How Much Does a Facebook Ad Cost?

 

There are 7 million active advertisers on Facebook trying to achieve their goals with a whopping 2.7B active users.

You just can’t ignore the opportunity Facebook offers. But, is it cost-effective? If so, how much does a Facebook ad cost? An advertiser must know the answers to those questions.

In this article, we’ll discuss:

  • How much does a Facebook ad cost?
  • What factors affect a Facebook ad’s cost?
  • How can you optimize Facebook ad spend?
  • How can you maximize your ROI (return on investment) on Facebook ads?

If any of those questions pique your interest, stick with us till the end.

Before addressing the elephant in the room, let’s first look at how the Facebook ad auction work.

Facebook Ads Auction: How Does it Work?

Understanding Facebook ads auction lets you craft ads that bring results cost-effectively.

The Facebook auction comes into play after an advertiser selects the audience, objective, budget, demographics, and creates ad content.

There are essentially 4 elements of your Facebook ad that determine its cost as well as effectiveness.

  1. Ad bid: The amount you are willing to pay for a particular action.
  2. Estimated action rates: Probability of your ad converting a viewer.
  3. Ad quality: Measured based on post-click experience and feedback.
  4. Ad relevance: The combination of estimated action rates and ad quality

What Facebook does is measures the total ad value based on estimated action rate, ad quality, and the bid amount.

The ad with the highest total ad value wins and Facebook puts it in front of the relevant audience.

Let’s now talk about the factors that affect a Facebook ad’s cost.

Factors Affecting a Facebook Ad’s Cost

The answer to the question “How much does a Facebook ad cost?” is that it depends on several factors. Optimization of these ad elements allows you to minimize your ad spend.

Let’s discuss all of those factors.

Ad Objective

While creating a Facebook ad, you need to select one of the three objectives.

  1. Awareness
  2. Consideration
  3. Conversions

Source: Facebook.com

The more you move towards the “Conversion” side of the sales funnel, the higher you’d have to pay Facebook to achieve your goal. Conversions like a catalog sale bring higher value to a business, hence the higher ad spend.

On the other hand, showing Facebook ads just to build awareness doesn’t bring you immediate profit, so it requires lower ad spend.

If you select a goal between the two i.e. “Consideration”, your expenditure will also be between the two.

Audience

Your target audience has a substantial impact on your ad expenditure on Facebook. The factors that affect it include the age, gender, size, and interest of your target audience.

Source: Facebook.com

Source: Facebook.com

For instance, for an ad that targets only men, the CPC (cost per click) would probably be lower than an ad that targets women.

Similarly, an audience with the age range 55 – 65 would cost you higher as compared to an audience in the age range 25 – 34 years.

The reason for that is the lower number of people in the 55 – 65 age range on the Facebook platform.

As far as attributes or interests are concerned, more specific means less ad spend, generally. So, the broader your audience is, the higher you’d have to pay.

When you target a broad audience, many of them won’t act on your offers, which can easily lead to higher expenditure. On the flip side, if your audience is more targeted, you’d be getting most of them to act!

This eventually means a higher conversion rate, hence a higher-performing Facebook ad.

Ad Placement

Ad placement means the locations where Facebook “Places” your ads. This location also determines how much you are going to pay Facebook for your ad.

These include:

  • Facebook newsfeed
  • Facebook messenger
  • Audience network
  • Facebook right column
  • Instagram
  • Instagram stories

Companies are willing to pay a higher CPC cost on Instagram than Facebook. So, if you run an ad on Instagram, you’d be investing an extra $0.80 on average. This increase is only because competitors are willing to pay more to get an ad space on Instagram.

You can show your ads on the audience network for an even lower cost than Facebook and Instagram. The audience network is a network of apps and websites outside of the Facebook platform.

While an advertiser can select the locations for their ad, Facebook recommends using its automatic placement feature for best results.

