Facebook is still the largest social media platform today. It claims nearly 3 billion monthly active users. More than Instagram and TikTok combined and more than any other social network. However, the Facebook Ads Costs over the past few years have increased. Businesses have to compete more fiercely for ad placement. So how do adjust Facebook Ads Costs to get the best results? Let’s find out in the following article.
Common Mistakes About Facebook Ads Costs
As we have seen, Facebook Ads are a powerful platform for social marketers. But some common mistakes can keep you from getting the results you want. Before diving into Facebook ad cost planning and tracking, here are a few mistakes to avoid.
You’re not investing enough for Facebook Ads testing
To run ads successfully, you need to know what works. A lot of first-time Facebook marketers make the mistake of not investing enough in testing. You don’t have to spend your entire budget testing different audiences, placements, and ads, but you do need to experiment enough to get meaningful results.
You don’t know enough about Facebook Ads metrics
You need to understand Facebook Insights and Analytics. At a high level, that data will tell you how your Facebook ads are performing compared to other platforms. To a larger extent, tracking your Facebook metrics will help you keep your ads effective over time.
You don’t use tracking outside of Facebook
Facebook metrics are valuable, but they’re not the big picture. You will need:
- Facebook Pixel to track the activity on your website.
- Facebook Conversions API to track conversions on your website that are ignored by the pixel.
- You can use Google Analytics to check and validate the links people click on Facebook.
These analytics are all a bit more technically complex than Facebook’s built-in metrics. But they are well worth the extra effort because they give you more data. For example, your metrics on Facebook might show that two ads are equally successful in terms of clicks and conversions. But when you dig through the Conversion API data, you can see that one ad leads to a much higher order value than the other.
You don’t adjust Facebook Ads Costs
Ultimately, the biggest mistake you can make with your Facebook ad Costs is not knowing how to budget. From the very beginning, you need to set boundaries for your spending. Otherwise, you run the risk of randomly spending money without knowing how much you’ve spent or where it’s going.
How to calculate Facebook Ads Costs
How much should you spend on Facebook Ads Costs?
It depends on your business, your cash flow, your current return on ad spend, and how much you need to be profitable. You will need to know:
- The cost of the product or service you are promoting
- Cost per lead you get through Facebook ads
- The current conversion rate for those leads
- How much do you need to sell to make a profit?
Let’s say you are selling a course that Costs $1,000 and you want to make $20,000 in profit. Your Facebook ads direct people to the free webinar, and about 3% of the people in the webinar will go on to buy the course. For every 1,000 people, there are 30 people. To make 30 sales, you need to land 1,000 leads for $10 each. That means you would spend $10,000 on Ads, to generate $30,000 in sales, with a net result of $20,000. But if your cost per lead rises above $10, you’ll start to fall below that $20,000 threshold for profitability.
If you have a lower-value product or service, your price per lead will have to be lower. For example, with a $100 product, the same conversion rate, and a $10 lead cost, you will lose money because your profits are much smaller. You would spend $10,000 to generate only $3,000 in sales.
The metrics you’re working with will change over time, and they’ll be different for every product, service, and ad campaign you run. So the easiest way to organize these metrics is to use a spreadsheet. Use it to track your product Costs, lead Costs, conversion rates, and goals for your leads and sales.
Another example: let’s say you create a spreadsheet for your latest product. You know that your current lead Costs are around $5 and you want to get 1,000 leads with your first ad campaign. That means you will spend $5,000. You can use a spreadsheet to check how many of those thousands of leads will convert into customers, then multiply it by the value of the product to figure out if you’re making a profit. relative to your ad spend.
When your lead cost may be too high for your conversion rate and product value
If you’re struggling to make a profit from your Facebook ads, your lead cost may be too high for your conversion rate and product value. It’s time to test and find a way to bring that number down.
- Show your ad to a different audience (You may not have found the right audience or your current audience is showing signs of getting bored of your ads.)
- Adjust your lead magnet so it converts a higher percentage of people
- Sell to customers for a higher average order value and you can get a higher lead cost.
In the past, some have argued that it’s harder to sell high-value products on Facebook. But that’s not the case now. As Ads Costs and competition increase, you need higher-value products to make your budget work. So your options are to sell high-value products or be good at upselling and cross-selling for lower-value products. This is where metrics like the Facebook pixel and the Conversions API come into play, so you can track the lifetime value of your customers, instead of just measuring your ads based on single conversion.
When Facebook Ads Costs are balanced
If your Facebook ads are generating profits, keep running them. But don’t keep running the same ads forever. When something works well, keep testing new variations on it. Try lookalike audiences, similar ad creations, or new lead magnets.
Try to spend about 10% of your ad budget on continuous testing so you can continue to scale when things go well. The more success you have, the more you can experiment, creating a positive feedback loop.
How to track your Facebook Ad performance
Tracking at different levels
You can monitor your Facebook ads at different scales. You should take some time to consider these as each level will give you different information that you can use in different ways.
- Campaign level: Gives you data about your entire campaign. Use it to check if your ads are most profitable, then dig deeper into the numbers to improve or test further.
- Ad setup level: Here you can see your ad’s performance for specific audiences and ad placements. You can also separate leads from different regions to see how people react to ads in different places.
- Ad Level: You can check out the really fine details: images, ad copy, lead magnets, or link text.
- External data: Don’t forget to add data from your website and UTM so you can see order value and customer lifetime value for different ads. This can make a big difference in understanding your budget.
Facebook ad link click-through rate (CTR)
This internal Facebook metric tells you how many people came from your ad to see an offer or product. You need a CTR of at least 1% or higher. To find out these metrics, go to your Facebook ads manager and search through the drop-down menus in your ad activity reports for Performance and Clicks. With this report, you can compare CTR for different ad variations.
Facebook Ads Costs per lead (CPL)
Depending on your ad campaign goals and how you’ve set up your Facebook pixel, this could show up as a complete cost-per-sale or cost-per-signup. Knowing the cost per lead or sale is essential to calculating a profitable Facebook ad budget. As a general rule, if an ad is profitable, keep it running. You can use your budget to experiment with improvements and try to bring your CPL down even further, but in the meantime, keep that lucrative ad running. If an ad has a very high CPL, you can dig deeper into the numbers. Consider audience size, ad frequency, and cost-per-thousand-impressions (CPM).
While the younger generations are heavily focused on the new platform TikTok, Facebook’s audience is slightly more adult-oriented. That means people who see Facebook ads have a lot more disposable income to spend. However, this does not mean that you should use Facebook and ignore every other Ads platform. Diversification is still a great strategy. If you want to get the most return for your money, you will allocate your budget to other platforms like Google Ads, YouTube, and TikTok.