True Cost of Running Facebook Ads (1/2)

running Facebook ads

Facebook has a similar approach to most of the online advertising networks. They don’t give you a set quote for a price once you need to advertise on this platform. Instead, the cost of your Facebook ads will vary, depending on a list of factors. In this guide, let’s explore the cost of running Facebook Ads.

Moz creates some eye-opening statistics on the comparative costs of reaching people via different types of media. Although the 2014 figures are now a little dated, they still give an accurate picture of where Facebook advertising costs come from compared to the competition.

cost to reach 1000 people - running Facebook ads

According to the research, they found that the costs per media type to reach 1,000 people were:

  • Newspaper – $32.00
  • Magazine – $20.00
  • Radio – $8.00
  • Cable TV – $7.00
  • Google AdWords – $2.75
  • LinkedIn Ads – $0.75
  • Facebook Ads – $0.25

If you need to make YouTube advertisements, you need to set a budget, and then bid for advertising spots. In many ways, it works similarly to advertising on Facebook.

Technically, therefore, the cost of your Facebook ads will be the amount of money you are willing to spend. It is not a case of how much it will cost you to run an ad, as it is, how many ads will you get for your amount of money? Of course, if you bid too low, you will be unable to spend your entire budget, because there will always be somebody willing to pay more than you.

TLDR;

  • In the USA, the average cost per click (CPC) of Facebook Ads in Q3 2016 was 27.29 cents – this compares with a CPM of $7.19
  • The average CPC globally is about 28 cents
  • There were 2 days that had cheaper CPCs than other days of the week: Sunday and Monday
  • There were widely varying CPCs, depending on the target of your campaign (these are Q4 2016 data):
    • Reach – $1.01
    • Lead Generation – 79 cents
    • Video Views – 61 cents
    • Offsite Conversion – 37 cents
    • Impressions – 25 cents
    • Link Clicks – 12 cents
    • Post Engagement – 4 cents
    • Page Engagement – 3 cents
  • Average Cost per Like (CPL) in the USA was 20 cents, it was half the rate in Germany
  • Average Cost per App Install was different based on country, ranging from $5.40 in the UK to 44 cents in Brazil. It was $2.28 in the USA.

Facebook Bidding

There is so much space in customers’ feeds of Facebook to include ads and sponsored posts. This is particularly so for competitive keyword terms.

As a result, Facebook operates an auction system, where potential marketers set bids to take the right to run their advertising campaigns. Hence, there is no set cost of running ads on Facebook. It all depends on who else also needs to advertise on Facebook.

You start this process by setting a daily budget for your campaign. This is important. Without it, you would be in danger of finding a successful campaign that could cost you far more than you can afford.

You also choose whether you want to start your campaign today and run it continuously, or whether you want to run a campaign between the set start and end dates.

How the Facebook Ads Auction Works

Facebook does not just give space to the highest bidder to advertise. It wants to make sure that its users still enjoy the best experience. Therefore Facebook selects winning bids based on ads they believe to give the most overall value. It balances advertisers reaching people receptive to their message, with users who would be interested in seeing that message.

There are tons of ad auctions happening behind the scenes on Facebook every day. Indeed there is an auction occurring every time somebody opens their feed. Facebook weighs up all of the competing bids for a slot and chooses the ad it believes provides the best value to the targeted user.

Facebook analyzes three factors:

  1. The level bid by an advertiser
  2. How relevant an ad is to a person
  3. The likelihood that the person would take the conversion action optimized for by the ad

Facebook scores each ad, based on those factors above. They give the advertising slots on any feed to those ads with the highest scores.

This means that you do not have to get the highest bid to win a slot for your Facebook ads. They just need to be right for the audience.

If your ad ends up with the top score for a slot, Facebook will base what they charge you on what everybody was bidding. This means that you won’t necessarily have to pay your maximum bid amount.

Significant Factors Impact the Cost of Your Facebook Ads

1. Your Bid

When you set a bid amount for your ad, you can either choose to make the process Automatic or Manual. If you opt for Automatic, Facebook chooses the bid that allows you to gain the most ad slots at the best price. This means that Facebook attempts to spend your total budgeted amount, to maximize your results.

You can opt for a manual if you prefer to set a limit on how much you’re willing to pay for individual results. For instance, you could limit your bidding to $4 per click.

Keep in mind that if you set a very high manual limit, you are unlikely to end up paying that amount. Facebook adjusts the auction to make sure that the winning bidder pays no more than they have to.

2. Your Intended Audience

There is no point trying to boost your ads to everybody. No matter what your product is, there will always be some people more related to your campaign than others. Even big corporates like MacDonald’s limit their ad targeting to the kinds of people who are most like their typical customers.

Also, you need to know that you will have considerable competition in some niches. The more competition you face, the higher the ad cost will be. You can pay rates like $50 for particular legal-related terms.

The broader your customer net, the more firms, of different types, you compete with you for advertising slots.

custom audience on facebook-running Facebook ads

Of course, the target audience is a critical factor when it comes to your advertising, There is little point in advertising to a cheaper, but the irrelevant audience, if you believe your best market is too expensive to target.

Some relevant audience factors that can affect your advertising cost include:

  • Location
  • Age
  • Gender
  • Their interests
  • Connections (e.g., have they already liked your Facebook page)
  • Languages
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