By the time you’re through with this guide, you’ll have learned:
What are the average Facebook ad prices in 2020?
How does the Facebook ad auction work?
What’s the best way to set up your Facebook ad bidding for success?
How to lower the cost of your ongoing Facebook ad campaigns?
The theory behind Facebook Ads cost is one of the most important topics to understand before investing in Facebook advertising, so make sure you save this article and check back often to benefit from this full guide. 🤓
Let’s dive in!
What is the average Facebook ads cost in 2020?
While Facebook doesn’t disclose any data on the average advertising costs, there are, luckily, other kind brands that do: WordStream, AdEspresso, and most lately, Revealbot.
You’ll also want to note another metric many advertisers care about: the CPM, or cost per 1,000 views.
In 2020, it cost, on average, $7.90 – $9.90 to reach one thousand people with your ad.
However, the price can vary when you advertise certain content types. For example, if you’re promoting a catchy video, a blog, or some news articles, the CPM can be significantly lower. In contrast, we’ve also seen some cases with a CPM of $50, but the ads still paid off because the audience was very narrow.
However, look at the chart below, which shows the average cost-per-click of different Facebook ad campaign objectives. In direct contrast with CPM costs, Conversion-focused campaigns have a lower CPC, while the Reach objective has crazy high CPC figures.
This cost breakdown makes sense. People browsing Facebook and Instagram are usually in ‘leisure mode’ and disinterested in business products. However, this is not to say that B2B Facebook ads can’t have a positive ROI. There are plenty of SaaS and B2B companies successfully advertising on Facebook.
Some of the seasonal holidays we notice inflated Facebook ad costs include Black Friday, Cyber Monday, Thanksgiving Day, and Post-Holiday Sales. Prices also increase during local elections.
Pro tip: If your sales are not tied to the holiday period (e.g., you’re selling B2B services), it may make sense to turn off your ad campaigns for a week or two to avoid skyrocketing advertising costs.
Now that you know the Facebook ad cost benchmarks let’s learn how the Facebook ad auction works and what influences the price you pay to reach your target audience. 💰
Let’s take a look at what each of the items signifies. 👇
Advertiser bid – that’s the maximum cost-per-action that you can set on the ad set level. You can also use automatic bidding so that Facebook’s algorithms will determine the best sum to bid at any given auction.
(We recommend using the automatic bid, especially if you’re unsure how much an ad click should cost.)
Estimated action rates – This number shows how likely a person is to take the action you’ve optimized your ad campaign for. Facebook needs at least a couple of results per day to estimate your campaigns’ action rates. If the estimated action rates are high, you will have lower cost-per-result.
User value – The user value is an indicator of whether your ad and offer are relevant and useful to people seeing your ads. For example, if your ad has lots of negative feedback, it may decrease the ad’s total user value. On the other hand, getting many likes, shares, and clicks will increase the ad’s user value.
Every time a Facebook ad auction occurs in the background, Facebook will standardize the above three factors and combine them into a total competitive advantage. The ad with the highest total value wins and will be shown to the target audience.
The ad with the highest bid and relevance wins the auction – Image source
The Facebook Relevance Score
According to Facebook, they try to balance two things:
Creating value for advertisers by helping them reach people in their target audiences.
Providing positive and relevant experiences for people using Facebook, Instagram, or Audience Network.
“The best way for us to do this is to hold an auction in which both interests are represented. That way, advertisers are reaching people receptive to their ads and users are seeing something they’re interested in. This is different than a traditional auction because the winner isn’t the ad with the highest monetary bid, but the ad that creates the most overall value.”
Want to win all the Facebook ad auctions? With the right bidding, masterful targeting, and high-quality ad creatives, you can! 🤜💥🤛
🏆 How to set up your Facebook ad campaign bidding?
When creating your Facebook ad campaigns, there will be many bidding and budget-related decisions you’ll have to make.
Once you start setting up a new campaign, you will have to decide about the following questions:
What should be the budget of your Facebook ad campaign?
Should you use Daily or Lifetime budgeting?
Is an automated or manual bid strategy better?
Should you use the Facebook campaign budget optimization?
When should you add spending limits to your ad sets?
There will be a lot of bidding options to choose from – Image source
So what are the best practices for Facebook ad bidding in each of these steps? Let’s explore and take a look at the full campaign set-up process.
1. What should be the budget of your Facebook ad campaign?
The first decision-making point will be your Facebook ad budget: How much do you want to spend?
In general, the higher your ad budget, the more results you will get. Also, ad campaigns with higher budgets tend to get better results at a lower cost – that’s because the Facebook algorithm will have more data to learn from.
