Facebook Budget: How to Calculate It

Are you thinking about promoting your business on Facebook and you probably have a question: how much does Facebook advertising cost? I will explain it to you in this article dedicated to the budget for Facebook campaigns.

Facebook advertising has become a trusted strategy for businesses around the world with approximately 7 million active advertisers on the platform.

(Source AdEspresso)

Of course, your business may have higher or lower Facebook ad costs due to several factors, such as placement, target market, industry, and more.

I therefore recommend that you use these budgets as a reference point , rather than a standard, for your company's Facebook advertising campaigns.

How do Facebook auctions work?

Before we explore the different factors that influence the cost of Facebook ads, it’s helpful to review how ad auctions work.

Facebook's advertising system uses auctions to determine the best ads to show to users.

people at a given time.

Understanding how the ad auction works can help you understand how your campaigns are performing.

Auctions are activated whenever there is an opportunity to show someone an ad: it is decided which ad to show to that person. So there are billions of auctions per day between the various platforms of the Meta group.

Every time an advertiser sends a campaign for approval, they communicate that they want to address a specific audience. To determine the winner of the auction (who gets a specific space for a specific target) 3 factors come into play:

1. Bid: that is, the amount that the advertiser is willing to pay to achieve the desired result

2. Estimated action rates : This is the probability that showing an ad to a person will lead to the advertiser's desired outcome.

3. Ad quality: A measure of the quality of an ad determined by a variety of sources, such as feedback from people who view or hide the ad or the engagement it generates.

What affects Facebook campaign budgets?

If you want to prepare a realistic budget for your business, you need to know that a number of factors affect your advertising costs.

There are eight, let's look at them together.

Public

Your target audience has a significant impact on your Facebook ad prices. For example, if your ad campaign is targeted to women, your CPC could increase by $0.55. That’s $0.15 more than if your ad campaign was targeting men.

Considering age, ads are targeted to people between the ages of 55 and 65.

years or older tend to have substantially higher costs than campaigns focused on users aged 25 to 34.

That’s because Facebook only has 26 million users between the ages of 55 and 64. While that may seem like a large number, it doesn’t come close to the more than 58 million people (between the ages of 25 and 34) who use Facebook.

(Data source AdEspresso)

Interests within your target audience also impact costs: detailed interests can help you reach your specific market, broad interests can bloat your target audience with low-value users. Because these

Users frequently click on your ads, but don't act on your calls to action (CTAs), targeting these users can result in a low-performing campaign.

So what to do? Focus your campaign on the people who matter to your business by defining who your buyer personas are and their interests.

Advertising budget

When you launch a Facebook advertising campaign, you set a budget.

If you set a budget of $200, it impacts your ad bids, ad performance, and the overall results of your social media advertising campaign. Let’s look at how: For example, if your business is running an ad campaign with a monthly budget of $100, you can set a maximum bid of $1 per click. Since the average CPC (cost per click) for Facebook ads is $0.88, it’s easy to see if your bid isn’t competitive.

While a large ad spend provides additional flexibility to your business, you can still make a small budget work for your business. However, it is important to remember that a low ad spend provides fewer conversions due to its performance limitations.

Bidding Strategy

Your advertising bidding strategy also affects the cost of your Facebook ads. Facebook offers a few bidding strategies, including:

• Lowest Cost/Automatic Bidding Strategy : This option helps your business get the lowest possible cost per click or action. It also aims to make efficient use of your budget, which is why businesses tend to start with this strategy.

• Manual Bidding Strategy : This option works to achieve your desired cost per click or action. You can use this strategy only for app install, conversion, lead generation, or catalog product sales campaigns.

Depending on your bidding strategy, as well as your bid amount, you may

have higher or lower Facebook advertising costs. In most cases, manual bidding results in higher advertising costs, while automatic bidding tends to make the most of your budget.

