The Ultimate Guide to Facebook Advertising Cost in 2020 (Updated July 2020)
How Does the Facebook ads Auction Process Work?
Top 10 Factors That Determine the Cost of Facebook Ads
How to Lower Your Facebook Ads Costs?
The Most Important Facebook Ads Metric: ROAS (Return over ad-spend)
End of Summary
Welcome to the Ultimate Guide to Facebook Advertising Cost! After reading this article, you will have a better overview of Facebook Ads in 2020. Here is what you will learn:
- The Facebook Ads Cost in 2020
- The mechanics of the Facebook Ads Algorithm
- The Facebook Ads Auction Process
- The most important factors when it comes to Facebook Ads
- How to lower your Facebook Ads cost
- The 2 types of return of investment on Facebook
You will be able to answer the following questions:
- How much should you spend on a link click on Facebook Ads?
- What are the best Facebook Ads placement and which is the most cost-effective?
- How to lower Facebook ads costs once and for all?
We will update this article every once in a while. Share it and save it to come back to it whenever you want and see new recommendations and updates.
Facebook Advertising Cost Benchmark
You are probably concerned about the overall cost of Facebook advertising. You might want to know the average Facebook CPC, Facebook CPM, Facebook cost-per-purchase, etc. However, there are many factors that determine facebook ads costs so there is not a determinate answer to this question.
Fortunately, there are a lot of existing studies revealing that a benchmark for Facebook ads cost across all industries is between $0.50 and $2.00.
For example, a study done by WordStream revealed that the average cost-per-click for Facebook across all industries is $1.72.
Nevertheless, keep in mind that it’s considering all industries and that the finance industry has the highest cost at $3.77 per click.
Fortunately, not all industries have such a high cost per click. As you can see on the WordStream graph below, the retail ($0.70), travel ($0.63), and apparel ($0.45) have the cheapest Facebook advertising costs.
According to a study done by Adespresso, the average Facebook advertising cost-per-click across all countries is $0.97.
When looking at your KPI’s and benchmarks, you should always take into consideration your country and your industry. For example, in eCommerce, the average Facebook ads cost-per-click is $1.00. Consequently, if you see that your Facebook ads cost-per-click is more expensive than $1.00, then you should try to consider A/B testing new audiences and testing different creatives to lower your cost-per-click on Facebook.
Facebook Advertising Cost in 2020
Facebook Advertising Cost (Updated June 2020)
Facebook Ads Cost Per Click (CPC)
CPC stands for cost per click. It is the price that you will pay Facebook for each click on your ad. In your campaign options, you can choose to optimize for CPC, therefore Facebook will try to get as many clicks as possible.
According to Revealbot’s recent study:
- the average Facebook Ads CPC starts from $0.95
In the graph above, we can see that Facebook CPC is finally stabilizing after COVID-19 as it stayed the same from May to June.
Now let’s take a look at another graph from Revealbot that describes the average Facebook Ads CPC by Campaign Objective:
Keep in mind that the “Reach” campaign objective goal is to get as many eyeballs as possible and not to drive traffic thus explaining the high cost.
To conclude, we observe a clear increase in the Facebook Ads CPC from Q1 to Q2.
Facebook Cost Per Mille (CPM)
The CPM or Cost per Thousand is used in advertising to denote the cost of 1000 impressions.
According to Revealbot, it cost between $7.90 – $9.90 on average to reach one thousand people using Facebook Ads in 2020. In this article, we will see the top factors that define your Facebook advertising cost as well as tips on how to decrease it.
How Does the Facebook Ads Algorithm Work in 2020?
We are now going to show you the secret sauce to win at Facebook Advertising.
To build successful Facebook Ads Campaigns, it is important to understand how Facebook ads work.
Facebook Ads is essentially an auction process. Actually, there are billions of auctions that take place every single day.
In the above graphic, we can see a young man that has shown interest in entrepreneurship, space, NBA, and travels.
On Facebook, there are millions of advertisers but let’s say that only two of them are targeting those interests.
Both of those advertisers want to show their ads to this man.
As you can see, the advertiser #1 is interested in targeting men from 18-24 that are interested in Space. And the second advertiser wants to target men aged from 18-24 that are interested in Travel.
Even if those two advertisers are not targeting the same interest, they are basically competing in this situation because they are going after the same individual.
This is what’s happening every single day on Facebook Advertising. When you are launching a Facebook ads campaign, you are basically competing with millions of advertisers.
