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Cost of Facebook Advertising in 2020

 

With more than 7 million people advertising with Facebook, it’s quickly becoming a popular part of marketing strategies. But, before you decide to promote your product or service through Facebook, you should understand the cost of Facebook advertising, and what determines the costs.

The amount you spend on Facebook ads is based on the model used, CPC (Cost Per Click) or CPM (Cost Per Impression). With the CPM model, the average cost is about $7.20 per 1,000 impressions, while CPC averages $0.97 per click.

To learn more about the costs of Facebook advertising, including bidding models and cost factors, keep reading.

 

The Cost of Facebook Advertising

 

The average cost for advertising with Facebook will vary based on your preferred method. When paying per click, the average cost is around $0.97, and CPM averages $7.19. However, if you’re aiming for downloads or likes, the average is $5.48 / download or $1.08 / like.

 

 

Cost of Facebook Ads

 

The following table helps give an easy-to-read list of the average costs based on bidding model:

 

 

Keep in mind these are not set prices, and your actual ad cost may be different. The above amounts were the result of an in-depth AdEspresso study assessing around $300 million in Facebook advertising. Many factors will impact the overall cost, such as target market, ad positioning, your industry, etc.

The purpose of the provided averages is simply to reference a generalized idea. Without some type of starting point, you would have a higher risk of setting unrealistic budgets for ad campaigns, leading to poor and unsatisfied performance.

 

Facebook Ad Auction

 

There are some things about the Facebook ad auction that you should know before learning about the various ways costs are determined. By knowing these few things, you can optimize your Facebook ad campaign and have a higher rate of success.

Below are the steps to take to run a Facebook ad campaign:

  1. Log into Facebook Ads manager
  2. Create a new ad campaign
  3. Choose your max spend or daily budget
  4. Choose the model type (clicks, downloads, views or likes)
  5. Build a target audience through user interests, demographics, or device targeting
  6. Add ad content, video, or images
  7. Approve and start the ad

After creating and launching your ad, the Facebook ad auction begins. The following occurs:

  1. Facebook grades each potential ad’s estimated action rate, bid amount, and ad quality.
  2. The ad quality and estimated action rate help determine the ad’s relevance
  3. The ad’s total value is generated based on ad quality, estimated action rate, and the bid amount.
  4. The winning ad or highest bid is then shown.

It is possible to detect which factors are most important to your ad based on the auction, including:

  • Ad relevance
  • Ad quality
  • Estimated action rate
  • Ad bid amount

By optimizing these different areas, such as increasing ad quality, the cost of each ad can be reduced. Even Facebook has stated more relevant ads cost less and receive better results.

Continue reading to learn about how you can optimize the ad metrics.

 

What is Facebook Advertising Costs Determined?

 

Similar to Google’s PPC (Pay Per Click) advertising model, Facebook ad costs have many different factors. You will need to have at least a basic understanding of these factors to create a realistic advertising budget.

There are 8 areas that impact Facebook ad costs:

  1. Audience
  2. Bid
  3. Budget
  4. Placement
  5. Objective
  6. Quality
  7. Industry
  8. Season

 

Audience

 

Based on the AdEspresso study, the costs for Facebook ads are greatly affected by the target audience. This is where you determine who will see your advertisement.

For example, if you are targeting specific age groups, you may spend more to show ads to people 54 to 65+ because Facebook has fewer users within this age range while having twice as many between 20 to 30 years old.

Targeting men, women, or both will also factor into costs. In fact, your ad costs could average $0.50 per click for targeting women, and only $0.40 for targeting men.

The reason for this comes down to Facebook’s user demographics. While they have over 58 million users between 25 to 34, there are only around 26 million users between 54 to 64.

Facebook ads are popular because it allows you to target a very specific audience, such as:

  • College sports fans
  • Philanthropy
  • Yoga
  • Hikers
  • Hunters
  • Other niches

By targeting a specific audience interest, your ads will have a better rate of success than being shown to users not interested in your product or service. However, these factors directly affect the costs for you to advertise with Facebook.

One approach to using the audience factor to increase your ad campaign includes targeting a specific attribute vs. a wide range of interests—for example, cross-country cycling vs. mountain biking.