Campaign Goal

When you create an ad on Facebook, you need to choose one of the following main objectives for the ad:

• Notoriety

• Consideration

• Conversions

Once you have chosen your main goal, you need to select a specific goal:

Notoriety

• Brand awareness

• Coverage

• Consideration

Traffic

• Interactions

• App installations

• Video views

• Lead Generation

• Messages

Conversions

• Traffic in the store

• Sale of catalog products

• Conversions

In most cases, more engaging advertising goals , such as a visit

in-store or purchasing a product, result in higher advertising costs. This is because these actions, such as purchasing a product, have immediate value for businesses. Selling a product catalog, for example, generates immediate revenue for your business.

When creating your advertising campaign, however, it is important to keep brand awareness in mind. When you reach and connect with people early in the purchase funnel ( click here to learn what a sales funnel is and how we apply it ), you can increase their interest in your brand and move them further down the sales funnel, ultimately resulting in a purchase.

Even though this action happens later, it provides real, tangible value to your business. It can also reduce your Facebook advertising costs, as most businesses pay less for awareness and consideration goals than conversion goals.

The only difference is the time for a conversion. With a goal related to

conversion you immediately connect with a user who wants to buy. In comparison, users in the awareness and consideration stages need a little more time before converting.

Ad Placement

The placement of your ads also determines their cost. With the Ads Management platform, your ads can appear in six placements:

• Instagram

• Instagram Stories

• Facebook News Feed

• Facebook right column

• Messenger

• Audience Network

Through Facebook, you can easily create Facebook and Instagram ads, saving time.

Let's see in more detail:

• Instagram maintains the highest CPC when it comes to Facebook advertising costs. On average, businesses spend an additional €0.78 per click to appear on Instagram. For Instagram Stories, the CPC increase is about €0.71. (Source AdEspresso)

• The average CPC for Facebook ads is about $0.30 less than Instagram. It offers a versatile platform to advertise your business. Your ads can appear not only on Facebook, but also on Facebook Messenger , a popular messaging app for the social network.

• Audience Network , which allows your ads to appear on websites and mobile apps, maintains an even lower CPC than Facebook and Instagram. In most cases, businesses spend an additional $0.20 (based on the average advertising cost for Facebook) per click.

While you can change where your Facebook ad appears, Facebook recommends automatic placements. This tool allows the social media platform's publishing system to make the most of your ad spend by placing your ads on the platforms that offer the greatest potential for results.

Ad quality

The quality and relevance of your ads (as rated by Facebook) also impacts how much advertising on Facebook costs your business. If you create ads with a high relevance and engagement score, you will have lower advertising costs.

Hootsuite (in this article) demonstrated the power of an ad’s quality or relevance score in a recent study. The company created two versions of the same ad: one with a relevance and engagement score of 2.9 and another with a relevance and engagement score of 8.

The low-scoring ad had an average CPC of $0.14, while the high-scoring ad's CPC was $0.03.

When it comes to your relevance and engagement score, your ads can be rated between 1 and 10, with 10 being the best possible score and one being the worst possible score.

Facebook assigns a relevance and engagement score based on positive and negative ad feedback.

Keep in mind that Facebook requires approximately 500 impressions or ad views before assigning a score.

Period and seasonality

The time of year can also affect the amount of Facebook ads.

During peak sales seasons, for example, businesses tend to spend more on advertising. The increased demand for ad space translates into a more competitive market , which can lead to aggressive bidding and larger campaign budgets that inflate the cost of advertising on Facebook.

Some of the most expensive days/times to advertise on Facebook are:

• Christmas

• Black Monday

• Saint Valentine

• New Year's

• Mother's Day

What to do? You can increase your budget for those high-demand periods or review your advertising strategy to improve the quality of your ads.

Sector

While there is an average cost for Facebook ads, you can get more information about your expected Facebook advertising costs by looking at the average Facebook campaign price for your industry. This data provides a more accurate estimate.

Average Cost Per Click

Clothing $0.45

Car $2.24

B2B $2.52

Beauty $1.81

Education $1.06

Finance & Insurance $3.77

Fitness $1.90

Health care $1.32

Real Estate $1.81

Retail $0.70

Technology $1.27

Tourism $0.63

That's why you should only use these numbers as benchmarks for your business.

Get better results from your Facebook ads

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Whether you’re looking to increase brand awareness, get qualified leads, or generate sales, our decades of experience can help.