An effective Facebook Ads campaign can be a profit machine — a lucrative source of leads and sales.
But, as with any advertising platform, you need to consider the Facebook Advertising costs to determine if you can earn a decent return on your investment. If you’re already advertising successfully on other platforms, you might wonder if Facebook Ads could be worth it.
To help you out, we’ve put together a guide to Facebook Ads costs. We’ll cover the four billing models and their costs, the factors that impact how much you pay for ads, and take you behind the curtain of the Facebook Ads algorithm.
Facebook Ads Costs breakdown: average price of impressions, clicks, actions, and engagement
Depending on your goals and type of ad, you’ll follow a certain type of billing model. A billing model decides how you bid for and pay for your ads.
The four main different billing models are:
- Cost per 1,000 impressions
- Cost per click
- Cost per action
- Cost per engagement
Let’s look at each one in more detail and see the average Facebook advertising costs. Keep in mind that the cost of Facebook Ads may vary from these averages.
Cost per 1,000 impressions (CPM)
Impressions measure how many times a Facebook user has seen your ad. If a user sees your ad once in the Facebook app, and again on their web browser, that’s two impressions. This tactic can be great if your goal is to to increase brand awareness.
CPM is the cost for every 1,000 impressions you receive — the M stands for “mille.” Your CPM is the average cost of 1,000 individual ad views you buy.
For instance, if you spend $100 on a campaign that receives 10,000 impressions, your CPM is $10.
Average CPM cost in November 2021: $14.67 across all industries.
Cost per click (CPC)
CPC is how much you spend for each click your ads get. If you want to maximize your website visits, you should optimize your ads for clicks.
Facebook calculates the CPC by dividing total ad spend by the number of link clicks. CPC used to count clicks on any links in your ads. But in 2015, Facebook changed its policy to only charge for clicks on links relevant to campaign objectives. You can, however, still see “all clicks” in your performance reports.
Average CPC cost in November 2021: $1.22. It’s much lower than CPM because you typically need fewer than 1,000 impressions to drive a single click.
Cost per action (CPA)
CPA means cost per action, which calculates how much you spend for each conversion. You define the action; it could be a new subscriber or a completed purchase.
Again, the CPA you see in your report is your total ad spend divided by the number of actions.
If you’re promoting an app, you should optimize your campaign for app installs. When pushing your newsletter, you should set up a conversion action for new leads.
Average CPA cost (for leads) in October 2021: $9.25. This price gets closer to CPM, as it might take hundreds of impressions of an ad to drive a single lead.
Cost per engagement (CPE)
You can also run campaigns to get more likes and engagements on your Facebook posts. Here, you’d optimize for engagements and measure the price in CPE. Facebook calculates CPE by dividing your ad spend by the number of likes, shares, reactions, and other engagements.
Average CPE cost in November 2021: $0.194. It’s cheap because engagement is an easier goal than clicks and leads. It happens within the platform, so there’s less resistance from the users.
But you can’t just create a campaign and expect to pay the average price for a lead or conversion.
You might pay per lead, click, or action, but Facebook calculates the price based on the impressions you need to generate the results.
If Facebook estimates you’ll use $15+ worth of impressions to get a lead, a bid of $5 CPA won’t get you any traffic. Your bid must be able to compete for every potential ad view.
Once you break it down, ultimately, every model uses CPM. The fewer impressions you need to get a click, lead, or sale, the lower your CPC and CPA will go.
How are Facebook Ads costs determined?
Facebook Ads uses AI-powered real-time auctions to determine the price of each impression or click, so there are a lot of factors at play. Locations, interests, audience age, time of year, and placements all impact the cost of your Facebook Ads campaigns.
Below we cover some of the main factors that determine what you pay for each view and click.
Audience and demographics
Your costs can differ depending on your audience’s demographic and psychographic profiles.
For instance, campaigns targeting people in the U.S. aged 65+ can cost a lot more than those targeting the 25-34 range in the U.S.
That’s because only 10.6% of Facebook users are aged 65 and up, plus they are often a lucrative target.
Psychographics could also play a part. For example, an audience that’s already shown interest in products in a certain industry tends to cost more per impression.
Facebook also offers geotargeting — targeting customers by location. If you’re a local business, you can advertise to a very specific geographical area.