Your overall audience reach will be smaller, but higher-value because they are interested in what you’re offering. A larger audience may have more reach, it’s considered low-value because it usually gets less engagement.

Since you are paying for the ad to be shown, it only makes sense to target people who are most likely interested enough to click the ad. These are the impressions that count with long-term results, especially with a lead generating CTAs (call to actions).

 

Bid

 

Your bid strategy will impact the ad costs, but Facebook provides several different bidding strategies.

 

Lowest Cost Bid

 

Often referred to as the automatic bid method, this approach can get you the lowest CPC or CTA bid possible. It’s common for businesses to begin by using the Lowest Cost Bid because it helps use ad budgets more efficiently.

 

Target Cost

 

Often referred to as the manual bid method, this approach helps your business reach a more desired CPC or CTA. This method is only available for certain areas, including:

  • Product Catalog Sale Campaign
  • Conversions
  • App Installations
  • Lead Generation

Your overall costs will depend on your bid amount and bid strategy. However, this bidding method usually costs more. Although, you need a clear understanding of how the Facebook ad auction works before you can make the best-informed decision. Like with any platform, you will be more successful when you know how the algorithm works.

With the Facebook Ad Auction, each bid is graded by three key factors:

 

Estimated Action Rate

 

The Estimated Action Rate indicates how likely users will engage with the ad either through downloading or clicking. Therefore, a higher estimated action rate means your ad is more competitive, but that requires building an advertisement relevant to your targeted audience.

Bid

 

This is the amount you can spend per engagement, such as $1.00 per click. Facebook stated the per action bid amount is the top factor in ad performance.

 

Ad Relevance and Quality

 

Facebook rates ad quality and relevance based on the amount of positive vs. negative engagement. The more positive interaction, the higher the ad quality and relevance are perceived to be, and the better your ad will do.

When combining all three factors, if your overall ad score beats that of the competition, your ad will be shown instead of theirs. Thus, winning the Facebook ad auction.

The higher your bid, the more aggressive and competitive your ad will be. However, this will increase your ad costs. That is why you need an understanding of how each area of the bid strategy works, target the most relevant audience by showing a high-quality ad.

 

Budget

 

Your budget is the amount you or your company is investing in the Facebook ad campaign. This will factor into your advertising expenses, ad performance, ad bid and the results of your campaign, whether you are budgeting $100 per month or $1,000, it’s more than just what you’re spending.

 

 

For example, let’s say your business set an ad campaign with a budget of $100 per month and max CPC of $1. Considering the average CPC for Facebook ads is $0.96, the budget and bid amount does not offer much competition, and the number of clicks and impressions will need below.

In fact, experienced Social Media Marketing experts recommend setting your daily Facebook Ad budget to $5 or more. That would require a minimum ad budget of $150 per month.

 

However, if your business does not have a large ad budget, you can still be successful with a smaller budget through targeting specific interests. Of course, the smaller the budget, the more limited the performance can be.

 

Placement

 

Another key factor to ad costs will be the ad placement. The Facebook Ad program offers six positions:

  • Facebook Newsfeed
  • Facebook Messenger
  • Right Column
  • Instagram
  • Audience Network
  • Instagram Stories

Now that Facebook owns Instagram, that is a competitive advantage to social media advertising. It’s basically like advertising on two platforms with a single ad campaign. Let’s take a closer look.

Instagram

When advertising through Facebook, CPC ads will average around $0.80 more for Instagram placement. This additional cost is around $0.77 more for Instagram Story placement.

Facebook

Ad placements on Facebook average $0.30 less compared to Instagram. In addition to newsfeed ads, you can have ads shown in Messenger, which is a very popular app.

Audience Network

By getting ads placed on the Audience Network, your CPC is often even lower than Instagram positions. It places your advertisement on mobile apps and websites, with the average cost being around $0.20 more than Facebook.

Facebook allows you to customize which positions your ad appears, but they recommend Automatic Placement. This feature allows the platform to choose the most efficient positioning for your ad based on your ad settings. However, it can increase costs.

By turning the Automatic Placement tool off, you can choose your own placement locations manually and could lower advertising costs. Choose between Facebook, Instagram, the Audience Network, or a combination.

