We all know that advertising is necessary to get our products and services in front of potential customers. And while there are many different platforms to choose from, Facebook is one of the most popular – and for some expensive. So, what factors influence how much you pay for your Facebook ads?

1. The Audience You are Targeting

The Audience You are Targeting

Because Facebook Ads are auctions where you compete with others, some demographics are more desirable or “expensive” than others. For example, Facebook will generally charge you more to reach people who are mid-career and have a lot of disposable income. Meanwhile, the low-income demographics will typically be cheaper.

Keep in mind, though, that the definition of “most desirable” can change based on what you are selling. Some businesses do, after all, concentrate on low-income people or the very young. Be careful to target your Facebook ads properly to boost effectiveness and manage to spending. To do this, make sure you craft a buyer persona as part of your overall Facebook ads strategy.

Further Reading: Facebook Ads Strategy: 15 Powerful & Effective Strategies for 2022

2. Your Ad Bid

It goes without saying that if you bid higher than you need to you might be overpaying! Bidding wars cause people to overpay in just about any industry: the fact that home purchases became notorious for this over the last couple of years underlines my point. However, Facebook ad bidding works a little bit differently, in that you don’t pay the absolute maximum bid price every time. Rather, your bid is the maximum you’re willing to pay, and Facebook bids for you up to that maximum. You might, as a result, pay a slightly different rate from one block to the next.

3. Ad Placement

Facebook Ads cost differs depending on where those ads are displayed. For instance, you will pay a different price for a mobile news feed placement than a desktop one, and a third rate for the right column ad. In other words, Facebook charges different rates based on what each piece of advertising real estate is worth. Choose options that will meet your business needs while providing the best value.

4. Ad Objective

The objective you choose at the beginning of a campaign has a huge influence on how the Facebook Ads algorithm serves and thus charges you for your ads. For instance, if you pay only for conversions, then you’ll pay a lot more per action than brand awareness campaigns, which are effective with mere impressions. On the other hand, Facebook will likely serve your ad to more people during an awareness campaign because it helps them get paid than they would in a conversion-based objective. This means that your Facebook Ads cost can balance itself out.

5. Season

season

Want to lower your Facebook Ads costs during the holiday season? Good luck! There’s a good reason why the winter holidays, in particular, are very expensive for advertising: people buy stuff. As in, just about anything, whether the reason is a religious observance or the receipt of year-end bonuses at work. There are similar principles at work for other holidays, too. If you want to advertise during these times of the year, you should budget a higher Facebook Ads cost. Of course, that extra cash usually pays for itself because you won’t risk giving up market share to your competitors.



6. Ad Quality Ranking

One thing Facebook does well is trying to provide a quality experience on the website. This is true because if people don’t enjoy hanging out there, they won’t come. For this reason, Facebook has an Ads Quality ranking, which expresses what percentage of competing ads are of higher quality than yours. Having a high-quality rating can help you better target your audience because you won’t have the level of guesswork. Of course, with better targeting, you’ll get lower Facebook ads to cost for the results.

Further Reading: 4 Steps for How to Measure Facebook Ads Metrics Effectiveness

7. Ad Quality

Ad visuals and copy are an art. The more engaging they are the more clicks they get and thus costs come down. In other words, when Facebook knows they’ll get paid for more clicks, they’re happy to sell those clicks at a lower cost. Or, as Facebook puts it, better-quality ads get more favorable auction treatment, and low-quality ads cost more with a lower distribution. Therefore, maximizing your Facebook Ads cost involves paying careful attention to quality.

8. Ad Budget

If you limit your budget when the platform is serving your ads at an optimized cost, it limits your ability to lower overall costs. The same goes for the opposite. In other words, if you have a favorable Facebook Ads cost, then you should keep the deal you’re currently getting. Keep in mind, that a favorable cost will involve both prices and return on investment.