The question is: how does Facebook decide which advertiser is going to get the eyeball of the user?
How does the Facebook ads auction process work?
The only acronym that you should remember when it comes to Facebook Ads is B.EA.R:
Let’s go through each one of those step-by-step.
B = Bidding – Understand the Facebook Ads Algorithm in 2020
Your bid represents how much you are willing to pay Facebook for a specific action (a link click, a conversion, a video view…)
Bidding represents how much you are willing to spend to get your Facebook ad in front of the individual that you are targeting.
If other advertisers are putting a high bid and not you, it will affect your results on Facebook Ads.
Tip: If you don’t want to do this manually, keep the bidding automatic (let Facebook do the job) or create a campaign template using Mark to simplify the process.
Bidding is the only part of the Facebook Ads algorithm that you have easy control over.
EA = Expected Action – Understand the Facebook Ads Algorithm in 2020
The expected action represents how likely your audience is going to perform the action (purchase, a video view, an engagement, a click… ).
This is based on their search behavior, their online behavior, and their interests. By mixing all of those elements, Facebook is able to tell if your audience is likely to convert. If the answer is yes, then Facebook will show your ads.
Actually, Facebook probably knows you better than you know yourself because it’s constantly listening and watching.
In our previous example with the young 20 years old man. Facebook will consider the expected action of this man to know which advertiser to choose.
R = Relevance & Quality – Understand the Facebook Ads Algorithm in 2020
The last factor that Facebook considers is Relevance & Quality. This is essentially the quality of your Facebook ads campaign.
It is based on the relevance score of your Facebook ads, the targeting, the creative, the negative feedback, and your Facebook ad account quality score.
Facebook will see if the headline of your ads matches the headline of your landing page.
If we take back our example with the young man above. Why Facebook decided to go for Advertiser #2? Because he probably had a better landing page, more consistency in his messaging, a high ad account quality score, and a bigger budget/bid.
Top 10 Factors that determine the cost of Facebook Ads
1 – The Facebook Ads Algorithm
As we saw previously in this article, if you want to advertise on Facebook, you must understand how the Facebook Ads Algorithm works in 2020.
If you understand how the Facebook algorithm works in 2020, then you have more chances at lowering your Facebook Ads cost.
Let’s recap what we have seen previously.
The bidding represents how willing you are to spend to show your ads to your audience.
The higher your bid and the higher your chances are. That’s why the bid is actually the only part in the Facebook Ads Algorithm where you have “easy” control on.
Every day, the Facebook auction process decides which ads to show between millions of advertisers, and the bid is one of the factors.
When choosing your bid on Facebook, you have two options:
- Automatic bidding – you let Facebook set the bid that helps you get the most link clicks at the best price. If you are a beginner, we recommend picking up that option and letting Facebook do the bidding.
- Manual Bidding – you manually enter a bid to tell Facebook how much you are willing to spend for a particular action (example: link click).
Estimated Action Rates
The expected action rates represent how likely your audience is going to perform the action that you want (purchase, a video view, an engagement, a click… ).
Let’s say that you want your audience to purchase your item or sign-up for your product. Facebook will identify previous behaviors and find the people that previously bought products online or signed up for products.
If the estimated action rate is low and it’s not likely that your audience will perform the action, then your Facebook Ads cost will probably be high as a result. Consequently, for you to win Facebook Ads Auctions, Facebook will automatically increase your bid (if you choose automatic bidding).
Ad Relevance and Quality
This is essentially the overall quality of your Facebook ads campaign. The better your Facebook ads campaign is, the lower your cost will be.
It is based on the relevance score of your Facebook ads, the targeting, the creative, the negative feedback, and your Facebook ad account quality score.
Facebook provides a Relevance score metric that can help you to measure your ad relevance & quality. A high relevance score translates to a high-quality Facebook Campaign and lowers cost. However, if your relevance score is bad, then it means that there is something missing in your campaign.
It might be because your content is not tailored to your audience. Consequently, you will need to do many A/B testing to improve your relevance score.
2 – The Audience Targeting
The audience that you are targeting will have a significant impact on the cost of your Facebook Ads. Depending on the age of your audience or the gender, you can expect a change in your ad expenses.
This is also due to the competition. For example, if you are a local business operating in a crowded city, chances are that you will have many competitors going after the same audience. As a consequence, your Facebook Ads cost will be higher.
Here are all the audience factors that may affect your Facebook Ads cost:
- Behaviors (Is it an active online buyer?)