This is great for brick-and-mortar businesses — you get the power of an enterprise geofencing service without the price tag.
Of course, some areas are more expensive than others. For instance, targeting customers in New York City costs more than a small town due to high competition.
Facebook offers three broad objectives for which you can set your campaigns:
Each one has various sub-objectives within. For instance, the consideration objective has sub-objectives like traffic and video views.
Objectives closer to the sale — such ad add-to-carts or actual purchases — will cost more. Because Facebook’s algorithm believes these users are close to making a purchase, every impression costs more.
Time of year
Businesses tend to spend more on advertising during peak shopping seasons — like the holiday season. With more competitors for the same ad space, you’ll have to pay more to get your ads in front of customers.
For instance, CPMs jumped 30% during Thanksgiving week in November of 2020 as businesses prepared for Black Friday and general holiday shopping.
Some industries face stronger customer objections and stiffer competition than others. In high-ticket industries, driving a single click or lead will cost a lot more.
For example, internet and telecom companies paid the highest CPC in 2020, coming in at $3.07 CPC. Meanwhile, the food and drink industry averaged around $0.42 CPC in 2020, the lowest CPC.
Facebook Ads can go in six different places on more than one social media platform:
- Instagram Stories
- Facebook newsfeed
- Facebook right column
- Facebook Messenger
- Audience Network
The more competitive the ad placement, the higher the CPM will be. Individual placements can vary, but ads on Facebook generally cost less than Instagram ads.
How does Facebook Ad bidding work?
Facebook auctions off its ads to the businesses vying for those spots, and your bid and other factors determine how you place. In general, the highest bidder wins the ad placement — but not always.
After all, the highest bidding ad may be utterly irrelevant to the audience they’re targeting. That won’t lead to clicks or sales, and would harm Facebook’s reputation over time.
So, Facebook incorporates more than just the bid amount when deciding the winner of any particular placement.
Below, we’ll cover the Facebook algorithm, then go over the bidding strategies available for you to try.
Facebook’s algorithm: Factors beyond price
Facebook’s algorithm works with two main factors when auctioning off ad views. Facebook, the advertiser, and the user all win.
Your bid is the maximum amount you’ll pay for a bid.
However, you won’t always pay your maximum bid amount — Facebook’s ad system is designed to have you pay the minimum amount needed to beat other bidders.
For example, let’s say a competitor bids $1.50, and you bid $1.75 for an ad. Facebook won’t charge $1.75. Instead, they’ll charge $1.51 for the ad placement.
If you’re bidding for clicks, Facebook also has to factor in how likely your ad is to get clicks. After all, even if you’re bidding $0.50, if your ads get four times more clicks than an ad bidding $1.80, your ad should win.
That’s where ad relevance comes in.
Facebook judges how relevant an ad is to a particular audience. Basically, that means how likely it thinks your ad is to generate a click or other action.
Facebook used to use a simple relevance score system to judge ad relevance. It now uses ad relevance diagnostics to make ad relevance clearer and more actionable.
There are three relevance diagnostics:
Quality Ranking: Your ad’s perceived quality compared to ads competing for the same audience. Facebook judges ad quality based on user actions taken (liking, commenting, clicking, etc.) and by analyzing low-quality attributes like sensationalized language.
Engagement Rate Ranking: Your ad’s expected engagement rate compared to ads competing for the same audience. It excludes “engagement-baiting” tactics such as asking for likes and comments.
Conversion Rate Ranking: Your ad’s expected conversion rate compared to ads with the same optimization goal competing for the same audience. It evaluates your landing page and conversion flow, not just your ad.
Facebook groups your ad into one of five categories for each diagnostic:
- Below Average (Bottom 10% of ads)
- Below Average (Bottom 20% of ads)
- Below Average (Bottom 35% of ads)
- Above Average
We know this might be a lot to digest. If you’re unsure where to start, and would like some expert guidance, don’t hesitate to reach out to HOTH PPC.
Spend-based bidding strategies are designed to spend your entire budget and either get the most results or the highest value possible out of your dollars.
Facebook offers two spend-based automatic bidding strategies:
- Lowest-cost strategy: Aims to get the most conversion opportunities for your budget — but there’s no maximum cap per action, click, or view. A lowest-cost strategy opens you up to more bid opportunities, but you may end up paying more since you don’t control your bids. It works well if you don’t have specific CPA requirements.