⭐ 5 best practices for reviewing and improving your existing Facebook ad campaigns
If you have already invested in Facebook ad campaigns for a while, you can evaluate your results in the Ads Manager.
Up next, we’re going to share some of the go-to strategies that we use when working on our clients’ ad accounts at Linear Design:
Conduct a basic Facebook ad campaign review every week
Use different report breakdowns to understand your results better
Keep your eye on your Facebook ad campaign’s frequency
Re-budget and re-optimize your Facebook ad campaigns for better results
Scale the ad campaigns that get the best return on ad spend
1. Conduct a Facebook ad campaign review every week
The best time period for regularly reviewing your Facebook ad campaigns is one week.
That’s enough time for the campaigns to collect enough new data, and you won’t spend too much on underperforming ads, should the campaign fail to deliver anticipated results.
Facebook algorithms have a learning phase. This means that every time you make a change to a campaign, you need to wait for at least 48h to start seeing realistic results.
Facebook ad campaigns have a learning phase
According to Facebook: During the learning phase, ad sets are less stable and usually have a higher cost-per-result.
Usually, with a daily ad campaign budget higher than $50, your campaigns should get through the learning phase in 7 days, meaning one week is a good period for reviewing your results and making improvements to your ad campaigns.
When doing your weekly review, here’s what you should check:
What’s the cost-per-result of each ad campaign? Is it matching your expectations?
How were your ad campaigns doing in the past week compared to the week before? Are the results getting better or worse?
Are there some ad campaigns, ad sets, or ad creatives that are clearly outperforming the rest? Can you identify what makes them succeed, and could you apply this learning to other campaigns?
Pro tip: Customize your Facebook Ads Manager reports and set the new report as the default option. This way, you can see all the relevant metrics right away whenever you open the Ads Manager.
Customize your Facebook ads report
To keep your Facebook ad costs on a profitable level, you should take some action about each campaign with a negative ROI (return on investment). You could either pause it, lower the budget, or optimize it with better targeting, creatives, or other aspects.
2. Use different report breakdowns to understand your results better
If you see some campaigns delivering mediocre results, you can dive deeper to understand why.
Use the breakdown option to get more insight into your campaign
The most useful breakdowns for improving your ad campaigns are:
For example, you might discover that 90% of your product purchases come from women. Or that ads placed on Instagram stories and feed deliver much better results.
Based on these findings, you could edit your ad set configuration and leave out some of the lower-performing audiences or ad placements, leading to better results and lower ad costs.
However, be careful not to over-optimize your campaigns! If there’s only a slight difference between ad placements or you notice that Facebook isn’t spending any budget in lower-performing breakdown categories, you can keep using the automated set-up.
3. Keep your eye on your Facebook ad campaign’s frequency
Everybody loves ice cream. But if you eat too much of it, you’ll get a sugar overdose.
The same rule applies to Facebook ads: if you see some brand’s ad too often, it will hurt your perception of the company.
One of the reasons that your Facebook ads cost is increasing could be a too high frequency. It just doesn’t make sense to pay to Facebook for reaching the same people for the 10th time.
To review the frequency of your Facebook ad campaigns, go the Facebook Ads Manager, set the reporting period to the past 30 or 14 days, select the “Delivery” report and review the frequency per ad campaign.
Review the frequency of your ad campaigns
A frequency lower than 3 points shows that you’re still reaching a fresh audience.
A frequency between 3-6 points means that you may start to near the saturation of the target audience. Keep your eye on whether the CPC and CPM have gotten higher in the past seven days.
A frequency higher than 6 points means that you need to make drastic changes to your ad set. You could either increase the target audience size or update your ad creatives.
4. Re-budget and re-optimize your Facebook ad campaigns for better results
If you review your weekly ad results and are thoroughly unhappy with the results, you might need to reshuffle your bidding strategy.
Here are some potential changes you could make to your Facebook ad campaign structure and bidding to get better results:
Re-allocate your budget between the campaigns, adding more budget to the top-performing campaigns and reducing the budget of under-performing campaigns.
Set the minimum spend limits to best-performing ad sets. This is relevant if you’re using a campaign-level budget and want to assign more budget to your top ad sets.
Change the ad delivery optimization goal. For example, if you have optimized Landing Page Views, change it to down-the-funnel events like Registration or Purchase so that Facebook will show your ads to a more relevant target audience.
5. Scale the ad campaigns that get the best return on ad spend
If you are particularly happy with some ad campaigns’ performance, there’s no reason not to invest more in it.
Scaling Facebook ads is a fine art, and if you do it too rapidly, you might end up ruining the ad campaigns’ good performance.