- Size of audience
The size of the audience in an interesting factor. Facebook has a feature that let you know the size of every audience that you can choose on the Facebook ad manager:
The audience size can impact how much it costs you to advertise on Facebook Ads.
A broad audience (> 1M) will typically lead to additional expenses. That’s why it’s more expensive for an eCommerce store to advertise on Facebook than for a local business like a restaurant.
3 – Your Ad Creatives
Ad Creatives are a very important part of a Facebook ad if not the most important.
You need to understand that people are not on Facebook to shop but rather to look for content, engage with their friends and family, etc. Consequently, your creatives must be eye-catching enough to grab the user’s attention. You only got a few seconds to grab that attention.
The more eye-catching your creatives will be, the more eyeballs you will have, and the less your Facebook Ads will cost.
Here are some tips for cost-effective Ad Creative on Facebook Advertising (useful if you are on a budget):
Tip #1 – Use Carousel Ads
Video production can be very expensive. Fortunately, there are other options. On Facebook, you can use Carousel Ads. This format will let you show 2 or more images and/or videos :
People will be able to scroll through your images/videos by swiping (on mobile) or clicking on arrows (on desktop).
Tip #2 – Use your phone
You don’t need to buy an expensive camera to have great creatives – your phone is enough.
Tip #3 – Use third-party apps to improve your creatives
There are many third-party apps that can help you to create and improve your video ads. Mark is one of them and the whole team is working hard the build the most effective all-in-one advertising platform.
Tip #4 – Use GIFs and Boomerangs
The goal of Facebook Advertising is to grab the attention of your audience.
GIFs and Boomerangs will add movement and originality. Those types of content will surprise your audience and they will be more likely to convert.
Tip #5 – Enhance your content
There are multiple ways to enhance your content. For example, you can create compelling ads by adding text, music, and automated captions to engage people on the Facebook News Feed with sound off.
4 – The Budget
When launching a Facebook Ads Campaign, you will have to set an advertising budget.
With Facebook Advertising, there are two types of budgets that you can choose: daily budget and lifetime budget.
Let’s see the difference between the two:
- Daily budgets: Facebook will spend the amount that you are giving per day. They are very easy to set up. If you are beginning with Facebook Ads, we recommend you to start with daily budgets. With daily budgets, you will have much more control over how much you spend. However, Facebook will always spend the daily budget no matter the performance of your campaign.
- Lifetime budgets: with lifetime budgets, you are telling Facebook how much you would like to spend for the entire campaign. That’s why you necessarily have to set up a start and end date. With this option, Facebook will be more conscious of the performance of your ad account and will adjust daily spend based on the performance of your campaigns. The drawback here is that your daily spend can fluctuate a lot. If you are in an important season for your business, daily budgets make more sense.
The budget you set on Facebook will impact the cost of your ads and the overall results of your campaign.
The minimum budget recommended per day on Facebook Ads is $5. However, you need to realize that a low ad budget provides fewer conversions because your performance will be limited.
5 – The Campaign Objective
When creating a Facebook Ads Campaign, you need to choose an objective. There are 3 objectives that you can choose:
Then, for each objective, there are multiple options. For example, if you want to drive traffic to your website, you might choose “Traffic”. If you want to drive sales to a Shopify store, you might use the “Conversions” objective.
As we saw in this article, the cost of each objective will vary depending on what you are trying to accomplish. The conversions objective will cost you more money than the traffic objective.
Typically, the more valuable the ad goal is, the higher the ad costs will be.
6 – The placement
The placement is where your ads are shown. The Facebook Advertising ecosystem has many placements that we will describe in this article. Here are they:
- Facebook News Feed (Desktop)
- Facebook Right Column (Desktop)
- Facebook News Feed (Mobile)
- Instagram News Feed (Mobile)
- Instagram Stories (Mobile)
- Audience Network
- WhatsApp (Coming Soon)
As you can see, with Facebook Advertising you can advertise on Instagram too. That’s because Facebook owns Instagram.
Facebook: Facebook News Feed & Right Column
This is is one of the most used placement on Facebook Advertising. That’s because it easily grabs attention as it occupies the largest space on Facebook. Facebook’s users will see your ads while scrolling through the Facebook news feed.
Also, when advertising on Facebook, it’s important to consider that the average CPC will be about $0.30 less than Instagram.
Instagram: Instagram News Feed & Stories
In the Facebook Advertising Ecosystem, Instagram represents the highest cost. It means that you will pay more to advertise your company on Instagram than you will pay on Facebook.
