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. There is no minimum cost to advertise on Facebook.
- What are you buying on Facebook?
- So how much is the Cost Per Click?
- Factors That Influence Facebook Advertising CPC
- Direct response campaigns
- How to get a low cost per lead
- The single biggest mistake of Facebook advertisers
- Setting Up a Budget for Testing Costs
- Outsourcing Facebook Ads?
What are you buying on Facebook?
We first have to answer the question: What are you buying on Facebook?
Well, to simplify the matter, you are buying traffic from Facebook.
“Location, location, location!” If you run a brick-and-mortar business, I’m sure you are no stranger to this maxim. If your store is on Orchard road, lots of traffic will flood your business. On the other hand, if you are in Pulau Ubin, even a good product will not save your business. In essence, the hefty monthly rental cost in Orchard Road is the cost of high foot traffic.
In the online space, it is no different. Think of Facebook as a giant landlord that sends online traffic to your Facebook page or Website based on your advertising spend. Traffic takes the form of a click in the online space. Facebook charges you by cost per click. Your goal is, therefore, to turn those traffic or clicks into leads and customers.
Facebook, being a nice landlord ,’tries’ to help you to achieve your advertising objectives. To tell Facebook what you want, there are a few bidding options you can choose from: Cost per click, Cost per thousand impressions, Cost per like, Cost per conversion etc. Depending on your requirements & situation, you will choose the bidding option accordingly.
Say you are a brand marketer and you are shifting your ad budget from newspaper to Facebook ads platform, you will be looking at Cost per click or Cost per thousand impressions, which are indicators of the reach of your ads.
If you are running a campaign to drive leads and sales directly, aka “Direct response campaigns”, you are probably less interested in the reach of your ads than the actions people take on your ads. For that, we focus on cost per action or cost per conversion.
In this article, we will discuss Facebook Cost per click in Singapore, followed by Cost per conversion. No matter the objective you choose, Facebook follows a PPC(Pay per click) bidding system. This means if you receive no conversions from your campaign, you still have to pay Facebook for the clicks or traffic generated. Hence, it is essential to understand the 101 of Cost per click first!
So how much is the Cost Per Click?
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 2017, the average cost per click for Singapore was $0.76.
Factors That Influence Facebook Advertising CPC
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 .
Free bonus: Get a 1-page Cheatsheet to Facebook advertising: Step-by-step guideClick here to download
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. You can draw reference to this infographic published by Wordstream on the global CPC across various industries on Facebook.
Advertisement quality and content type
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. Check out this infographic for a more thorough breakdown of Facebook’s ad auction system.
Like Google, Facebook rewards advertisers that meet users’ needs with cheaper advertising costs. This is to ensure that users’ experience is positive and they are being protected from spammy ads.
Hence, you could be paying alot more to Facebook if you do not take the time to understand your target audiences’ needs and to come out with ad copies that could relate to them.
Here’s a simple explanation of Facebook cost per click.
Top-of-funnel posts such as informative articles, videos or infographics almost always get a lower cost per click than bottom-of-funnel offer such as “consultation sign-up” or “free trials.” So if you are aiming for higher reach and awareness, producing useful content is your best bet.
For example, an article ad with a strong relevant headline could cost as low as $0.20 per click while a landing page click typically costs $1-$3.
Direct response campaigns
If you are running a campaign to drive leads and sales directly, aka “Direct response campaigns”, you are probably not very interested in cost per click or cost per thousand impressions.(marketers like us tend to geek out over these metrics).
Instead, you are interested in Cost per Conversion.
Cost per conversion
Cost per conversion is a higher-level business metric. Conversion is defined as an action that the user takes on your website, such as a purchase(for e-commerce stores), signup, and enquiry or a lead. Until we start talking about Cost per conversion, your Facebook ads have very little relevance to the sales & revenue growth of the company. As a social media marketing agency, we are also accountable to our clients where it comes to cost per conversion.
However, cost per conversion is derived from cost per click(CPC), hence the inevitable discussion about CPC earlier. Here’s the relationship between Cost per Click and Cost per Conversion(otherwise known as CPA, cost per acquisition):
Cost per Conversion = Cost per click * no. of clicks required to make a conversion.
Say it takes 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 1-3%.
While Cost per click affects Cost per conversion, it sometimes makes sense to pay $3 for a landing page click if it’s a highly relevant click from an interested prospect. On the other hand, using clickbaits can get you low cost per click but the conversion rate will probably suffer. Needless to say, cost per conversion will also shoot up.
Here is an example of a clickbait using giveaways.
