If you came here looking for an average number to wrap your head around... well, here it is:
That’s right. Even though there are averages, no average is going to accurately match your campaigns. The number you’re looking for depends on a few factors.
So what are these averages... those factors?
Let’s dig into the details.
Types of Facebook advertising costs
Before we start going over the numbers, it’ll be helpful to introduce Facebook’s cost structures.
There are currently five different cost types for Facebook ads:
- Cost-per-click (CPC): charges advertisers only when a user clicks their ad
- Cost-per-thousand-views (CPM): charges advertisers on every 1,000 impressions
- Cost-per-view (CPV): charges advertisers every time their video ad is watched
- Cost-per-action (CPA): charges advertisers when a user takes a certain action on their website
- Cost-per-like (CPL): charges advertisers when a user likes their page
CPC is the most common, though it all depends on ad objective. For the purpose of breaking this all down, I'll focus on CPC.
What influences ad cost?
The simple answer is: demand.
Facebook ad costs largely depend on your competitors, but it's not just your industry competition. Here, anyone interested in your audience is your competitor.
How many advertisers are interested in "your" spots, what they're willing to spend, and how good their ads are – it all plays a part.
That’s where the more realistic answer comes in: Facebook ad costs are influenced by a system of levers that is helmed by a unique auction system.
Bidding for ads
Regardless of everything else that influences the cost of your ads, there are two direct ways to limit your overall ad spend: your bid and your budget.
Your bid is how much you’re willing to spend to land an ad placement. Your budget is the total amount of money you’re willing to spend on a single campaign.
Facebook has two budget types:
- Daily budget: the amount you’re willing to spend on a campaign each day
- Lifetime budget: the amount you’re willing to spend during an entire campaign
Your budget should be your main barrier when trying to limit your ad spend. That’s not to say bid has no part in the mix – just have budgets that you’re comfortable with before you start to play with bids.
If you don’t choose a bid, Facebook will assign one based on budget and campaign duration. There’s nothing inherently wrong with that, but it could end up affecting your performance. Facebook always encourages marketers to bid true to what the action is worth to you – focus on ROI instead of the lowest cost.
The higher your bid, the more access you may have to those in your audience that matters most.
It’s also important to know that you’ll never pay a penny more than the next highest bidder. It doesn’t matter if you set your bid to $5 and the next highest bid is $1.45 – if you win the bid, you’ll end up paying $1.46.
Lastly, keep in mind that ad costs fluctuate. Don’t “set and forget it.” Check in on your campaigns often to ensure they’re on track.
Who wins the bid & why
Imagine a world where the highest bidder wins the best ad spot and that’s that. Such a system would prioritize wealth over anyone trying to leverage advertising to get an edge.
Thankfully that’s not the case. Even though ads are secured via a bidding system, that system doesn’t work as you’d expect – after all, Facebook won’t even charge you the full amount of your bid if it’s not necessary.
Since so many businesses want a piece of the Facebook Advertising pie, the platform’s auction system is one that prioritizes quality above all else.
The delicately balanced ad system ensures that the platform remains pleasant to browse for users while also promoting healthy competition among businesses of all sizes.
Facebook does this by using an auction system that considers the interests of both users and advertisers. Ads with the highest combination of the following win the auction:
- Estimated Action Rate - An estimate of whether people will engage with or convert from a particular ad
- Ad quality - A Facebook metric that measures the quality of an ad as determined from many sources (feedback from people viewing or hiding the ad, overall visual quality, information presented, engagement bait, etc.)
Together, estimated action rate and ad quality equates an ad's relevance score. The more relevant an ad is (the higher its score), the more Facebook will subsidize its cost.
In order to be fair, the system needs to be biased towards what works best in each specific instance. It’s nothing personal, it’s just business.
I'll get back to ad relevance later.
Factors that affect ad cost
All the following influence ad cost:
- Ad Objective
Facebook calculates much of its ad pricing based on general industry revenue.
Obviously this isn’t something you have much control over, but it’s worth noting. Think about it – if you’re selling cars, your cost per result will (and should) probably be higher than if you’re selling a 30-day software trial.
To get a better idea of the price disparities between industries, let’s turn to a 2018 CPC study done by WordStream.
The disparity between Apparel ($0.45 CPC) and Finance & Insurance ($3.77) was massive. While there isn’t much you can do to separate your products from their industry, you can, however, optimize everything else about your ads.
Also, notice how retail is at $0.70 – that average is fantastic for anyone selling products online. More on that later.
Choosing the right ad objective is the first step in making sure your ad cost stays low.
Ad objectives are the marketing goals advertisers have to choose from when creating their ad.
Generally speaking, the more there is to gain from an objective, the higher the ad cost will be. For instance, conversions will typically cost more than clicks, which will usually cost more than video views.
Each objective has different key performance indicators (KPIs) and is shown to different people based on the results you want. The smaller your audience pool, the more your cost rises – except in certain highly-targeted, highly-relevant campaigns.
These are the available Facebook ad objectives:
- Brand awareness
- App installs
- Video views
- Lead generation
- Post engagement
- Page likes
- Event responses
- Catalog Sales
- Store traffic
And to give you an idea of the pricing disparities between these objectives, let’s take a look at a 2019 study done by AdEspresso.
Typically, Reach and Lead Generation campaigns cost more. Reach campaigns are for exposure (not for clicks), and good leads can be priceless. Take these numbers with a grain of salt, though. There's no way to predict exactly how much any of this will cost you.
Even with certain goals in mind, don’t hesitate to explore alternative ad objectives. You never know which path will be more useful and/or cost-effective to you.
This was implied earlier, but it’s important to highlight.
