What Factors Influence the Ad Cost on Facebook?
Numerous factors influence the required ad spend for Facebook ads, but below are some of the most common.
Type of Ad
There are many different types of ads, but for this purpose, we will be explaining the cost difference between cost-per-impression (CPM), cost-per-click (CPC), and ads for low-frequency events.
Generally, there is a required Facebook minimum ad spend of one dollar per day for CPI ad sets, five dollars per day for CPC ads and ads charged for likes, post engagement, and video views; and at least $40 per day for low-frequency event ads, such as app install ads. However, this is not a one-size-fits-all amount—more factors go into the minimum price of each kind of ad.
If you are using any of these currencies, including USD, EUR, and GBP, your ads will be slightly more expensive. If you use a form of currency not included on that list, your minimum budget will be lower—generally half of the cost.
Depending on the time of year, your advertising campaign may be more expensive. During seasons where there is a higher volume of advertisements in the same space, it will likely take a higher bid amount for your ad to win out against the many others competing for the same target audience. These times include the holiday season, the summer, and other specific holidays, such as Cyber Monday.
How to Set Up an Advertising Budget
It may seem like setting up your campaign’s budget will be as easy as picking a number and letting Facebook take care of it. While it is true that Facebook can divide your budget so that you get maximum results, there are still many things to consider when you create your ad budget.
Calculating Your Budget Amount
Generally, the amount you spend on Facebook ads and marketing, in general, should be based on your company’s revenue. If you’re aiming for aggressive growth, it is recommended that you spend around 12% of your annual revenue on marketing efforts, while companies satisfied with their rate of growth should spend around five percent. You will then need to determine how much of that budget should be spent on each campaign.
Different Types of Advertising Budgets
There are two different ways that you need to distinguish your budget. Any Facebook advertising budget can be either a campaign or ad set budget, and both of these types of budgets can be further made into either a daily or lifetime budget.
A campaign budget is a budget that applies to your entire ad campaign. This means that Facebook will distribute your budget across your entire campaign based on which ads it finds the best opportunities for. This option works best if you have flexibility when it comes to which ads are getting promoted the heaviest.
Ad Set Budgets
Ad set budgets allow you to pick a specific group of ads for a budget to apply to. This option gives you more control over which of your ads get the highest percentage of your budget, and it works best when you have different bid strategies or optimizations for different ads in your campaign.
A daily budget is exactly how it sounds: a set amount of money that you spend on ads on a daily basis. Each day, Facebook will spend that set amount on promoting your ads, and once that amount has been spent, it will stop showing your advertisements until the next day. Keep in mind that depending on the day, Facebook may spend up to 125% of your daily budget to optimize results.
A lifetime budget is a budget that spans the lifetime of your ad campaign. Generally, a lifetime budget will lead to maximum results, as Facebook will have more control over how it spends your budget according to different opportunities that arise during the run of your campaign.
Considerations for Running a Successful Facebook Marketing Campaign
While all of the above information is useful for funding your campaign, even well-funded campaigns can end up unsuccessful if the other elements aren’t done right. Here are a few things to keep in mind when creating your ad campaign.
Your Optimization Goals
An ad optimization tells Facebook what the desired outcome of your campaign is so that their system can bid appropriately during ad auctions. It is essential to consider your optimization, as Facebook will use this optimization to target specific audiences who are likely to fulfill it. For example, you can optimize an ad set for link clicks, which will then tell Facebook to target audiences that are most likely to click on ads.
Your Ad’s Total Value
Even if you have the highest bid in the industry for your ad, you may be missing out on the best advertising opportunities. This is because Facebook determines an ad’s total value by looking at three values: your bid, the ad’s estimated action rates (ERA), and the ad quality. Typically, the advertisement with the highest bid will get the opportunity, but if the ad’s ERA or quality is too low, the space will go to the second-highest bid.
An ad can have a high bid and amazing quality, but if the wrong people are seeing it, then you won’t get any conversions. Whether you operate within a vertical or horizontal market, you need to identify your target audience to make sure your ads are as effective as possible.
Your Digital Marketing Campaign with Versa Creative
If all of this seems like a lot of information to you, you’re not alone. There’s a reason why many marketing professionals specialize in social media marketing—to help business owners and companies navigate complex systems and the terminology to maximize their benefits.
Versa Creative is one such award-winning marketing agency, armed with a team of marketing experts ready to take your company to the next level with Facebook advertising and more. Contact us today to see how we can maximize your Facebook marketing results!