How Much Does It Cost To Advertise On Facebook

by Nedim Talovic · Updated 16 Aug 2021

Before I start explaining advertising costs on Facebook, I’d like to explain you why should you advertise on Facebook.

Firstly, there are more than 1.7 billion Facebook users who are active EVERY month. That’s a huge number and a huge opportunity as well.

Facebook Active Users

Next, the organic reach is decreasing all the time.

An interesting photo, that I already mentioned in the previous post, is from guys at Convince & Convert.

Facebook Stocks and Organic Reach

There’s a strong correlation between Facebook Inc. stock price and average organic page reach. It definitely makes perfect sense.

Whenever they decrease your organic page reach, you’re forced to buy an ad. Now, let’s learn something more about Facebook advertising costs.

There are a lot of variables that influence on advertising costs, so answering this question is not that easy.

Costs by Industries, Country & Age Range

According to MarketingCharts, the most competitive industry is Gaming whose average Cost-per-Click (CPC) is $0.75.

On the other side, the lowest CPC has Organizations and Associations with an average CPC of $0.18.

U.S. Facebook Advertising Benchmarks

Furthermore, an interesting fact is that industry with the lowest CPC, Organizations and Associations, has the highest Click-through-Rate (CTR).

The country is also one of the factors which influence on advertising price. Most people probably think that advertising in the United States is the most expensive.

That’s a false. The most expensive advertising is in Japan, then it comes Norway, Australia, and Switzerland.

CPC by country

On the other side, advertising in South Africa and Portugal are the cheapest.

Of course, not every country is on this list, and there are probably some smaller countries where advertising is cheaper, but I’ll mention them some other time.

Next, did you know that there’s a segmentation like age range? For example, it’s cheaper to advertise to people up to 25 years old than those who are older than 55 years.

CPC by age range

However, advertising price still depends on many other factors. The various factors that may influence include:

  • Audience
  • Ad Quality
  • Timing
  • Placements
  • Frequency

But, before that, we need to focus on several other things.

Budget

Everything begins with the budget. You have to know how much money you got for marketing campaigns. Also, you need to understand a few terms:

  • Average Revenue Per Customer (ARPC)
  • Churn Rate (CR)
  • Customer Lifetime Value (CLV)

When you know these terms, you can create better estimates and plans.

First, let’s say that ARPC is quite simple to understand. It’s basically how much does average customer pay to your company.

This also depends on the type of the business. For example, if you are in subscription business you should know what’s the average plan that customers choose.

On the other side, everyone in E-commerce business should know what is the average order value customers make.

Next, Churn rate tells what percentage of customers cancel the subscription. Generally, it’s fine when your monthly CR is ~1.3%. For E-commerce, it’s a bit complicated.

You need to know how many customers you have, and how many purchases in average they make. In other words, it’s necessary to know how much of them will leave you without buying another time.

Finally, when you know ARPC and Churn rate, you can easily calculate a CLV. Here is the formula.

CLV Formula

Let’s do some simple math:

  • ARPC: $49
  • Churn rate: 1%

CLV will be exactly $4,900 Here is the photo from Google Sheets.

How to calculate a CLV

This suggests that an average customer will pay us a total amount of $4,900 until he stops being our customer. Now, let’s go back to Facebook Ads.

A beautiful part of advertising on Facebook is that, once you know your budget, you can set a limit.

As they say, you define how much you’d like to spend, and when you’d like your ads to appear.

Budget

There are two types of budgets:

  • Daily Budget
  • Lifetime Budget

The difference is really simple. The daily budget won’t spend you more than specified per day, and on the side, lifetime budget means your budget can be spent during a few days.

For example, maybe you’re planning to have a campaign for 30 days and if you set Lifetime Budget, in theory, it’s possible to be spent in a three days.

As for me, I always go with Daily Budget because it gives me more control. Surely, if I notice above-the-average results, I always increase the limit.

This way, you can control your campaigns too.

Bid Amounts

Every marketing campaign should have its objective. For example, if you run an E-commerce store, your objective is probably Increase conversions on your website.

What's your markteing objective

Also, when you choose this objective, you have to implement Facebook pixel for measuring and optimizing ads. More on this later.

