Unlike advertising on traditional mediums such as Straits Times where you fork out $7000 to buy a ”half-page ad space” , things are very different on Facebook. So how much will it cost to advertise on Facebook?
One of the biggest difference in ads pricing on Facebook vs traditional media is the flexibility in choosing your budget. When it comes to Facebook marketing, there is absolutely no minimum required amount for getting started with paid ads. You can literally spend $1 or $0.50 and have your advertisement show up. Of course, the budget then gets exhausted in probably one click with minimal impact.
There are a few bidding options you can choose from. Facebook charges you by Cost per click, Cost per mile or Cost per conversion. Depending on your requirements & situation, you will choose the bidding option accordingly.
For example, CPC bidding lets you bid for clicks. As long as your ad is clicked, you have to pay, whether it results in a conversion or not.
CPM is cost per thousand impressions. An impression is counted each time your ad is shown on Facebook.
The cost per action is another option where you bid for actions being taken, designed to get more sales conversions and a higher ROI.
So how much is it?
Statista released the most updated findings on 2021 Facebook ad costs in numerous countries, including Singapore. In 2021, it is found that the cost per click in Singapore is US$1.20 (S$1.64). It can be observed that advertisers in developed countries tend to experience a higher cost per click on Facebook. This is because the Facebook ads platform is an auction driven by supply & demand. If advertisers in a particular country or industry bid higher, it drives up the overall cost.
In our experience, the cost for one click can range from $0.10 to more than $3, depending on your industry and other factors listed below (which you find out for your business here). You can decide for yourself how much you’re willing to spend and form a budget for yourself.
What about cost per thousand impressions?
In Singapore, cost per thousand impressions(CPM) is about US$18 (S$24.59) based on studies by Adcostly. If you find yourself paying more than $25 CPM, it is a sign that your ads are not performing well on Facebook and you are getting penalized. It could be your target audiences choosing to hide/report your ads, not click through and not engage with your ads. It means you need to change your ads or your target audience.
Has Pandemic affected ad costs?
Has Pandemic affected ad costs?
You might already have heard that Pandemic has caused ad costs to go down and are not sure whether it is true or not. According to studies by Statista and Socialbakers, it is indeed the case. The reason being for the drop in cost is due to advertisers opting out of ads altogether. For example, some businesses might be affected by Covid and couldn’t operate. As a result of fewer advertisers bidding for ad space, the cost is lower for us.
Factors That Influence Facebook Advertising Costs
Facebook and other online advertising platforms such as Google base your advertising costs on 2 main factors: 1)competition in your market , 2)quality of your advertisement .
Get a 1-page Cheatsheet to Facebook advertising: Step-by-step guide
The theory behind this is simple – if many other advertisers are going after the same demographic group(s) as you, expect to pay more. Vice versa, if you are the only one, or the rare few, then the costs will go down.
Different industries require different costs. Here’s a chart from Wordstream, one of the biggest advertising software company in USA. Usually, industries with higher costs are finance, e-commerce, technology, and education.
Advertisement Quality and Relevance
Similar to Google’s Quality Score, Facebook’s algorithm provides a score to every advertisement that partakes in the bidding process.
Each ad has a relevance score that will constantly evolve depending on the ad’s performance. An ad is considered to have performed well if a large portion of the target audience interacts with it, which is determined by click-through rate. Naturally, the advertiser with the highest relevance score holds a distinct advantage over the rest.
Even with a lower bid, that advertiser can win the auction and pay lesser for clicks. Therefore, the better the quality score, the lower the costs. To put it simply, an advertisement with good engagement may cost up to 10 times lesser than that of a poor advertisement targeting the same set of audience.
Like Google, Facebook rewards advertisers that meet users’ needs with cheaper advertising costs. This is to ensure that users’ experience are being protected from spammy ads.
Hence, you could be paying alot more to Facebook if you do not have the time, effort or know-how to optimize your ads.
How much to spend on Facebook?
There are 2 main ways to make this decision: 1)Your marketing budget 2)What do you want to achieve?
Most business owners derive their budget using the 2nd method.
First, you find out what is your goal and you work backwards. A realistic ROI is 3-5x.
Let’s say you want to make an additional $50,000 per month. Assuming an ROI of 5x, you need an ad budget of about $10,000 per month. A 10x ROI is very unlikely because of the market dynamics. For example, in an industry that sells high ticket items, the advertising cost is also higher due to competition.
Nonetheless, a 3-5x ROI is very healthy. Consider the fact that no other investments in the world, be it property or stocks, can provide a return of 2x consistently.
However, do take note that when you scale the campaign, the cost might increase as well. This is because of the need to find more audiences to target as well as having to create more ads to convert your audience.
If you can reliably spend $100 on Facebook to gain a new customer that brings in $300 in sale, you have to continue running or attempt to scale the campaign! It just makes business sense to do so. All growth companies do that. If you are not sure yet, check out this video on whether you should do advertising for your business.
How to calculate your spending
Say it takes a 100 clicks for you to get one lead.
One click costs $0.50.
100 clicks * $0.50cents/click = $50 per lead.
One click on facebook will get you nowhere, since the average conversion rate is at 2-3%. The minimum spending, if any, is to generate 200-300 clicks at the very least. From there, you can have an idea of what kind of results it will yield you, and whether to continue or not.
In deciding how much to spend, you will then have to decide how much is a lead worth to you ? As legendary marketer, Dan Kennedy puts it, the winner is not the business that gets the cheapest leads, but the one that can afford to pay the most per lead.
Setting up a budget for testing costs
Before launching your Facebook advertisement, it is necessary to implement a budget for testing costs. These can include costs for audience testing, ad copies, images, and it is recommended to fork out at least $500 to $1000. During this process, different variations of ad images, ad copy and audience are tested in order to find the combination that works best.
Ads take time, effort and some trial and error – you can’t expect them to kick-off successfully from the beginning. Therefore, you have to include costs for these into your budget to ensure a more successful advertising result.
On the other hand, if you choose to outsource your work to an agency, you have to take the agency fees into account as well. Different agencies have different charging models: they can be fixed monthly retainer fees or a percentage of your budget. You can also get a free quote by answering a few questions here.
For the latter, the figure can range between 20% to 40% of the budget. Some companies can also charge by performance, such as the cost per lead.
The Bottom Line
No matter which method you use, you should test and compare each of them out repeatedly to determine which will give you the best results. Don’t forget that the main goal of any Facebook advertisement is not to reduce costs, but to maximize ROI. You can find out how we use a combination of Youtube, Facebook and Google ads to maximize ROI in this video.
Many variables come into play, such as the click-through rate and bid price to conclude which provides the best return. You can estimate ad budget required for your business here.
Need Facebook advertising services? You can check out more about agency services here.
Based in Singapore & Malaysia , Ice Cube Marketing is all about turning your customers from ice cold prospects into hot leads and happy advocates. We do so through ROI focused and data driven campaigns aimed at helping SMEs improve their sales.