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. Facebook uses a PPC(pay per click) model of advertising.
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.
Other than clicks to your website, clicks on the “like”, “share”, and “comment” buttons are also charged. For CPM bidding, you decide the maximum amount you want to pay for 1,000 impressions.
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?
It can be annoying to say this, but there is no specific magic number. The costs depend on a variety of factors, as we will explain below.
The cost for one click can range from $0.10 to more than $2, depending on your requirements and other factors. You can decide yourself how much you’re willing to spend and form a budget for yourself.
Although we don’t have exact figures, we have historical averages that you can possibly use as a reference. In 2015, a report by Nanigans revealed that the average cost per click was $0.11, and the CPM was $1.61 in Southeast Asia.
Adespresso also estimates that in 2016, the average cost per click for Singapore was $0.41.
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 .
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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. Usually, industries with higher costs are professional services, 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.
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.
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.
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?
If you are a business owner determined to grow your business, it is almost always recommended that you use the 2nd method to derive your spending on Facebook.
Think of it this way. If you have a machine that reliably gives you $300 for every $100 you put in, how much money would you put in the machine ??
Infinite! The same philosophy applies to Facebook.
If you can reliably spend $100 on Facebook to gain a new customer that brings in $300 in sale, would it make sense to continue? Why not? Unless you have capacity issues, a company aiming for growth will always reinvest their earnings in Facebook.
Check out this video where I explain how to calculate your ROI and to determine your total ad budget:
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.
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.
Many variables come into play, such as the click-through rate and bid price to conclude which provides the best return. Be patient, because doing so needs time. Additionally, go for the one that best meets your overall objectives.
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.