However, if you’re not sure about choosing an objective, I strongly recommend choosing Send people to a destination on or off Facebook.

This way, you simply send visitors to your website and wait for the results. Here is the list of available Facebook metrics (bidding types):

  • Cost per Post Engagement
  • Cost per Page Like
  • Cost per 1,000 Impressions
  • Cost per Link Click
  • Cost per App Install
  • Cost per 10-Second Video View
  • Cost per Result

Please keep in mind to be careful when paying per 1,000 impressions. This is especially a case when you choose a too wide audience.

Ad Scheduling

Did you know that you can run ads all the time, but also you can run only during the specific days, and part of the days? That’s what we call Ad Scheduling.

If you check the photo below, you can read that ads will run on

  • Monday, Tuesday and Wednesday from 6 a.m. - 6 p.m.
  • Thursday, Friday from 9 a.m. - 3 p.m.

Ad Scheduling

Maybe you’re wondering how is that related to total cost of advertising. Here’s how.

Sometimes you want to target people who’re similar to people who liked your Facebook Page. Now, if you check Page Insights, you can see when your fans are online.

When your fans are online

For my Facebook page, the highest number of fans are online at 9 p.m.

What does it tell me?

It tells me that I can increase a bidding amount for 6 p.m. - 10 p.m. period. This way, I can save the money because I won’t show ads in non-relevant time.

Ad scheduling and accelerated delivery   

The image above shows how I can display ads from 6 p.m. - 10 p.m. Please take a look at Delivery Time. I set my ads as an Accelerated.

Basically, my ads will be shown as quickly as possible. Also, Ads Scheduling is only available for the lifetime budget type.

Factors That Influence On Facebook Advertising Costs

#1 Audience

The audience is the key to Facebook advertising success. If you fail here, you’ll lose your money and your costs will be high without any ROI. Do you know your perfect customer? Can you answer the following questions:

  • What gender is a perfect customer?
  • What age is he or she?
  • Where does he or she live?
  • What preferences he or she has?
  • How often does he or she travel?
  • Which mobile phone does he or she use?

You should know answers to the most of the questions.

Here’s the simple rule:

MORE INFORMATION = MORE EFFICIENT ADS = LESS ADVERTISING COSTS

Currently, when you’re targeting your audience, you can narrow the audience by:

  • Age range
  • Location
  • Gender
  • Languages
  • Platforms (Facebook, Instagram, Audience Network)

But, did you know that you can also create Custom Audience and Lookalike Audience? Custom audience means that you can target people by:

  • Customer File (Email, Phone Number, First Name, Last Name, and so on.)
  • Website Traffic (Target people who visit your site or specific pages)
  • App Activity (Target people who have taken a specific action in your app or game)
  • Engagement on Facebook (Target people who have engaged with your content on Facebook)

Here is how it looks.

Create a custom audiene

However, Lookalike Audience is a step forward because it finds you people on Facebook who are similar to your existing customers.

What does it mean?

Basically, you’re telling Facebook: Hey, this is my Custom Audience, so please, find customers who are similar to those.

Custom Audience isn’t the only source. You can choose a conversion tracking pixel, or a Page. If you know how they’re able to find those customers, the answer stands in two words: Machine learning.

The whole idea of targeting is to narrow audience as much as possible since it lower your costs. However, you can’t narrow too much because there might be a low interest in your ads.

#2 Ad Quality

In order to reduce costs, your ads have to be really interesting. This is measured by the metric we call Relevance Score.

The most advertisers pay their ads per click. In fact, there’s a strong negative correlation between CPC and CTR.

The photo above suggests that higher Relevance Score is necessary if you want low CPC.

Cost per click vs Click-through-rate

In other words, high CTR will make low CPC. The question is - How to achieve high CTR? You need to:

  • Carefully target your audience
  • Use attractive photos
  • Do A/B test
  • Choose appropriate placements
  • Use magnet words
  • Use CPA

Relevance score performance

Anyway, if your ad gets too many positive feedbacks, your relevance score will go up.

On the other side, if you get negative feedback, it will go down. Positive feedback depends on ad’s objective. For example, if your objective is to drive sales, then one of the indicators is a number of conversions.