- Highest-value strategy: Aims to spend your entire budget but get the highest value purchases instead of the highest number of purchases. In other words, this will try to target big spenders rather than as many customers as possible.
Goal-based bidding lets you maximize certain actions or results with specific cost goals.
- Cost cap strategy: This tactic uses cost control. In this case, you’re setting a target cost per action that you want Facebook to try and stay near. For instance, you might set a target cost per purchase to maintain a specific profit margin. You’ll pay no more than that target cost for each purchase, but ideally, you’ll end up paying less.
- Minimum return-on-ad-spend strategy: This lets you set a target for the minimum return on ad spend (ROAS) you’d like for each bid. Targets are set in the form of decimals. For instance, if you want to earn at least $120 for every $100 spent on ads, you’d set a 1.200 ROAS control. This is similar to a highest-value strategy but won’t spend your full ad budget if it isn’t possible.
Through manual bidding, Facebook also lets you control how much you bid across your auctions. You set the maximum bid across auctions instead of letting Facebook change bids on a case-by-case basis.
It can work well for companies with smaller audiences. Without a big data set, the algorithm can sometimes struggle to spend your investment efficiently. You can set your maximum bid to a profitable amount and continue advertising without losing money.
Best practices for lowering Facebook Ads cost
Now that you’re familiar with how Facebook Ads work and how much ads on this platform cost, let’s look at some best practices for cutting your campaign costs to improve ROI and other important PPC metrics.
Hone in your targeting
First and foremost, you want to nail your targeting. Start with customer research. It’s important to know your target audience better than they know themselves. You’ll then be able to see how to tweak your targeting inside the Facebook Ads platform.
The better you define your audience, the more relevant your ads will be to them. Ultimately, this will bring your costs down.
You can also use Facebook’s algorithm to help you here.
Use lookalike audiences
Lookalike audiences are groups of users similar to people who took a certain action related to your business. For example, it could be people similar to those who liked your page or bought a product.
You can either plug in a custom audience as your “source audience” or use the Facebook Pixel to collect data. Facebook then uses that audience’s data to identify new potential audiences.
Experiment with the creative
Successful advertising is all about testing and tweaking. Experiment with the image and ad copy to see if you can bring your ad costs down.
Ad groups should always include at least three variations on your ad idea.
Once you have something that works, use that as your “control” but continue testing new versions. That will help you keep ad costs low and reduce ad fatigue.
Match the creative with the ad placement
Facebook has several options for where your ad can go, and they have different dimensions and user interfaces. You have to consider this when creating your ad.
For example, an Instagram story ad should look completely different from a Facebook newsfeed ad.
In many industries, trying to convert “cold traffic” — people who’ve never seen your product before — is nearly impossible.
Retargeting — or remarketing — on Facebook circumvents that by putting ads in front of people who already interacted with your brand. You can run special sales promotions to existing subscribers, people who like your page, or previous customers.
Test different bidding strategies
Testing is the key to success when advertising on Facebook. If one bidding strategy isn’t working — even after changing the creative and audience — switching bidding strategies could help.
Always use a strong call-to-action (CTA)
Leaving out CTAs in your ads is a common Facebook Ads mistake. It’s okay to get creative, but your ad should match your landing page content. If it doesn’t, you risk low ad relevance scores and conversion rates.
Make sure you include a CTA, like “get free shipping if you order before December 17.” Scarcity and sales can help drive the point home and boost your ad’s performance.
Don’t be afraid to break the rules
If you get an interesting idea for an ad, don’t dismiss it before you test it — even if it breaks a few rules or best practices. Sometimes the best performers can come from 100% unexpected angles and designs.
A key part of succeeding with Facebook Ads campaigns is keeping a tight lid on your costs. Understanding how the algorithm works and what makes an ad expensive or cheap is the first step in turning your Facebook page into an ad revenue machine. Then you can weigh your options when it comes to bidding strategy.
But the essential part of successfully running ad campaigns on any platform is testing. You never know how well something will perform until it’s in front of your potential customers.
By investing some time in exploring all your options and experimenting with new strategies, you can discover winning campaigns that earn you an excellent ROI.
If you’d rather take the shortcut, and get expert advice to create impactful campaigns from day one, schedule a call with us today.