Keep in mind these three best practices that we covered in detail in this article:
1. Increase your ad campaign’s budget gradually, not all at once.
To ensure that your ad campaigns’ learning phase is successful, add the extra budget in 20% increments every 24h.
2. Use Facebook’s automated rules to automate the budget increase.
Facebook allows advertisers to create custom rules. For example, one that increases the budget automatically by x% when an ad set meets certain conditions.
3. Increase your target audience by expanding interest-based targeting and adding Lookalike audiences.
We recommend keeping your Lookalike and interest-based target audiences larger than 20,000 people.
⭐ 5 tips for optimizing your ad campaign’s target audiences
One of the most important aspects of your Facebook advertising strategy is the target audience. If you accidentally target people with no interest in your product or service, you’re also unlikely to get any results.
For example, most fashion companies only target a female audience as they’re times more likely to purchase something.
This Facebook ad is targeting a female audience
Luckily, Facebook has the best target audience building tools in the industry. You can create broad interest-based audiences, Lookalike audiences of existing customers, and retarget people who have already engaged with your product.
While there are a thousand different options to narrow down your Saved Audiences, the general rule is that “less is more.”
Do not over-optimize your interest-based audiences.
A good Facebook Saved audience size for an ad campaign with a $500-$2000 budget is between 10k-50k people.
If you’re unsure who is your buyer persona, try asking yourself this question: Who is your ideal customer? – What’s their age, gender, social background, interests, and location (urban vs. rural)? Are they tech-savvy, what other brands might they like, etc.
Using the AND/OR audience targeting features, you can reach people interested in A, B, C, and D and…
Use the AND/OR features to narrow your audience
However, we always recommend keeping the audiences rather broad and letting Facebook’s algorithms to the final round of optimization.
3. Use the “frequent shoppers” targeting option
One of the secret sauces of the leading Facebook advertisers is the “engaged shoppers” behavioral targeting option.
It allows you to target people most susceptible to buying after they see something promoted in ads. This is especially relevant to B2C brands selling low-cost consumer products.
You can find the “engaged shoppers” identifier when simply typing it in the interest-based targeting options’ search box.
Target engaged shoppers
In addition to the “engaged shoppers,” you can find interesting behavioral targeting options such as “frequent travelers” and “Facebook page admins.” Browse around to uncover the audience segments that are likely to be interested in your offer.
Speaking of Facebook ads cost, the remarketing campaigns’ CPC and CPM are often more expensive than those of your prospecting campaigns. That’s because you are targeting a relatively narrow set of people.
However, when working on our clients’ ad campaigns, we see that remarketing campaigns usually have 2-3x higher ROAS (return on ad spend) than any other campaign.
A study by Adobe found that 40% of sales revenue in the US comes from remarketing or repeat purchasers, while they represent only 8% of all website and store visitors.
When it comes to Lookalike audiences, we recommend adding a few ad sets with Lookalike audiences to your primary Prospecting campaigns.
For some brands, Lookalike audiences bring the results at a lower cost. However, we have also seen cases where broad interest-based audiences outperformed the Lookalikes in terms of the number of results and cost per result.
Here are a few suggestions for high-performing Lookalike audiences:
Create a 2% Lookalike audience of the 10% of your top-paying customers.
Create a Lookalike audience of people who have made at least two purchases over the past 180 days.
Test a 2%, 5%, and 10% Lookalike audience of your entire global customer base.
5. Match ad creatives with their target audiences
Once you get started with Facebook advertising, there is virtually no limit to how many new ad creatives you can test inside the ad campaigns.
Some advertisers prefer to optimize for quantity over quality, creating many different Facebook ad visuals, all with a similar message. This makes sense for brands like Lyft or Uber that have one specific product use case: ordering a ride.
A typical Facebook ad by Uber
However, once the product portfolio diversifies, brands need to start segmenting their target audiences. For example, when Uber launched the Uber Eats product, they created a separate Facebook page and a completely different set of ads.
Uber Eats ad on Facebook
Even if you don’t have significantly different product verticals, you still have multiple audience segments to show slightly different ads to.
Let’s take Shopify as an example. The e-commerce platform has a wide variety of different customer personas, from plant nerds to fashionistas to DJs.
The easy option would be to show a generic ad to a broad target audience. However, if Shopify would create 5-10 ad sets that each target people with different interests, they can also create a more relevant ad creative for each user group.
For example, below, you can see a Shopify ad that’s clearly targeting musicians.
Shopify’s ad for musicians
And here’s another Shopify ad that is clearly addressing online food businesses.
