Facebook advertising is a regular feature in many small businesses’ marketing plans. There are 3.7 million businesses running ad campaigns through Facebook, spending a combined $5.5 billion to reach potential customers using the social media platform.
Numbers like that are impressive … but intimidating. So much competition for attention on the platform means ever-increasing costs. That’s not to say you need a million-dollar Facebook ad budget to drive traffic, leads, and sales through the app.
This guide shares how much you should budget for Facebook ads, with tips to reduce the cost of your campaigns without sacrificing results.
Maximize your Facebook ads return on investment 💰
What determines your Facebook ad cost?
Despite what you see in your news feed, Facebook doesn’t want to overload its audience with adverts. There are limited advertising placements for businesses to sponsor across Facebook and Instagram.
To determine which advertiser wins the spot, Facebook’s advertising algorithm enters them into an ad action.
Every advertiser submitting their campaigns competes for a specific ad placement in front of their target audience. If two beauty brands are reaching millennial women in the news feed, for example, they compete in the auction together.
Price isn’t the only factor taken into consideration when deciding on an auction winner. To award the ad spot, Facebook determines an ad’s total value—in other words, how much the target audience would like or engage with the ad.
The algorithm looks at ad quality (including previous feedback) and estimated action rates (how many people will take action—like, share, or comment—on the ad). The campaign that ticks these three boxes the best has the highest value and wins the ad space.
Auction aside, many advertisers find their Facebook ad costs fluctuate throughout the year.
The more advertisers that compete in an auction, the higher your Facebook ad costs will be. Facebook advertising in industries like finance, insurance, and home improvement tend to be more expensive for this reason.
Seasonality plays a role, too. Ad costs historically skyrocket throughout the latter months of the year. Black Friday and Christmas-induced online shoppers lead more advertisers to the platform, increasing the number of competitors in an ad auction.
How much does Facebook advertising cost?
Research suggests that advertisers should expect to pay: $0.94 per click or $12.07 per 1,000 impressions. Facebook bills advertisers based on two metrics: cost per click (CPC) and cost per mille (CPM)—otherwise known as cost per 1,000 impressions.
Average CPC for Facebook ads
As mentioned, seasonality and competition both play major roles in the cost of a winning Facebook ad auction bid—especially since a website visit is the desired outcome for many advertisers. Run campaigns in the first half of the year if expensive ad costs are a concern.
Average CPM for Facebook ads
Many online stores use Facebook as a platform to build brand awareness. That’s sensible—the app boasts 2.8 billion monthly active users, many of whom use the social media platform to engage with their favorite brands.
If reach and awareness are your goals, expect to pay $12.07 to reach 1,000 people through the Facebook app.
Average cost per lead (CPL)
While there are only two metrics that determine how advertisers pay for ads, other financial metrics come into play when understanding the cost of your Facebook ad campaigns. Brands use the platform to generate email subscribers—potential customers they can sell to in the long-term without factoring in repetitive ad costs.
Research pits the average cost per lead for a Facebook ad at $5.83. But get your audience targeting right and this could be cut dramatically.
Alex Trpkovic, Marketing Director at Growbuds, explains how the brand ran “a Facebook lead ad campaign in early to mid-October, just before the Black Friday and Cyber Monday holidays.
“The intent of the campaign was to have as many people subscribe to our email newsletter,” says Alex. “We spent a little over $4,000 and gained over 2,600 new email subscribers, which have just recently 7x’d our ad spend on that campaign. We have a special segment for these subscribers to track the revenue they made.
“Since we didn’t care about CPC or CPM, the metric we valued most was cost per subscription—we tracked it to be around $1.55 per subscriber.”
💰Worried about overspending? As part of your bidding strategy, set a maximum daily budget and bid cap for your advertising campaigns. You’ll only enter auctions at your maximum bid, so you’ll never overpay to run the ad.
How to reduce your Facebook ad cost
As soon as Facebook becomes a reliable source of new customers, playing around with digital marketing budgets feels risky. You don’t want to shut the tap and let a competitor claim the ad spots proven to work for your business.
