The answer to this question is that there is no one right answer to how much a company should allocate to Facebook advertising. According to Facebook itself, you can advertise with as little as $5 per week or as much as $50,000 per week – both are possible. It largely depends on how much you are willing to invest in Facebook advertising financially.
What’s also crucial in this question is determining the amount that is sufficient to generate meaningful business results (conversions). The final price tag will depend on your target audience, conversion goals, ad type, day of the week, competition in the auction on the platform, and many other factors. It’s challenging to predict the exact cost, but I will get you very close to it in this article.
How is the price of Facebook ads determined?
In Facebook, the surest way to be aware of how much money is going into advertising is to adjust the budget yourself, so let’s start with budget types. Facebook offers a couple of different budget types from which you can choose how much money you want to spend on advertising. These same budget types are available at both the campaign and ad group levels.
As the name suggests, the daily budget determines how much your Facebook campaigns will spend in a single day. Choosing a daily budget comes into play when there is no specific end date set for the campaign, and the advertising is done continuously.
The lifetime budget sets the total amount your campaign will spend overall. When adjusting the lifetime budget, you need to set an end date for the campaign. Your campaign will not spend a penny more on advertising than what you have set as the lifetime budget.
Once the budget is chosen…
Once you’ve set the desired amount and goals, Facebook will do its best to achieve the objectives with that budget. When advertising on Facebook, you are also competing against other advertisers for visibility. Competition is enabled by the effective auction principle used in Facebook ads.
Facebook Ads Auction Principle
The display of Facebook ads operates on an auction principle, which has its impact on the prices of showing ads. In the auction, campaigns and advertisers compete for visibility in front of target audiences. If, for example, there is a lot of advertising targeted to a specific audience by multiple advertisers, the costs of campaigns are generally higher on average. The more intense the competition, the more advertising will cost. This is why increased Facebook marketing has generally led to rising ad prices.
Different Result Costs
Facebook differs from Google in that it charges for impressions, not just clicks and results. The easier the result is for Facebook to achieve, the less it costs, for example, per impression. But the more challenging it becomes to produce a result, the more it will cost, for example, per action. Facebook provides various pricing information for campaigns based on result-specific price data. These include:
- CPC = Cost Per Click, which tells you how much a single ad click has cost you.
- CPM = Cost Per Mille, which tells you how much it costs to display your ad 1,000 times.
- CPA = Cost Per Action, which tells you how much it costs to get a viewer of the ad to take a desired action on your site.
Examples of Advertising Costs*:
Here are some examples from Wordstream’s article on the costs of different advertising results:
- The average click cost across all industries in 2021 was €1.59 (Wordstream, converted from dollars).
- Typically, the cost per click can be expected to range from €0.50 to €2 (Sixads 2021).
- The cost per thousand impressions (CPM) averaged €13.32 (Wordstream 2021, converted from dollars).
- The average cost per action (CPA) according to Wordstream was €17.27 (converted from dollars).
*All numbers are average results; actual amounts may vary up and down.
Picture of Facebook CPM changes over the last 12 months in the USA. (Image: Revealbot)
In conclusion, the same rule applies on Facebook as in all other paid traffic channels. The more money you invest, the more you’ll get in return. If it feels like your Facebook advertising hasn’t gained traction, it may be because your budget is flowing into supporting the wrong objectives or simply isn’t sufficient. The more results you want, the more money you’ll need to invest!