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In the early portion of 2021, Facebook clocked roughly 2.89 billion active users, giving advertisers on the social media platform one of the most potentially extensive marketing reaches versus other advertising channels. This access to the most diverse array of segmented demographics possible helps Facebook remain a leading advertising channel across multiple industries as we enter 2022. Trends show that Facebook will continue to benefit advertisers in both B2C and B2B consumer channels.
The Facebook advertising model is built around bidding strategies for advertisements to appear in specific locations across the site in order to optimize the cost per click (CPC) for each ad. In this article, we’re going to break down the various models and strategies businesses used to bid on ad placement, what factors can impact Facebook Ads cost, and examples where the costs and process are worth the effort and those where there might be better advertising alternatives.
How Much Do Facebook Ads Cost? Understanding the Facebook Bidding Process
At its core, advertisers achieve their goals in Facebook Advertising via a bidding process that helps determine where your ads appear and which ads will appear. Successful ad placement is only partially determined by the amount of the bid. The factors beyond the bid amount that impact ad placement include two other determining factors tied to your advertisement itself: the relevance score and the estimated action rates.
Ad Relevance Scores and Estimated Action Rates
An advertisement’s relevance score is generated over time and based on positive and negative interactions of users. Interactions range from likes, clicks, shares, and comments to hiding or ignoring the ad. The relevance score is extremely meaningful to Facebook’s algorithm, as more relevant ads will reduce the bounce rate of users on Facebook and increase the time they spend on the site. The relevance score plays into the second factor, estimated action rates, as the more relevant an ad appears to be to the algorithm, it will be prioritized over other ads because it’s expected users will interact with it more actively than other less interesting or engaging ads.
The Facebook Ad Auction: Bid Strategies To Light Up Your Customers’ News Feeds
The bidding process allows advertisers to take several different approaches to bidding that maximize the impact of their marketing efforts and keeping costs in line with their strategy and the goals set at the start of the campaign. These goals can range from maximizing the number of impressions and focus on the cost per impression (CPM) or the average CPC for a specific advertising link. You can shoot for an average cost or keep your daily budget for bids within a specific range. Let’s break down the various strategies in detail that you’ll use to build out your ad in the Facebook Ads manager.
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Spending-Based Bidding
Presented by Facebook as ad budget-conscious bidding options, the spend-based models of bidding allow leveraging your full marketing and ad budget allocation to Facebook towards maximizing results and value. There are two options available within the spend-based approach.
- Lowest-Cost: Bid on ad placement that will maximize conversions at the most optimal use of the available budget.
- Highest-Value: Within the available budget, focus on highest value ad placements, which assumes that the higher the cost of placement, the more conversions will take place.
Goal-Based Bidding
You might have multiple campaigns you intend to run across Facebook, each with a specific campaign objective relative to targeted outcomes. Goal-based bidding gives you more granular control over your advertising spend. There are two options within this targeted strategy.
- Cost-Cap: Useful when ad costs are variable to market conditions and you want to keep your cost per purchase within a specific range. You’ll only buy ad space at a specific range in order to ensure your cost per sale doesn’t exceed your profitability.
- Minimum Return on Ad Spend (ROAS): This option is best if you’re attempting to keep within a specific return on your ad investment, but need more control than Highest-Value bidding strategies. Minimum ROAS is less concerned with spending your full budget than it is controlling profitability.
Manual Bidding
In other bidding strategies, you cede bid control to the automation built into each approach through Facebook’s bidding system, allowing the system to keep bids within strategic ranges to achieve specific ROI or conversion targets. With manual bidding, the user leverages a single strategy.
- Bid-Cap: Rather than a slider of various bid values and strategies, this approach instead sets a maximum value across all auction choices. This is for experienced users with strong historical data allowing them to set bids based on informed predictions of conversion rates.
How Rankings and Bidding Strategies Impact Cost of Facebook Ads
Facebook marketing costs can be extremely volatile, as they depend upon not only the relevance score and estimated actions rates but also on the mix of bids allowed by the bidding strategy you employ. In this section we’re going to briefly break down how pricing can be directly impacted by each of these elements.
Relevance Score Impact On Cost
As a social media platform, Facebook’s advertising system aligns with the platform’s goal of putting the right content in front of the most relevant audiences. Advertisements with a higher relevance score, then, signal that they will perform well with a given audience. Ads with higher relevance scores will be given priority by the ad bidding algorithm and be offered at a lower cost to appear in specific ad spaces. Focusing on building strong and relevant advertisements can help increase the efficiency of your Facebook Ad campaigns and reduce overall costs.
