How much do Facebook ads cost and how much budget should you allocate to Facebook ads?
In this article, we break down cost benchmarks, how to set your Facebook budget, and how the Facebook auction works. We also delve into other factors that influence the cost of Facebook ads, so you can plan accordingly.
The Short Answer: Facebook Ad Cost Benchmarks
Facebook ad costs differ greatly across industries and are influenced by the chosen objective you optimize your campaign towards.
Here are high-level Facebook ad cost benchmarks to give you a ballpark range by objective:
- When optimizing for traffic, expect to pay between $0.90 - $1.75 per click.
- When optimizing for video views, expect to pay between $0.02- $0.06 per 6 to 15 sec video view.
- When optimizing for engagement, expect to pay between $0.10 - $0.50 per engagement.
- When optimizing for reach, expect to see a Cost Per Thousand Reached (CPM) between $3 - $8.
- When optimizing for conversions, your CPA will vary.
What Should Your Budget Be for Facebook Ads?
When boosting posts, Facebook recommends a minimum daily budget of $10/day.
When running ads, Facebook recommends setting your ad set budget to 50x your optimization goal. For example:
- An advertiser is optimizing their campaign towards Add to Carts.
- On average, it costs $1 for a customer to add an item to cart on the website.
- There are two ads sets within the campaign (one for lookalike audiences and one for general audiences).
- The campaign budget should be set to at least $100/day or $50/ad set. This ensures that the system is collecting enough data to optimize towards the desired goal across the ad sets.
So how do you determine if you should spend more or less on Facebook ads? Ultimately, your Facebook budget should be determined by measuring Cost Per Acquisition (CPA) and Return on Ad Spend (ROAS). A healthy Return on Ad Spend is 4 to 1 on Facebook – meaning you will make $4 revenue off every $1 spent on your ads (400%).
Assigning a target Cost Per Acquisition for each conversion can be useful. An online university may be willing to pay $20 for every phone call, and $200 for every online application, because online applications are 10x more valuable to the business. You can scale your budgets as long as you continue to stay profitable.
How Does the Facebook Auction Work?
Facebook uses an auction to determine the best ad to show at any given time. Advertisers competing for the same target audience will show within the same auction. For example, if one advertiser targets hikers in Canada and another advertiser targets females interested in Hiking Equipment in Toronto, they will qualify for the same auction.
To determine the winner of the auction, Facebook measures bid, estimated action rates and ad quality for all eligible ads:
Bid: How much an advertiser is willing to pay for their desired outcome, which may be a click, an engagement, a video view, a form fill, a purchase, etc. You can set a bid cap to limit how much you pay for your desired action.
Estimated Action Rates: How likely your ad will drive the desired outcome. Facebook estimates the expected number of actions you will get on your ad.
Ad Quality: How relevant and useful your ads and landing page are to your target audience. Facebook will assign a quality ranking from 1-10 for each ad you run.
The ad with the highest total value (the best combination of these three factors) will win the auction.
What Other Factors Influence the Cost of Ads?
There are a number of other variables which influence how much Facebook ads cost:
1. Audience Targeting – How Narrow Is Your Audience?
The Facebook algorithm performs best when you combine many lists or interests into the same ad group. This is a new approach – in previous years, many advertisers broke out dozens of ad sets to collect data about individual audiences.
As a general rule:
- Targeting multiple relevant medium/high volume interests into one ad set is better than targeting just one small, niche interest.
- Targeting multiple high value custom audiences into one ad set is better than targeting just one.
- Double layering (i.e. layering interests on top of a lookalike audience) will drive up your Cost Per Clicks. Avoid layering audiences on top of each other unless this is necessary.
- For Remarketing audiences, expect a higher Cost Per Click (CPC), as this forces your budget to be spent on a smaller pool of people. However, your Remarketing campaign may convert at a lower Cost Per Acquisition (and perform better overall) as it is targeting audiences lower in the funnel.
You can checkmark “Detailed Targeting Expansion” in your ad set to let Facebook reach people beyond your selected targeting only when it will drive performance.
2. Seasonality & Time of Day – How Busy Is the Auction?
CPCs tend to rise during key times of the year, including Valentine’s Day, Mother’s Day, Black Friday, Cyber Monday and the Holiday Season. During high volume weeks, expect to pay more for your ads, as the auction is inundated with many advertisers.
3. Competition – Who Else is Bidding on Your Target Audience?
CPCs will rise when competitors are bidding on the same audiences as you. Determining factors include age, gender, language, interests, and connections.
Targeting younger age demos (age 14-18) may be more expensive than targeting older age demos, as this is a highly sought-after audience. When setting your demographics, start by setting a wide range (targeting both genders, a large age range, etc.) as the system will naturally optimize towards your chosen objective. Later, you can zero in on the demographics that convert best.
4. Placement – Where Are Your Ads Showing?
Is your business only showing ads on Instagram Stories? This will drive up your cost, as you are forcing the budget to spend on just one placement. Facebook recommends setting your placements to “Automatic Placements”, as this allows the system to spend optimally across Facebook, Instagram, the Audience Network, and Messenger.
Now that you know how much Facebook ads cost, get in touch to learn more about how to use Facebook ads as part of your marketing strategy.
