Facebook advertising is a regular feature in many small businesses’ marketing plans. There are 3.7 million businesses running ad campaigns through Facebook, spending a combined $5.5 billion to reach potential customers using the social media platform.
Numbers like that are impressive … but intimidating. So much competition for attention on the platform means ever-increasing costs. That’s not to say you need a million-dollar Facebook ad budget to drive traffic, leads, and sales through the app.
This guide shares how much you should budget for Facebook ads, with tips to reduce the cost of your campaigns without sacrificing results.
What determines your Facebook ad cost?
Despite what you see in your news feed, Facebook doesn’t want to overload its audience with adverts. There are limited advertising placements for businesses to sponsor across Facebook and Instagram.
To determine which advertiser wins the spot, Facebook’s advertising algorithm enters them into an ad action.
Every advertiser submitting their campaigns competes for a specific ad placement in front of their target audience. If two beauty brands are reaching millennial women in the news feed, for example, they compete in the auction together.
Price isn’t the only factor taken into consideration when deciding on an auction winner. To award the ad spot, Facebook determines an ad’s total value—in other words, how much the target audience would like or engage with the ad.
The algorithm looks at ad quality (including previous feedback) and estimated action rates (how many people will take action—like, share, or comment—on the ad). The campaign that ticks these three boxes the best has the highest value and wins the ad space.
Auction aside, many advertisers find their Facebook ad costs fluctuate throughout the year.
The more advertisers that compete in an auction, the higher your Facebook ad costs will be. Facebook advertising in industries like finance, insurance, and home improvement tend to be more expensive for this reason.
Seasonality plays a role, too. Ad costs historically skyrocket throughout the latter months of the year. Black Friday and Christmas-induced online shoppers lead more advertisers to the platform, increasing the number of competitors in an ad auction.
How much does Facebook advertising cost?
Research suggests that advertisers should expect to pay: $0.94 per click or $12.07 per 1,000 impressions. Facebook bills advertisers based on two metrics: cost per click (CPC) and cost per mille (CPM)—otherwise known as cost per 1,000 impressions.