 

Objective

 

 

One of the first steps you take when creating a new Facebook ad is choosing your objective. There are three main objectives:

  • Conversion
  • Consideration
  • Awareness

To choose the most efficient objective for your strategy, you will need to determine your goal.

Conversions:

  • Conversion
  • Store/Site Visits

Consideration:

  • Engagement
  • Lead Generation
  • Traffic
  • Downloads / Installs
  • Messages
  • Video Views
  • Product Catalog Sales

Awareness:

  • Reach
  • Brand Awareness

Depending on the objective, your cost could increase. For example, store visits, lead generation, and product purchases can cost more than other ad goals. They offer faster value to the business by creating a future lead or generating a sale.

Brand awareness is an important part of any marketing strategy and successful business. That is why you need to stop and think about how well your brand is known. Through connecting with visitors during the earlier part of your sales funnel, you have the opportunity to enhance their interest with your brand, progressing them down the funnel until making a purchase.

While the final action of purchasing a product is later, it helps create a tangible and real value between you and your customer. It can lower ad costs as well because brand awareness and other consideration based goals tend to cost less compared to the goals mentioned earlier. The main difference being the turnaround time between instant and delayed action.

 

Quality

 

As mentioned earlier, the ad quality will impact the overall ad cost. Facebook grades quality based on user engagement; a more positive engagement equals a higher score. The higher your ad score, the lower the cost usually is.

Ad quality’s impact was demonstrated by Hootsuite by building two versions of a single ad. Each version aimed to have very different ad quality scores (2.9 vs. 8). The results were as drastic as the score. The ad that scored higher only averaged $0.03 per click. However, the lower quality ad averaged $0.14 per click.

Scoring is base don a 1 to 10 scale for engagement and relevance. Ten being the highest and best, while one is horrible. The amount of positive or negative feedback on an ad will directly impact the score.

Because the quality of your ad campaign is so important, your team needs to create ads that have high engagement and relevance to obtain the best results and lowers costs. Monitoring your score regularly will help you determine when and where changes are needed.

This is how you find your relevance and engagement score:

  1. Open Ads Manager
  2. View your ad
  3. Go to Customize Columns
  4. Choose Relevance Score
  5. Select Apply

You should not be able to see your score, but Facebook requires an ad to have around 500 views before it provides a score. The interactions with your ad are tracked while the ad is active. Because of this, checking your score regularly is recommended so you can make quick changes as needed to enhance performance and get the most out of your advertising budget.

 

Industry

 

Although the in-depth study from AdEspresso showed $0.97 to be the average CPC, your industry average will also be different. To have a better idea of a starting point based on what you are advertising, take a look at the industry averages below for a rough estimate with creating your advertising budget.

 

Industry Average CPC
Auto $2.23
Apparel $0.44
Beauty $1.80
B2B $2.51
Consumer Services $3.07
Employment and Training $2.71
Education $1.05
Fitness $1.89
Finances / Insurance $3.76
Healthcare $1.32
Home Improvement $2.92
Industrial Services $2.13
Legal Services $1.31
Retail $0.72
Real Estate $1.80
Travel / Hospitality $0.62
Technology $1.26

 

As you can see from the averages above, advertising with Facebook can be cost-effective depending on the industry, help generate leads, build brand awareness, drive traffic, and increase conversions. Social media marketing can benefit any business.

The reason your competition is using Facebook ads is that it works, and they get results. From increasing page followers to getting potential customers to reach out physically or through an online store, there are many opportunities available.

Keep in mind, all of these prices provided are simply estimates. They are not set rates and will vary between campaigns, time of year, demographics targeted, etc. However, they can still be a starting point for your marketing team.

  • Season

That’s right, what time of year you advertise will play a role in your costs too. The reason being, the more businesses that are advertising, the more competition there will be and a higher demand fighting to get advertising placements.

There are many peak days during the year that will encounter increased costs due to aggressive bidding and companies with massive budgets out playing the little guys. To avoid going up against large businesses with a small budget, you may need to consider peak seasons in your marketing strategy.

The following are some of the most expensive times to advertise on Facebook:

  • Black Friday
  • Boxing Day
  • Christmas
  • Cyber Monday
  • New Year’s Eve & Day
  • Thanksgiving

While the seasonal periods do tend to cost more, the increase in consumer demand is an advantage to businesses. Instead of avoiding these peak times, you may prefer to save towards having a larger budget during these periods and adjust your marketing strategy accordingly.