The good news is, a few small tweaks to your campaign can bring down advertising costs without sacrificing results, leading to better return on your investment. Here’s how to do it.
- Select the right campaign objective
- Go narrow with audience targeting
- Run retargeting campaigns
- Make your campaigns relevant
- Reduce ad frequency score
- A/B test ad creatives and placements
- Focus on post-click experiences
1. Select the right campaign objective
The first step of creating a new Facebook ad is to select a campaign objective. This is the overarching goal of your campaign—the result you want to achieve from buying ads on the platform.
Experimenting with these objectives, and being crystal clear on the outcome you want to achieve, impacts the cost of advertising on Facebook.
The algorithm pairs your objective with users who fit that criteria. If you’re bidding for sales, for example, your ad is more likely to be shown to Facebook users who’ve made purchases through the platform before.
As a result, the average CPC for each campaign objective differs. AdEspresso found that campaigns with the goal of awareness would pay $1.85 per link click. However, choose the link click goal and Facebook will find users in your target audience with a history of clicking ads—hence why the CPC for these campaigns is just $0.21.
David Sweet, VP of Marketing at Eterneva, adds, “Making a flawed choice in an ad objective, for instance picking lead generation, when your goal is brand awareness, can have a negative impact.
“This mistake is often compounded by not understanding your target audience prior to choosing a campaign. Doing your due diligence in identifying your target audience, and matching your marketing goals to campaign objectives before you begin, will increase engagement, add value, and lower cost.”
2. Go narrow with your audience targeting
Facebook’s algorithm considers ad relevance score when calculating bids. The smaller and more relevant your audience is, the more chance you have of winning the ad auction.
“Start your targeting a bit broader than you would initially think,” says Josh Jurrens, founder of Caliper Marketing. “This gives Facebook a bit more room to find users most likely to take your intended action before narrowing your targeting. Starting too narrow will result in high costs and fewer conversions.”
Let’s put that into practice and say you’re an online business selling quick, at-home coffee machines. You’re seeing expensive Facebook ad costs with this custom audience:
- Based in the US
- Aged 18+
Sales data shows most of your customers are based in Los Angeles; customer surveys show they purchase from you because they don’t have time to grab a Starbucks coffee on their morning commute.
Taking that information into consideration, you narrow your target audience down to people who fit this criteria:
- Based within 10 miles of Los Angeles
- Interest in “Starbucks”
- Annual income of $75,000+
Just like that, your audience size dramatically shrinks, but your ad relevance score increases—especially if you use that customer data in your ad creative (more on this later.)
3. Run retargeting campaigns
The Facebook pixel collects data about your website visitors and pairs it to a Facebook profile—including the pages they visited, which items they added to their online cart, and how long ago they visited. All of that data can be used to run personalized retargeting campaigns.
“In my experience, I have found that remarketing ads were the cheapest to run,” says Usama Ejaz, co-founder and CEO of SocialBu, in an email interview. “All other ad types were simply very expensive, even when compared to Google ads.
“Let’s say you want to run a campaign for sign-ups or orders. If you run ads for conversions, it might become really expensive. But if you run an ad for simple clicks to a relevant blog post of yours, it can be less expensive. Now, combine that with a remarketing ad that targets the visitors to your blog post used in the first ad and you will save a lot of $$.”
Other smart ways to retarget Facebook users and decrease ad costs include:
- Dynamic product ads. Show the products a shopper had in their online shopping cart but didn’t purchase. Reminding them of what they bought could be the nudge they need to head back and purchase.
- People who visited a specific landing page. For example, people visiting your coffee machine and coffee pod categories see two different ads.
- People who visited your site in the last 30 days. The less time between visiting your website and seeing a retargeting ad, the more likely someone is to remember your brand.
Note: When running retargeting campaigns, regularly upload your customer list and exclude them from your ad set. That way, paying customers don’t stay lumped in the same retargeting audience as leads.
“Double down on audience types you exclude. Some brands worry they might be excluding potential customers, but if there are certain demographics or interests that might indicate a poor fit for your product, exclude them.”