Shopify’s ad for online food stores
Pro tip: Create multiple Facebook ad sets under one campaign, each targeting an audience with different interests. Then, add to each ad set creatives that are relevant to those particular audiences. Your Facebook ad costs are bound to go down. 📉
⭐ 5 suggestions for lowering your ad cost with a higher relevance score
Now that you’re aware of all the technical aspects of Facebook ad budget optimization and the most profitable target audiences, let’s take a look at how to create stronger ad creatives and landing pages.
We have seen Facebook ad campaigns where changing the creatives helped improve the CPC and cost per result 10x. So it’s no small deal to get the best-in-class Facebook ad visuals.
Consumer Acquisition’s study found that images are the most influential part of your Facebook ads. They’re responsible for 75%-90% of performance. If your Facebook ad creatives fail to grab attention, you won’t get any sales.
So… Are you ready to crack the secret to high Facebook ad relevance scores?
Get started with these five best practices:
Add the key value proposition to your ad image
Promote discounts and limited-time offers
Create Facebook ads for all placements, including video
Update your Facebook ad creatives regularly
Improve your landing page and make sure that it matches with your ad
Crack the secret to high Facebook relevance scores – Image source
One of the gravest mistakes that Facebook advertisers make is being unclear what’s being promoted.
According to the advertising legend David Ogilvy, writing a good advertisement starts by studying the product – you have to know what makes it beneficial to the user and different from your competition.
A strong Facebook ad value proposition is:
Short, up to 50 characters: it has to fit into the ad image.
Clear and straightforward: so that anyone can understand what’s the benefit that you’re advertising.
Amplified by the ad creative: your ad’s value proposition and visual need to match.
Let’s take a Facebook ad by Jobbatical as an example.
The ad features a logo (always include a logo in your ad creatives) and a captivating offer: “Travel. Work. See the world.” Now that sounds like a nice deal.
A good Facebook ad example
And on top of having a strong value proposition, this ad is featuring beautiful Paris panorama. It would be hard to find a better example of ad copy and image working together so well.
Aim for Facebook ad creatives where text + image amplify each other.
2. Promote discounts and limited-time offers
If your Facebook ads have a low CTR (click-through rate), it ill also lead to higher CPM and CPC costs. That’s because Facebook will think that your ad is irrelevant to your target audience.
One of the surefire hacks to improve your ads’ engagement rate and relevance score is… You guessed it! – Promoting a special deal.
For example, Cos is promoting a summer sale with up to 50% off.
Advertise special offers
You can even do a 1-week test to see if a promo offer helps lower your Facebook ads cost.
Here’s how to set up a 7-day discount campaign test:
Select a Facebook ad campaign that has already been running for at least one week.
Editing the exact same ad creatives, add to them a discount offer, both to the ad images as well as text.
Make sure that you also activate the discount offer on your website!
Run the campaign with new ads for at least seven days, then give it a short 3-day cooldown period before you compare the results.
Check the Facebook Ads Manager reports and compare the two weeks’ results: did your key ad metrics (CTR, CPC, the number of purchases) improve?
3. Create Facebook ads for all placements, including video
Most advertisers only upload the ad creatives in one format: landscape or square.
However, with Instagram Stories soon outgrowing the feed placement, you should also work on a unique ad creative for the Stories.
Most of the big global brands create custom ads for Instagram and Facebook Stories.
Take Spotify, for example: they have plenty of ads in 1:1 square format that is perfect for Facebook and Instagram feeds…
Spotify Facebook ad for feed placements
… And they also have custom-made ads to be shown in Instagram and Facebook Stories placements.
Spotify Facebook ad for Stories placements
Here are the top Facebook ad sizes that cover almost all placements:
Landscape: 1200 x 628 pixels
Square: 1080 x 1080 pixels
Portrait: 1080 x 1920 pixels
You can upload multiple ad creative formats when editing your ads in the Ads Manager.
What about video ads? 🤔
We usually recommend that advertisers add at least one video creative per ad set so that they will get access to all the available ad placements.
In a recent LinkedIn post, a brand shared its surprising story with Facebook video ads, showing how much different creatives can affect the Facebook ads cost.
While some video ads resulted in $1.30 cost per app install, others cost 3x more.
Different ad creatives can lead to highly different results
The key takeaway?
Always be testing new ad creatives to find ideas that work.
Karola is all about random cool ideas, growth marketing, and taking new marketing approaches on a test drive. And boy does she love conversion copywriting or any writing for that matter (ask anyone who’s worked with her). Want to collaborate with Karola? Send her some delicious black chai, and then we’re talking!