Clicks can be likened to the raw materials that you purchase from a supplier, in this case, Facebook. Marketers like us then run campaigns and do our work to turn clicks into leads and into customers.
Cost per click affects the costs of acquiring a customer. It is therefore important to a marketer, much like the cost per kilogram of raw vegetables is important to a chef.
It then takes a good chef to turn the raw ingredients into something palatable.
How to get a low cost per lead
So how much exactly does it cost to acquire a customer or a lead on Facebook? For simplicity sake, lets just look at Cost per lead because that is independent of an individual company’s sales capability.
Referring back to the formula above, cost per lead is derived based on the number of clicks required to make a conversion, in order words, the conversion rate.
If conversion rate is 5%, that means 5 people signed up- out of 100 people that clicked on your ad and/or visited your website.
For direct response campaigns, conversion rate is much more important than the cost per click, and it is based on several factors:
Industry: Industries that do better on Facebook tend to be “wants-based” rather than “needs-based”.i.e. beauty, fitness, enrichment classes, lifestyle products etc. This is because these types of trades convert customers based on impulse more than with logical analysis & comparison. Facebook is also more suitable for mass-market products. Obviously, you are not looking at changing your industry, so what you can do is to position your offer as a ‘want’ rather than a ‘need’.
Type of lead: What is being considered a lead is also ambiguous. For the purpose of lead generation, Facebook allows us to set up messenger ads and lead ad forms. Is a Facebook chat message from a prospect considered a lead? How about someone who fills in your Facebook lead ad form? These 2 types of leads are seen to have a lower cost per lead than leads from landing pages. However, the latter produces higher quality leads because the users have read up about your company offerings beforehand.
Offer: The offer you put up on Facebook has a huge bearing on your cost per conversion. ‘Offer’ however, doesn’t always refer to 50% discount, 1-for-1 or anything to do with a reduction in price. In other to stand out without cheapening your brand, we recommend ‘offers’ such as a complimentary strategy session, centre tour, free trial, free diagnostics, free site visit and quotation and so on, depending on your type of business.
Message: Known as ad copy or landing page copy, this is simply the message that you put out in your Facebook campaign to your audience. Message is critical because no one ever bought anything without first understanding the value behind what they are buying. The better you are able to build up perceived value using copywriting, the more they are willing to pay for your product/service.
Marketability: Marketability encompasses several other factors such as the uniqueness of your product as compared to that of your competitors. A recognizable brand name, strong social proof, media endorsements, and awards garnered all contribute to higher marketability.
In Singapore, a sales-qualified ‘cost per lead’ can go anywhere from $30 to $300/lead based on the factors mentioned above.
Free bonus: Get a 1-page Cheatsheet to Facebook advertising: Step-by-step guideClick here to download
The single biggest mistake of Facebook advertisers
Facebook advertisers complain of high cost per conversion because they do not understand the characteristics of Facebook audiences.
This is especially true for businesses that are used to advertising on Google and writing ads the super-direct way. They fail to attract the attention of Facebook users who are scrolling through newsfeed for news and entertainment.
However, if you know how to connect the desires of your target audience with the benefit of your product, you can pretty much sell anything on Facebook. Really.
Check out this video for a better explanation
Setting Up a Budget for Testing Costs
Many marketers spend a few hundred bucks on Facebook and call it quits after failing to see sufficient leads and customers to turn a positive ROI. That is a fatal mistake.
In Facebook, the first few hundred to a thousand dollars are ‘testing’ costs. Think of it as buying data from Facebook. At the initial stage, the marketer runs as many adsets as possible to test various ad angles, images, and target audiences. During this process, different variations of ad images, ad copy and audience are tested in order to find the combination that works best. The priority during this phase would be to gain as much insight as possible, rather than to acquire sales.
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.
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 businessperson 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 in Facebook.
If you can reliably spend $100 on Facebook to gain a new customer that provides $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 on Facebook.
Outsourcing Facebook Ads?
The benefits of outsourcing Facebook ads are obvious; you spend less money paying ‘tuition fees’ on Facebook. You also outsource the stress of running a Facebook ads campaign that seems to be getting no results no matter what you do.
The learning curve is negligible, particularly with a specialized direct response digital marketing agency.
The trick, however, is in knowing which agency knows their thing because everyone claims to be the expert. When campaigns fail to generate any results, businesses are left with a big hole in their pockets.
Ice Cube Marketing, our agency, does it differently. We go on a performance-based charging model, one of its kind in Singapore. This means that clients do not pay for services such as ads creation, copywriting or split-testing. Clients only pay for results and conversions.
To find out if your business is suitable, claim your Facebook Ads consultation.
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.