Facebook Ad Cost FAQ

Below we will try to answer some of the common questions about Facebook ad costs.

Average CPM Costs

If your marketing strategy uses impression-based advertising, the average cost per 1,000 views or impressions is around $7.20. That comes out to just under $0.01 per view, with high quality, well-targeted ad this can be a cost-efficient approach.

Average Cost Per Like

If your working on growth, your ad campaign may focus on increasing page likes. For this type of goal, the average cost is around $1.10 for each like received.

Average Cost Per App Install

When you need to increase downloads or app installs, this goal will average around $5.50 per app download and install.

Remember, these are only averages. Your final cost will be determined based on many different factors.  Below is a recap of these different cost factors:

  1. Audience

The target audience will impact your costs depending on what demographics you’re targeting. A specific target will often provide better results than a broad audience.

  • Ad Bid

The bid amount will have the largest effect on your ad campaign’s success. By using the auto-bid tool, you combined with creating a high-quality ad score, you can reduce the costs.

  • Budget

Your budget will determine how flexible you can be with your bid amount. It is recommended for the best results to aim for a minimum budget of $5 per day.

  • Ad Position

When advertising through Facebook, you have the option for auto-positioning, or manually choosing where ads are shown. There are six available positions across Facebook, Instagram, and the Audience Network. Knowing where your target audience is will help reduce costs.

  •  Objective

Your ad objective will be based on your overall goals. There are three main objectives to choose from, Conversion, Awareness, or Consideration. The cheapest ad strategies will fall under Consideration, while conversion-based goals often cost more.

  • Ad Quality Score

 

Facebook grades your ad quality based on the amount of positive or negative feedback it gets. The higher your score, the better pricing you receive. By ensuring your ad will generate positive engagement, it can greatly reduce costs per click.

 

Industry

 

If your business is in a more competitive market, such as consumer services or insurance, the costs will likely be higher compared to less competitive markets.

 

Season

 

There are many peak periods during the year that advertising platforms charge more because of consumer demand. A few of these peak times include Thanksgiving, Christmas, and New Year’s. The higher costs may not be avoidable, but planning for these periods can allow your company to prepare for a successful bid and budget amount.

 

What is the monthly cost to advertise on Facebook?

 

The size of your business, your goals, and the ability to invest in social media marketing will make a difference. However, the average monthly budget for Facebook is between $200 to $800. Your investment may need more or less than this range to hit your goals.

The final costs to reach the goal you want will greatly be based on the decisions made when creating the ad. If you can produce a high-quality ad with a ton of positive engagement, targeting interested users ready to buy your product, you could be very successful on the lower end of this average. However, a low-quality ad may fail even at the higher end.

It is not uncommon for larger companies and enterprises to spend thousands per month on Facebook advertisements. Therefore, the average monthly cost will be different for each company. What works for others may or may not work for your particular situation.

The larger your budget, the more you can afford to bid, whether per click or impressions.

For example, Company A invests $200 per month, and Company B can invest $400, with an average CPC of $1.00. Company A will receive 200 clicks, while Company B receives 400. But, larger budgets do not always mean more success from an ad campaign due to overall ad scores. That is why it’s best to hire an experienced social media advertising agency if your team lacks experience.

 

What is the average annual cost to advertise on Facebook?

 

 Depending on the business size and goal, the average annual costs range between $2,300 and $9,500 for Facebook ads. The marketing strategy used also impacts is invested in marketing and could be well over $9,500 per year, even for smaller companies.

 

An example of a business that may spend more on advertising includes eCommerce stores with an active following. The reason they invest more is that it drives their audience to purchase products, but a business that has a much larger brand awareness could spend less because their already well known and bringing in consistent sales.

In conclusion, to ensure your business is getting the most out of social media marketing, it is important to first decide what goal you want to achieve with ads. From there, determine your target audience and learn which platform they spend most of their time browsing to decide which platform(s) would be best to position for. Focus on creating a quality ad that gets a higher engagement and relevance score to reduce your average costs, and finally choose your ad bid and budget. When taking the time to get all of these areas right, you are much more likely to have a successful campaign, whether you have a small or large budget.

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