Ad Quality and Relevance

Your advertising cost also depends majorly on your ad’s quality and relevance. The higher the quality and relevance, the lower you’d have to pay.

So, if you manage to create top-notch ads, you might not have to pay a high ad amount to Facebook.

Let’s say you have created two ads with relevance and engagement scores of 2.9 and 8.0, respectively. The ad with the higher score will have a much lower CPC, thus reducing your ad spend.

Facebook assigns your ad a relevance and engagement score between 1 and 10, 1 being the lowest. It measures your ad’s engagement and relevance based on feedback.

It’s a good idea to keep a tab on your ad’s relevance and engagement score for any potential improvements.

You can access your engagement and relevance score through the following route:

  1. Go to the Ad Manager
  2. Select the Ad
  3. Click on the columns drop-down
  4. Click on “Customize columns”
  5. Pick “Relevance Score”
  6. Click “Apply” and view your score

Facebook keeps on checking user interaction and the relevance of your live ads. As an advertiser, it’s a good idea to have a critical eye on your ad’s relevance score and ensure that it’s performing well.

Ad Budget

While this is an obvious one, it still deserves a mention. When you are creating your Facebook ads campaign, you set a budget for it.

Your ad budget will eventually determine how impactful your ad campaign is going to be.

Source: Facebook.com

Of course, the higher your ad budget, the higher you are bidding for an ad click. This can lead to better ad performance.

That said, you can get good results with a low ad spend as well. Narrowing down the time for your budget can help you achieve that.

For instance, if you have $100 for a month, run the ad for 20 days. This would be $5 per day, which most social media strategists recommend.

Ad Bid

Your ad bid also impacts your overall Facebook ad cost. You can choose between the two ad bid strategies on Facebook.

  1. Lowest cost bid strategy: Facebook’s automatic bidding strategy minimizes the cost per action you have to spend. The main aim here is to use your ad budget efficiently. It’s the right way to go if you can trust the Facebook algorithm.
  2. Target cost bid strategy: This strategy lets you set your own cost per click and is also termed manual bidding. It normally works for actions like app installs, lead generation, conversion, or product catalog.

Source: Facebook.com

The automatic bidding model is more cost-efficient normally. Manual bidding almost always costs higher.

However, your bid amount isn’t the only factor when it comes to winning an ad spot against a competitor.

Facebook takes into account 3 things to select the winning ad:

  1. Bid
  2. Estimated action rates
  3. Ad quality and relevance

The ad with the highest total value wins. Facebook calculates this value based on the three factors above.

So, while a higher bid amount can boost your ad’s value, it increases your ad spend. The best way is to create a relevant and high-quality ad and optimize the bid strategy.

Industry

The industry you are trying to reach people in can also affect your ad’s cost. For instance, the CPC in the Finance industry is higher than the CPC in the apparel industry.

So, keeping an eye on the average CPC of your industry can help you create a realistic social media strategy.

Season

Shopping seasons tend to attract higher advertisement costs. As there are more shoppers in the market, more and more businesses compete for the ad spaces too.

When more businesses bid for ad space, it naturally gets expensive. Events like Thanksgiving, Cyber Monday, and New Year’s Eve are good examples.

While you might have to pay more for an ad on such special days, you also get in front of more prospects. So, a higher ad spend isn’t a bad idea here.

Final Thoughts

A Facebook ad’s cost can vary depending on several factors. These include:

  • Audience
  • Ad budget
  • Ad objective
  • Ad bid
  • Ad quality
  • Ad placement
  • Industry
  • Season

You can either let Facebook use the automatic bidding feature to spend your ad budget cost-efficiently. Or, you can do manual bidding, which leads to a higher ad spend in most cases.

Your ad’s total value is the measure of three metrics:

  1. Bid
  2. Estimated action rate
  3. Ad quality and relevance

So, while you can bid a higher amount to win an ad space, focus on your ad’s estimated action rate, quality, and relevance. This will allow you to keep your ad spend to the minimum while achieving your desired results.

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