No worries, we will show you how you can decrease the cost of your advertising campaigns.
Facebook’s Audience Network
What is Facebook Audience Network?
Facebook Audience Network (FAN) allows advertisers to extend their reach beyond Facebook (on other websites and apps). It makes sense the advertise on FAN because most consumers spend a significant amount of time on other platforms and apps.
By using FAN, your ads can appear on Facebook apps, on Tinder, and other websites. Here are the formats available in FAN:
On average, businesses will spend an extra $0.20 per click (compared to the average Facebook advertising cost).
Here is a quick description of each format:
- Native: native ads fit seamlessly into the website. It doesn’t interrupt the user experience.
- Interstitial: a full-screen ad that captures attention. You usually find them in mobile apps.
- Banner: traditional banner format at the top or bottom of the screen.
- Video Ad: a video ad that starts before, during, or after a video within a website.
Facebook Automatic Placements VS Manual
Facebook recommends advertisers to allow Facebook to use Automatic placements (Facebook, Instagram, and Audience Network combined) and let Facebook do the job. If you follow this recommendation, you might pay more because Facebook will try all the placements and see which converts the best.
Facebook says that choosing automatic placements will reduce the average cost per result of your advertising campaigns.
At Mark, we recommend you to choose the placements that make the most sense to your business. If you know that your audience is not using Instagram, then it doesn’t make sense to choose Automatic placement because you will pay more and won’t convert them.
If you don’t know which placement will work best, then using Automatic placement is a good idea because it will allow you to test all placements.
7 – The Timing
When you are advertising on Facebook and estimating your Facebook ads cost, it’s very important to consider the time of year.
It’s always more expensive to advertise during the holidays because there are more advertisers that will compete with you.
According to a study revealed by Adespresso, the most expensive months to advertise on Facebook are October November and December. That’s why you need to be aware that if you advertise during winter months, the cost of your Facebook ads will be higher.
Here is a list of the key events that you should keep in mind:
- Black Friday
- Cyber Monday
- New Year’s Eve
- Mothers’ Day
- Valentine’s Day
- Spring Break
Again, if you are planning to advertise on Facebook during the holiday season, it’s important to always remember that there will be more advertisers and therefore your cost will be higher.
8 – The Industry
As we saw previously, the average Facebook ads cost across all industries is $0.97 per click. However, when you are advertising on Facebook you must always consider the KPI’s of your industry. An advertiser in the eCommerce industry won’t pay the same as an advertiser in the Finance industry.
Thanks to this Wordstream graph, you can find Facebook Ads cost for your industry:
We can see that Facebook Advertising is a cost-effective platform to generate brand awareness, leads, conversions, and much more. Even if you are in a competitive industry, you can benefit from Facebook Ads.
It’s worth mentioning that those KPI’s are average. Those numbers are benchmarks for your business. They will help you to have realistic expectations and make logical decisions.
We will see how with a great Facebook Ads campaign you can effectively reduce those Facebook Ads cost.
9 – The Country
AdEspresso published in 2016 a study to determine what really influences their overall costs.
Obviously, it’s more expensive to advertise on Facebook in 2020 because there are more advertisers than in 2016 but we show you this graph to help you understand the difference between each country.
For example, it will be far more expensive to advertise in the US than in India or France because the US is a highly competitive market.
10 – The Optimization for Ad Delivery
When creating an ad on Facebook Ads, you will find an option called “Optimization for Ad Delivery”:
This choice will influence who Facebook shows your ads to. If you want to optimize for Link Clicks, then Facebook will find people that are most likely to click on your ad.
It’s important to consider your objectives. If you want your audience to buy products on your Shopify store, then it’s better to optimize for Conversions because Facebook will help you to get conversions at the lowest cost.
If your goal is to generate data, then the Link Click optimization is a good idea because Facebook will find people that showed previous “Link Clicks” behaviors.
This option can affect the cost of your Facebook ads because if you choose to optimize for Conversions but what you want is to generate brand awareness, then you will pay more as the Conversion optimization cost more (it’s more valuable and brings you revenue).
How to lower your Facebook ads costs?
#1 – Tailor content to audiences
The first thing that you can do to lower your Facebook ads cost (CPM) is to improve your targeting. If you show the right creative and messaging to the right audience, you will improve your relevance score and consequently lower your ad costs.
The best strategy on Facebook Ads is to break your market into multiple segments and run targeted ads to each of those segments on Facebook. Your advertising campaigns need to be super personalized.
