When you start thinking of promoting your product on Facebook platform, the first two questions you might have are the following:
- Is it a good idea to advertise on social platform?
- How much does it cost to advertise on Facebook?
First one is easy to answer - there are millions businesses successfully advertising on Facebook and since it’s cheaper than Google Ads it’s certainly worth at least a try.
When it comes to the question of Facebook Ads cost, you will never find the exact pricing as it just doesn’t exist. But reading this article you will learn:
- what are average Facebook ads costs in 2020
- 7 factors influencing Facebook ads cost
- What is Facebook ads auction and how it works.
Let’s start with existing statistics.
Compared to Google ads, Facebook ads are way more profitable:
- CPC (cost per click) is up to 70% lower
- CTR (click-through rate) is 20% higher
- Conversion rate - up to 70% higher.
- CPC (cost-per-conversion) is 77% lower.
Average Facebook ads CPC is around $0,87, but it’s a very approximate number. CPC is different for every campaign objective. For example for traffic objective average CPC is about $0,15; conversion objective CPC is $1,01.
This table represents the results for March 2020 and we should keep in mind the coronavirus situation which certainly made its own adjustments (many marketers have shut their campaigns and some businesses just ceased to exist), but still.
Whichever indexes you consider, Facebook charges advertisers on a CPM basis. CPM is cost per thousand impressions, i.e how much is for showing your ad to a thousand people. Let’s take a look at the table of CPM by campaign objective 2020:
Engagement, traffic and reach objective CPMs commonly don’t exceed $3. Though the average CPM is $7,2, as you can see Reach objective CPM was about 5x cheaper. And although CPMs dropped during the pandemic meaning ads were cheaper to buy, CPCs dropped too, which means Facebook users are still likely to click on ads. Now the situation is turning back to normal, advertisers are returning to the platform creating increased competition.
The more clicks within a thousand impressions, the cheaper click and less CPC. On Facebook average CTR(Click-through rate) is 0,9%, usually it varies between 0,5-1,6%. That’s one of indexes you would prefer to see high.
Here are some more Facebook Cost-per-based averages:
And before we’re done with all these rough numbers, just to compare: in 2019, average CPM was between $10 and $13 (~$12.5 in November and December as the most “hot” months for advertisers); CPC varied between $0.77-0.99; average Cost per Lead was $3.645 (Lead Generation objective).
As i’ve already mentioned, there is no exact Facebook ads pricing, and the reason is there are several key variables that affect charges. Keep reading to learn what they are and how whole ads cost system works.
7 factors influencing Facebook ads cost
There are 7 factors that determine how much you will pay advertising on Facebook:
The first and the last one are namely the crucial metrics. Your ad budget is how much you are willing to spend on your Facebook campaign. Facebook offers you two ways of spending your money on ad campaigns - daily basis and a lifetime. The point of Facebook advertising is that it will never spend more than you want it to. If you choose, for example, to spend $5 per day, it will optimize to showing your ads for this daily amount. If you take a lifetime budget and set a number of days to run your ads, Facebook will distribute it as will see fit: some days more,some days less. We recommend spending not less than $5 daily as otherwise you’d face some performance limitations, get less impressions and clicks and so you would reach not all your target audience. Facebook needs enough data to optimize your campaign and get the best results for you.
There are 11 objectives to choose from when you are setting your ad campaign. The more valuable your ad goal - the more expensive ads. It makes sense since to just deliver your ads to more people (reach objective) is faster and cheaper in contrast with Conversion goal as there you choose Facebook to optimize for reaching people who are likely to convert.
The platform offers you three options where to run your ads - Facebook placements, Instagram and Audience Network. Instagram turns to be the most expensive - about $1.15 per click. Audience Network ads costs are the least but often resultless. Advertiser can manually choose placements to place the ads or leave it to Facebook. As Facebook says, “Allowing us to show your ad on Instagram and the Audience Network as well as Facebook gives you more opportunities to reach the people you care about across devices. It can also reduce your average cost per result. “
The audience you want to reach strongly influence your ads cost. It’s because of competition between marketers to reach a particular audience. Facebook Ads become more expensive when competition to reach the audience is high. Researches show that very specific audiences, targeting different ages and locations influence costs. If your audience is too narrow Facebook ads will cost you more, as well as if it’s too broad. Custom audiences usually require more budget.
Season and industry
How much Facebook ads will cost also depends on the season and industry. On the holidays eves,for example, advertisers start promoting much more actively and competition increases. November and December are usually the most expensive months. Summer isn’t a “hot” season for the most businesses and many industries take an advertising time-out, while businesses selling summer goods and some others are prospering.
Preparing an ad campaign, you can set a bid manually or automatically. Automatic is when Facebook sets a bid for you to maximize the desired results. Manually you can set a higher bid showing how you’re interested in showing your ad. Don’t fear of bidding high amounts - you’ll not actually pay that expensive. If you bid $3 and the nearest competitor’s bid is $1.72, you’ll pay $1.73 for the ad placement. Bid is a component of an Auction which actually defines the costs of your advertising on Facebook.
Auction is nearly the most important factor which influences Facebook ad costs. Facebook obviously wants its users to spend time on site and have no reasons to leave the platform. So it considers both sides advertisers and users and provides the overall value - advertiser promotes to people who are likely to be interested in his product/service, and users see only what they find valuable.
Facebook estimates how likely the person will take the action you are optimizing for with your ad (this is called Estimated Action Rate).
When your campaign started, Facebook needs about 500 impressions to assign your ad a Relevance Score. The quality and relevance of your ad get estimated based on ad’s performance. Facebook considers both positive (e.g. number of clicks, video views, or app installs) and negative feedback (e.g. number of people who clicked “I don’t want to see this” on your ad). The bigger ads Relevance Score, the lower ads cost.
Now you have a general picture of Facebook advertising costs and know you can spend $5 for ads as well as $50,000.
Aside from ad costs there is also ROI to take into account.
ROI = (Return – Investment) / Investment
If you have an idea how much each client spends on your service, you can determine if each conversion is worth the money you spent. A $10 conversion seems so expensive, but in case your customers spend not less than $30, that’s already a three-time return.
Here is an article on how to reduce ads costs and make sure you’ve done your best.