The more relevant your audience, the lower your cost. But also note that people with certain traits cost more to reach than others. Ultimately, the more accurate your audience, the higher your ROI – regardless of whatever it costs to reach your ideal audience.
Facebook ads are displayed to users based on comprehensive targeting parameters – over 350 audience attributes that you can select and combine. This includes demographic information, interests, behavior, event history and more.
Choose an audience too broad and your ads will get lost in a sea of irrelevant exposure. Narrow it too much and it could also lead to higher costs because of limited placement options.
When mastered, audience curation is a science that cuts down on costs and greatly improves results.
Then comes the timing of your campaign.
If you want to run ads around any holiday, on popular days, or during certain hours, you’ll need to just accept that certain times cost more.
Competition increases during peak times and so does the cost of advertising. This includes major holidays like the months leading up to the Q4 holidays:
There are also price differences between the days of the week:
And of course, among the hours of each day:
You’ll want to look into the best times for social activity for your industry and audience and apply your findings.
This is another element of your ad campaigns that you’ll have to test extensively.
The spots where you can run your ads are called Placements.
There are placements all over Facebook’s extended network, and while they’re all priced differently, their value is fairly consistent. Certain spots just perform better, are more eye-catching, or just work better for different types of ads.
Here are all the placements available in 2020:
- News Feed
- Video Feeds
- Right Column
- In-Stream Videos
- Search Results
- Instant Articles
- Sponsored Messages
- Rewarded Video
- In-Steam Video
AdEspresso found that on average, both Instagram Stories and Feed ads are more expensive than Facebook ad placements. The audience network options rank as the most affordable of the bunch, but that doesn’t necessarily mean they’re the most cost-effective.
There are no “bad” placements, but there are ineffective ads.
High value spots – like Instagram Stories, for example – just need to be leveraged effectively in order to avoid wasted ad spend.
Last but not least, the most important factor to consider is the quality of your ads.
Your presentations, your messaging, your product. It all matters.
Facebook is a browsing platform, not an action platform. The point of Facebook is to keep you connected with the people you care about and to share content. It’s easy to engage with anything on the site, but people don’t just engage without a reason.
To perform on a platform like Facebook, your ads need to be visually appealing and they must also do one or more of the following:
- Pique user interest
- Invoke emotion
- Persuade people to act
Ad relevance is the part of the puzzle that you have both total control over and virtually no control over.
On one hand, you have total control over the ad’s contents, placement, audience, etc. But on the other hand, people’s actions influence an ad’s relevance score more than anything you can do on your end.
An ad’s relevance score can be anywhere between 1 - 10. This number is first calculated from ad quality (how Facebook’s systems perceive and rank your ad) as well as estimated action rate (how they estimate your ad’s performance). As your ad is served across the network, the score fluctuates depending on how people engage with the ad.
If an ad’s relevance score is high, Facebook will subsidize part of the expense – making its CPC significantly lower. The more positive interactions (video views, conversions, likes, etc.), the higher the score will be. The more times people hide or report an ad, the lower the score will be.
Any score 5 or higher is good, but 8 - 10 is where you really want to be.
Your ads need to appeal to your target audience or Facebook will begin to see them as ineffective. If deemed ineffective, they won't cover any cost – especially if you choose to keep running with the same ineffective ads. In such a scenario, such ads would be shown less and would cost more when they are shown.
Facebook and ecommerce
There’s no doubt that Facebook is a fantastic marketing platform for all sorts of businesses, but it’s particularly effective for anyone with an ecommerce business.
If selling products is one of – if not the main reason that you’re turning to Facebook for marketing, then you should really consider running dynamic product ads.
Dynamic product ads are automated product ads that target top priority leads with products they’ve shown interest in.
This is where WordStream's $0.70 retail CPC average really shines. Retargeting tends to be generally cheaper and more self-sustaining than other forms of product marketing. The ads make themselves and Facebook puts them in front of the right people.
With the use of a tracking pixel, solid product data, and little effort, you can have Facebook’s algorithms net you sales that could have otherwise slipped away.
- If you don’t already have one, creating a product catalog is a one time effort that is essential for effective omnichannel marketing. Most DPA content comes from your data, so optimized data means optimal ads.
- Audience, time, and placement selection with DPAs is linear and data-driven. You won’t lose any time fine-tuning the details.
- Retargeting is very much a “set it and forget it” form of marketing – you’ll want to check up and adjust your frequency accordingly, but you can take a step back.
- Cost-per-click pricing means you’ll only be paying when one of your bottom-of-the-funnel leads clicks on your product.
- With DPAs, you’ll not only maximize your product data and your reach, but you’ll also gain insight on how your audience reacts to your PLAs on the Facebook ecosystem.
Facebook retargeting is a no-brain layer of automated product marketing that you don’t want to ignore.
If you're looking to dive in and launch your own dynamic product ads on Facebook, check out our guide on getting started.
There's no simple answer when it comes to determining what your Facebook ads are going to cost you – but there's a lot you can do to improve your results, as well as cut back on ad spend.
Industry, ad objective, audience, time, placement, and relevance all influence your bottom line. And while you can't just switch industries, you can tweak and optimize the rest.
Just remember: don't just strive for a lower cost, focus on ROI. The price and presentation disparities between Instagram and Audience Network ads are a good example of how cheaper isn't necessarily better. Also, don't forget to get experimental with your ads; you won't know what works best until you test different options.
For ecommerce businesses, dynamic product ads are essential. You don't want to miss out on that opportunity.
Building out your product catalog is one thing, but optimizing your data is another. Feel free to reach to us with any questions – we know a thing or two about omnichannel marketing.