We get asked this a lot when we talk to our clients about boosting lead generation or online sales. It’s probably the 3rd most frequently asked question – so here’s our best stab at an accurate answer.
The short answer is that it costs whatever you want to spend on the platform. It can be as little as £1 per day which is the minimum budget that Facebook will let you set. But realistically, £1 won’t make a dent on your sales targets or brand awareness goals, so let’s look at more sensible estimates.
There are two main options when paying for ads on Facebook: cost per click (CPC) or cost per thousand (CPM). With CPC, you pay each time someone clicks your ad. With CPM, you pay to show your ad to 1,000 people, regardless of how many interact with your ad.
Based on Statista data, the average CPM in the UK is around £2.50, but while averages can be helpful, the amount that companies spend—and the amount you should spend—varies massively based on a handful of factors.
How Advertising on Facebook Works
Before we look at the individual factors that affect the cost of Facebook ads, let’s look quickly at howthe system works. Because it’s not as simple as Google PPC advertising.
Facebook uses a modified auction system where the winner is not necessarily the highest bidder. To determine the winner of the auction (meaning which ad will be shown to a given set of people), Facebook takes three factors into account:
- Your Bid
- Estimated Action Rates
- Ad Quality
Based on these three factors, the ad with the highest score wins, and it is then shown to customers. Then, and only then, does Facebook determine how much to charge the company showing the ad.
How Facebook’s Auction Affects Your Ad Cost
Let’s start by looking at how the three parts of Facebook’s Ad Auction affect your costs.
To help you manage your ad spend, you set a budget for your campaign. You can set a daily budget or a lifetime budget. Either way, Facebook won’t spend more than the amount you set.
Your budget will determine your total spend, but your bid affects your CPC or CPM.
Your bid is the amount you’re willing to pay to for a click or to show your ad. You can either let Facebook determine bids based on your budget and goals, or you can manually set what you think a specific action is worth to you.
So how does your bid amount affect your cost? If you raise your bid, you’ll likely win more auctions and have your ad shown to more people, but it will often raise your CPC or CPM. If you lower your bid, you decrease your odds of winning bids, but your CPC or CPM will usually be lower.
Estimated Action Rates
The next factor that affects your cost is the estimated action rate of your ad. When you run a Facebook campaign, you choose a specific area or action you want to target—like clicks or conversions. Once you’ve chosen the goal of your campaign, Facebook will show your ad to people it believes are more likely to take that action.
Facebook isn’t too helpful in explaining about how this will affect your cost, but we reckon that Reach is the most expensive objective at about £1 per click, offsite conversions come in at 2o pence per click, and link clicks are near the bottom at about 10 pence per click.
You’ll win more auctions and pay less for them if you have a high-quality ad. A high-quality ad is an ad that gets more positive interactions and less negative feedback than other ads.
That means that if you can create an ad that people regularly engage with, you’ll be able to decrease the cost of showing that ad. You can check the quality of your ad through Ad Manager by finding your ad’s relevance score. This will help you determine how your ad is performing. If you can improve your relevance score, you should see your Facebook costs decrease.
Other Factors that Determine Facebook Ad Costs
In addition to the three factors based on Facebook’s auction structure, there are other factors that impact how much you’ll pay for an ad on Facebook, whether you’re a local business or national.
Facebook has a lot of ways to narrow down your target audience, including age, gender area, interests, and search history. If the audience that you want to target is in high demand, you’ll end up paying more for your ads that are shown to them. If your audience isn’t being targeted by a lot of other companies, you’ll end up paying less. As an example, we ran a Facebook Advertising campaign for a Hampshire web design client who sold a very niche B2B product – the audience was very specific, but also highly competitive, so the cost for running ads was almost double the average we’ve seen. Equally, when we run Chichester or Havant web design campaigns, we find the cost is relatively low.
The location of your ad will also affect your CPC or CPM. You can let Facebook decide this for you, or you can manually choose where you want your ad to appear. For Facebook, options include the Newsfeed, right column, and Marketplace. Instagram, Audience Network, and Messenger have their own options.