Further Reading: 9 Ways to Enhance Your Facebook Ads ROI

9. Industry

Different industries have different costs based on the demographic that you are competing for. For example, brands that sell to younger customers, or those with a lot of disposable income, will likely pay more. On the other hand, some brands like senior care supplies will likely pay less, since there are fewer people who are interested in those products. Also, senior supplies don’t have the profit margins or discretionary spend factor.

10. Your Competition

Needless to say, your Facebook Ads competition is always in flux and is something out of our control. If your competition is bent on pushing everyone else out of the Facebook Ads space, they’ll bid high and you’ll have to adjust. On the other hand, a financially struggling competitor might try and scoop up deals. This is where trial and error during the bidding process, and some analytics insights, can really help.

How Much Do Facebook Ads Actually Cost? This is What the Latest Data Says.

Because of all of the different factors involved, we all know that Facebook Ads will cost different for every company. That being said, how do your ad campaigns compare to industry averages? Let’s look at what the data shows us so that you can benchmark your own Facebook Ads cost. If your costs are out of sync with the average, then you may need to analyze your ad quality and other factors to try and optimize.

Business of Apps

Business of Apps Data

Business of Apps is a site dedicated to companies that build mobile apps and then try to get people to become paying customers of those apps. For this reason, they list an industry-specific goal called cost per install. These numbers were found from across the web, then interpreted.

  • Facebook Ads CPM (Cost Per 1,000 views): $14.90
  • Facebook Ads CPC (Cost Per Click): $0.44
  • Facebook Ads CPI (Cost Per Install): $1.97
  • Facebook Ads CPA (Cost Per Action) range: $8 to $55

WordStream

WordStream Data

WordStream is a digital advertising platform, and they used their own data to compile some averages for Facebook Ads cost. These numbers aren’t averages, they’re median numbers because they’re more accurate when considering outliers. Notice how the numbers are divergent from the Business of Apps data:

  • CPC: $1.68
  • CPA: $19.68 (Cost per Action)

AdEspresso

AdEspresso Data

AdEspresso also uses client data for a lot of its statistics. Perhaps the biggest trend they noticed is that, in most years, the Facebook Ads cost is lowest during the first quarter of each year. However, 2020 was unusual due to supply chain problems. These numbers are from last year, but they are also examined in their historical context. Once again, you’ll see a different CPC than some other statistics.

  • CPC: $0.43
  • CPL: 0.37 (Cost Per Like)

Revealbot

Revealbot Data

Likewise, Revealbot gives us some statistics based on their research. Here, the article emphasizes the extent to which Facebook gives better terms to publishers of high-quality ads. Therefore, Revealbot emphasizes the importance of providing potential customers with ads they’ll enjoy seeing (who says nobody likes being “sold to?”

  • CPM: $15.11
  • CPC: $0.99
  • CPE: $0.14 (Cost Per Engagement)
  • CPL: $8.38 (Cost Per Lead)
  • CPI: $7.18 (Cost Per App Install)

AdCostly

AdCostly Data

AdCosty gives you charts that show Facebook Ads cost over the last 90 or 180 days. Unlike other providers on here, they break the information down not only by pricing method but also by industry. This lets you get a more accurate picture of what you might have to pay.

  • CPM: $4.43
  • CPC: $0.32
  • CTR: 1.39%

7 Ways to Reduce Your Facebook Ads Cost

Now that we have an idea of what Facebook Ads might cost, what can we do to help reduce the cost of our own Facebook Ads? It’s important to pay competitive rates because rates that are too high eat up profits. However, if we pay too little, then we might be missing out on revenues or failing to optimize. Here is a checklist of ideas to help you.

1. Choose the Right Campaign Objective

Choose the Right Facebook Ads Campaign Objective

Facebook advertising campaigns can be optimized based on the objective you choose to pursue, but if you choose the wrong objective, your results might vary from the ideal. For example, if your goal is to have someone install your application, then it probably doesn’t make sense to do a brand awareness (often CPM) campaign. On the other hand, a B2B brand is more likely to go with CPM or CPA, often to generate leads. The idea here is to get the right results at the right price.