4. Make your campaigns relevant
Once you’ve got your audience niched down, use the information you’ve collected about them to make your campaign relevant. (This is why retargeting campaigns work so well—you’re showing personalized ad creatives based on the experience they’ve had with your brand.)
Dig deep into customer research and figure out their:
- Tone of voice
- Pain points
- Goals and aspirations
- Favorite influencers
Use this data to produce your ad—everything from the ad creative to your message is determined by your customer data.
Continuing with the same example: post-purchase surveys show 60% of previous customers purchased your coffee machine because an influencer recommended it. So, partner with said influencer to produce a short clip endorsing your product. Run the video ad to your target audience since they’re already likely to know, like, and trust the influencer you’re partnering with.
Don’t have time or budget for influencer endorsements? Replicate your audience’s tone of voice to improve relevance score (and in turn, reduce advertising costs). Magic Spoon, for example, promises customers can “up their breakfast game” by purchasing its cereal.
5. Reduce ad frequency score
One drawback to niching down your Facebook advertising audience is that campaigns quickly become repetitive.
A potential customer that sees your ad several times in their news feed will likely grow frustrated with the repetitiveness. (And let’s face it: if they don’t engage with your ad the first few times it appears, they won’t on the 11th.)
Facebook’s advertising algorithm considers ad frequency scores for this reason. It favors newer, fresher ads that haven’t been exhaustively shown to the target audience.
Keep an eye out for frequency scores in your reporting dashboard. Once it creeps beyond two or three, refresh the campaign with new ad copy, images, or videos. The goal is to keep things interesting.
“Your ad will be seen by the same people repeatedly after it has been running for some time. Therefore, you will notice that your advertising costs will be lower if your frequency is as close to one as possible.”
6. A/B test ad creatives and placements
Facebook advertising is a mixture of science and art. With so many variables at play, it’s impossible to know what the “perfect” ad is—one that drives results for your online store without costing a fortune. But you can get closer to creating it through A/B testing.
“Reducing Facebook ad costs is all about refining your target audience and using the best possible ad images, videos, and copy. We have found that investing in creating high quality video ads has reduced our costs the most.”
Facebook’s built-in A/B testing feature helps advertisers find winning combinations. So, for each campaign, experiment with the following elements and monitor the impact on your ad costs:
- Ad creatives. Do images, videos, or carousels do a better job of engaging your audience? How about long-form versus short-form content? Influencer-created content or user-generated visuals?
- Placements. The news feed is the first port of call for advertisers, but test whether your ads get more attention elsewhere—like the audience network. Data suggests in-stream videos are cheaper if you’re billed based on reach. Instagram Stories are also worth exploring if your priority is clicks at the lowest cost.
7. Focus on post-click experiences
Driving traffic through Facebook ads is only half the battle. Presenting potential customers with a slow-loading website, or one with a generally poor user experience, isn’t going to drive revenue—no matter how eye-catching your campaign is.
Here are some simple ways to improve the post-click experience so people visiting your site through a Facebook ad convert:
- Direct shoppers to personalized landing pages. We’ve all been there: clicking a product highlighted in a Facebook ad, only to be diverted to the brand’s homepage and a search bar to find it yourself. Make product discovery easily accessible by always pointing to the product page.
- Make it mobile-friendly. The vast majority (98.5%) of Facebook users consult the app via a mobile device. Make sure your online store is responsive and adjusts to a smaller screen size.
- Offer one-click checkout. Less friction at the checkout means less chance of people dropping off. Ecommerce stores using Shop Pay see 1.91 times higher mobile checkout-to-order rates than those with regular checkouts.
“The best Facebook ads in the world won’t convert until you have a steller website and post-click experience that exceeds customer expectations.”
The cost of Facebook ads is always changing
Facebook is a valuable marketing tool for businesses of all sizes. You’ll find customers of various income levels, interests, and locations using the platform—many of whom discover new products through ads in their news feed.
Experiment with different campaigns and creatives, benchmarking them against the Facebook advertising cost averages we’ve shared in this article. Winning, low-cost advertising formulas tailored to your business and audience will soon start to appear.