#2 – Use retargeting
Retargeting is the superpower of Facebook Advertising because it works like a charm.
It’s hard to convert someone that doesn’t know your brand, however, it’s surprisingly easy to converts someone who already knows you. If you run an eCommerce store and have many adds to cart, then you should run a retargeting campaign and target this audience by tailoring the content to them (add a discount, answer objections, etc).
The bottom of the funnel (retargeting) will provide you the highest return over ad-spend. And you will usually break-even on cold audiences. By building this full-funnel, you can expect to generate a 3-5X return over ad-spend with Facebook Advertising.
#3 – Use eye-catching images
The more people will engage with your ads and the lower your Facebook ads cost will be.
To make people engage with your ads, you must use an image that stands out and grab the attention of users. If you are using videos, then the first 3 seconds are extremely important and you should A/B test the first 3 seconds to get the lowest cost.
At Mark, we recommend you to use eye-catching colors in your creatives. We don’t recommend using too much blue because Facebook is already blue and the image will not stand out as a consequence.
Also, always follow Facebook’s recommendations as they know their platform better than everyone. Always follow their ad-policy rules and make sure that your images are 1,200 x 628 pixels.
#4 – Use an all-in-one automated platform
First of all, you don’t want to waste your time on tedious and repetitive tasks that don’t move your business forward. Instead, you should collaborate with machines to do that for you.
Mark can help you to automate most advertising tasks by using powerful rules. There are many templates that you can use, find the routine that you want to automate, and apply it with one click across all your Facebook advertising campaigns.
Moreover, an all-in-one platform such as Mark will allow you to create creatives that are perfectly tailored to the right audiences and also optimize your ads 24/7.
#5 – Add social proof
The presence of social proof makes a business more trustworthy because it comes from customers and it validates the decision of your audience to engage with your ads.
Which ad do you think will have more conversions? The one that has plenty of social proof with great comments and likes or the one that doesn’t have social proof? You guessed right.
Social proof will increase your engagement and your relevance score. That’s why many advertisers use social proof in the ad-copy by including a testimonial from a satisfied customer.
#6 – A/B Testing
A/B testing is the golden rule of Facebook Advertising. When you are doing Facebook ads, it’s tremendously important to split test the audiences, the creatives, and the copy. You must always A/B test and see what works best for your business.
That’s the reason why Facebook Advertising requires budget: because you need to run many tests in order to be successful.
Always keep in mind that running A/B tests will lower your Facebook Ads costs.
#7 – Choose the right placements
Facebook recommends you to use Automatic placements. However, if you are beginning with Facebook Advertising, it’s better to only use the Facebook newsfeed as it’s the most cost-effective placement.
If you know that your audience is also on Instagram, then we recommend you to test the Facebook News Feed, Instagram News Feed, and Instagram Stories only. Then you can see what works best and double on that placement.
The Facebook News Feed is where most users devote their attention, so by choosing this placement, you will maximize your ad visibility.
On the contrary, the Facebook sidebar doesn’t get a lot of attention. Your ads will receive less engagement and your CPM will be higher as a consequence.
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The most important Facebook Ads Metric: ROAS (Return over ad-spend)
Sometimes, we are too focused on individual metrics like Cost-Per-Click (CPC) without considering the big picture. Always remember that the most important metric is Return-Over-Ad-Spend or ROAS.
If a Facebook Advertising campaign is showing a high CPC but a high ROAS it would not be smart to turn off that campaign only because of the CPC high. Look at the big picture: that campaign is generating high return over investments.
That’s what most advertisers miss out. They are too much focused on individual metrics instead of looking at the whole system.
On Facebook, you will find 2 types of ROI:
- Social ROI: it’s the amount of social engagement that you get from Facebook ads, brand awareness and the increased visibility are part of the social ROI. It’s not because a campaign is not generating revenue that it’s a bad campaign. You see the impact of Social ROI driven campaigns in the long term.
- Financial ROI: that’s the data-driven part of Facebook. When it comes to financial ROI, you must be data-driven and know how much it costs you to acquire a customer. If after 3 months you are still losing money with Facebook ads (your cost of acquisition is higher than revenue) then you need to switch your Facebook ads strategy
We hope that you found it useful and that you now understand Facebook Advertising better. We also hope that we gave you some new insights into how you can effectively lower your Facebook ads cost.
Don’t forget to share this article so that more people can benefit from it.
The Mark Team is there to help you if you have any questions. Start a 14-day free trial today and let our all-in-one platform help to create ads that convert.