2. Narrow Down Your Audience

The narrower the audience, the greater the chance that it resonates with a greater % of people, thus lowering ad cost because of the increased ad engagement. If you remember, Facebook gives better rates for high-quality advertising. Obviously, this depends on you narrowing down your audience correctly. Otherwise, you can serve ads to people who have no interest in your products at all. Not only does this reduce your quality ratings, but it drives up costs for some objectives.

3. Lower Your Ad Frequency

You might think of “frequency” as the number of times per day or week that you serve up a particular ad. However, as Adespresso points out, ad frequency in this case refers to the number of times a particular customer sees the same advertisement. And, the more times people see the same ad, the less sensitive they get to it. The blog writers even pointed out that some people get irritated at the advertiser and say so on the ad. Therefore, serving the same ad too many times not only costs more but also backfires.

Further Reading: Ways to Overcome the 20% Text Rule for Facebook Ads

4. A/B Test Ad Creatives and Placements

It should go without saying that A/B testing as much as possible will always help. Often, an ad creative turns out to not be as effective as you think it should be. For example, you can use a bit of humor that turns out not to be as funny as you’d expect, or that accidentally touches a nerve with some people. Short of that, though, there’s good and better in most advertising contexts. To reduce your overall Facebook ads cost, be sure to perform A/B testing.

5. Automate Your Facebook Ad Management

Automate Your Facebook Ad Manage

There’s a reason why developers have made so many Facebook marketing tools: like most other marketing efforts, Facebook Ads can be fickle. While we can always follow certain principles, the competition and market forces are always changing. In addition, Facebook policies and other variables can shift, too. Using various automation can help you get a handle on Facebook Ads costs and, at the same time, maximize your ROI.

Further Reading: The Top 16 Facebook Ads Tools You Didn’t Even Know Existed

6. Run Retargeting Campaigns

Getting a lot of engagement on your ads but no conversions? Try a retargeting campaign to this “warm” audience that you have built. One of the easiest ways to do this is using Facebook Pixel, which tracks site visitors so that you can retarget them with Facebook ads. The nice thing about Pixel is that you can add the code to your website, and then only need to reap the rewards.

7. Cap Your Bid

Force Facebook to only show your ads at the maximum cost you want to pay. You might not get delivery of your ads, but it will ensure a lower cost. If you need to advertise but only have limited cash, then this is something you might experiment with. However, if you find that your ads aren’t getting shown at all, or that the frequency is simply too low, consider raising your budget. Sometimes, you can only reduce your expenses to a certain degree.

Conclusion

One of the hard things about Facebook Ads cost is that it’s often hard to determine how much you need to pay because of the many pricing variables. Fortunately, with good planning, proper targeting, and smart bidding it’s possible to keep your costs in a range you can afford. Just be sure to balance affordability with effectiveness.

Photo by Jan Antonin Kolar on Unsplash

Actionable advice for your digital / content / influencer / social media marketing.

Join 12,000+ smart professionals who subscribe to my regular updates.
Share with your network!
Neal Schaffer
Neal Schaffer

Neal Schaffer is a leading authority on helping businesses through their digital transformation of sales and marketing through consulting, training, and helping enterprises large and small develop and execute on social media marketing strategy, influencer marketing, and social selling initiatives. President of the social media agency PDCA Social, Neal also teaches digital media to executives at Rutgers University, the Irish Management Institute (Ireland), and the University of Jyvaskyla (Finland). Fluent in Japanese and Mandarin Chinese, Neal is a popular keynote speaker and has been invited to speak about digital media on four continents in a dozen countries. He is also the author of 3 books on social media, including Maximize Your Social (Wiley), and in late 2019 will publish his 4th book, The Business of Influence (HarperCollins), on educating the market on the why and how every business should leverage the potential of influencer marketing. Neal resides in Irvine, California but also frequently travels to Japan.

Articles: 334

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.