Estimated Action Rates Impact Relevance Scores
Relevance scores are a combination of the quality of the advertisement and how that quality will impact a target user’s behavior. Certain qualities and components of an advertisement will present to the algorithm determining costs that the ad will have a high rate of engagement from users, leading to increased conversions and therefore value for both Facebook and the advertiser. The influence this has over cost via the relevance score can be significant.
Bidding Strategies Allow Varying Levels of Ad Cost Control
The various automatic bidding strategies above have a wide range of impacts on the cost of advertising on Facebook. For example, the lowest-cost strategy allows the bid system to focus on results within the budget, and in the process, remove cost controls from the equation. Strategies built on cost-cap and bid-cap, on the other hand, put more restrictions on the bid process and keep costs lower.
Common Scenarios Where Facebook Advertising Costs Are Worth It
There are a number of benefits that come with leveraging Facebook advertising.
Powerful Support of Multiple Digital Marketing Channels
The platform delivers the highest return on ad spend for eCommerce channels when advertisers utilize ads across the Facebook Feed, Messenger, and Marketplace. The powerful ad placement algorithm ensures each user’s ad experience is targeted specifically to their needs and ensures the best conversions for the advertiser.
The other two marketing channels where Facebook Ads excel are Pay-Per-Click and in content marketing. Coupled with the proper ad content, readers will be routed through your inbound marketing funnels, resulting in more eyes on your content on the platform and more traffic routed back to your website. Over time, this can help increase brand awareness and improve search engine rankings as well.
Highly Customizable Ad Content
Facebook advertising also provides a highly versatile advertising experience for businesses looking to create different types of ads and target multiple audiences. Ads can be formatted for video or story format, image-only ads, and other ad formats that can drive traffic under certain conditions from across Facebook’s various channels. The process of setting up and launching these campaigns is simple and ensures your ads are actively involved in your lead generation cycle extremely quickly, versus other platforms where the lead time to get ads up and running might be several days.
Integrated Data Metrics and Analytics and A/B Testing Allows More Control Over Content Performance
For your targeted campaigns geared towards improved customer engagement or building referral traffic to your website, the versatility, and reach of Facebook Advertising ensures that you can build an ad to meet your needs and accomplish your goals. You can track the performance and impact of your ads through the powerful data analytics provided by the platform, and even leverage A/B ad testing to adjust and tweak ads in order to maximize ad performance.
Common Scenarios Where Facebook Ads Are Not Worth It
There are some situations where an advertiser might have neither the resources nor the experience to properly leverage Facebook Advertising as a successful marketing channel.
Targeting Ad Campaigns At the Wrong Target Audience
Facebook’s market reach is massive, and it can be a daunting landscape for marketers. Advertisers who fail to find value in Facebook Advertising often over-limit their audience reach, thinking their ads will be more effective if they limit their target audience. Facebook Advertisements historically are more effective the wider the ad owner casts their net. That’s not to say that the advertiser doesn’t need to have a plan in place before running advertisements on the platform, as a full understanding of the business’s proper target buyer persona is necessary to run an impactful campaign. Those who fail to understand their audience also tend to fail on the platform.
Insufficiently Budgeted Ad Campaigns
Another misconception is that, because you’re advertising on Facebook, you can keep your Facebook ad budget extremely low and still expect results. Small businesses just getting started should understand that as a marketing channel, Facebook requires a decent amount of ad spend and budget per ad campaign in order to successfully gain traction in the auction process.
Brands Unprepared to Actively Compete or Evolve In Response to Industry Changes
The fact is, as marketing on Facebook becomes more popular and competitive, it’s harder for smaller organizations to run effective campaigns without an understanding of the factors in play that can impact ad performance and cost. Further exacerbating the complexities of advertising on Facebook are the recent privacy changes across iOS devices that allow consumers to block tracking across platforms, which diminishes the strength of certain targeting tactics utilized by the Facebook Advertising model. Facebook is not an advertising platform where you can set your ads and let them run unchanged over time; the platform requires an active hand in guiding and shaping ad content in order to remain competitive and relevant relative to changes to the platform.
Partner With Marketing Specialists Who Understand Social Media and Facebook Advertising Costs
While we can point out several challenges that make it difficult to truly leverage the power of Facebook Advertising, the truth is that businesses that aren’t able to capitalize on their marketing efforts to generate a positive return on advertising spend on the platform aren’t experienced with the nuances of managing advertising across the social media channel. That’s why it takes an experienced marketing partner that understands the various bidding strategies and methods for properly targeting and positioning ads to help truly position your brand for success across Facebook Advertising.