But, if people hide, or report an ad, your relevance score will still go down.

All in all, brand awareness campaigns have a smaller impact because their objective is to reach as many people as possible. Not the conversions, not the video views.

#3 Timing

During the holiday season, you can expect more sales, but also, you can expect more Facebook advertising costs. Here’re a few facts.

On November 1, 2014, the average CPM in the United States was only $4.47, says data from marketing cloud.

But, on Black Friday (November 28, 2014), the average CPM increased on $5.33. That’s increase of xx.xx%.

Facebook Ads trends during holiday season

What’s more, on Cyber Monday it was $6.10. But, that was two years ago. The situation was even worse in 2017.

Facebook Ads trends for Black Friday 2015 and 2014

The average CPM in 2015 was $8.68.

Now you can see why Average Revenue per Customer, Lifetime Value and Churn Rate are so important.

#4 Placements

When I create ads, I can choose placements - the place where my ads will be shown.

Ad devices

The default choice is, of course, Facebook, Instagram, and Audience Network.

Here’s the trick. Some people haven’t optimized their site for mobile users.

Now, if you’re one of them, and you still advertise on mobile devices, you can expect lower results and consequently - higher costs of advertising.

Furthermore, If I expand Facebook, I can see that my ads will be shown both in Feeds and in Right Column.

Ad devices Facebook

The problem is if your campaign’s objective is to increase a brand awareness, ads in Right Column will be seen less time.

#5 Frequency

Frequency is the average number of times each person saw your ad.

If you think about it, you’ll come to the conclusion that higher Frequency number means that your ad will be more boring and in the end, your:

  • CTR will decrease
  • Relevance Score will decrease
  • Cost per Click will increase

Remember when I told you that there’s a strong negative correlation between CPC and CTR?

CTR decreases while CPC increases

This photo AdEspresso proves this theory too. Anyway, this is where you can see a Frequency metric.

Ads frequency

If you don’t see the column and you’re wondering how to add it, here’s how.

Click on Columns drop down and after that on Customize Columns…

Customize columns menu

There, you can customize your columns and display whatever you want.

Customize columns

Click on Apply and you’ll see checked columns.

How To Measure Campaigns

I keep saying that measuring is the key of everything.

Indeed, If you want to make sure your ads work well and your costs go down, you need to measure and test everything. In the menu, click on Pixels.

Pixels menu

Now, you can see two possible options:

  • Facebook Pixel
  • Conversion Tracking Pixel (Old)

I’ll of course, go with Facebook Pixel because Conversion Tracking Pixel is deprecated. So, click on Set Up Pixel.

Set up your Pixel

Now, I have two possible solutions:

  • Use an Integration or Tag Manager
  • Copy and Paste the Code

Install your pixel code

If you choose the first solution, you can use integrations for Shopify, Google Tag Manager, Magento, BigCommerce, and Segment.

With the second option, you don’t need any integrations or third-party apps, you simply have to add the code to your site. I’ll show you the second option which is actually a three-step process:

  1. Install Pixel Base Code
  2. Install Event Code
  3. Check Pixel Status

The first step is to copy the clipboard pixel base code.

Pixel base code

You can copy it by clicking on the box above, and after that, click on Next.

Now, you have the list of 9 standard Facebook events (actions) and for custom solutions if these predefined doesn’t fit your needs.

So, I just chose to use Add to Cart event which will be triggered whenever someone adds a new product in the cart. For successful measuring, I need to use both codes (base + event).

Finally, I can click on Close and open Pixels - our starting point - where my pixel will appear. Please keep in mind, it may take 20 minutes to change after the installation.

That’s it. Measuring and optimization can start.

Conclusion

I hope you liked this tutorial. If you remember from introductory, I said that there’s no specific answer to how much does it cost, since there are really a lot of variables that can influence on your advertising.

However, your main goal is to create ads that are very attractive. This will lead to high CTR and finally, low cost per click. Once you start advertising, please be patient for at least two months because it will take some time before you see great results.

Finally, allow me to say this - if something works for your friend, it doesn’t mean that it will work for you. Everyone’s business is a different and that’s the reason why stats are just stats. You need to test and measure your own results.