Facebook ads are sold in an auction environment, which means the cost of Facebook advertising is largely determined by supply and demand.
When you set up a Facebook ad campaign, you have access to many tools and settings to help control your Facebook ad costs. You can look at the cost of Facebook ads in two ways: how much you want to spend on a campaign or by how much you want to spend per result.
You can directly control the amount you want to spend on a Facebook ad campaign, for example $5 per week or $5,000 per week, but you can’t directly control the cost of each result you get (for example a purchase, a download, or a click). Facebook has tools to help you control the cost per result to a degree, but there is no telling if you will consistently get results for your desired cost.
In addition to the auction, there are two other factors that make up the cost to advertise on Facebook, the value Facebook users get from your ad and estimated action rates.
Facebook’s goal is to increase the time their users spend on Facebook and too many bad ads in users’ news feeds will contribute to users leaving. So if you have an ad that doesn’t perform well because people don’t like it, you will have to pay more to Facebook for them to deliver it to their users. On the other hand, if you create an ad people like, you won’t have to pay as much for the ad because you’re helping make Facebook a better experience for their users. Facebook uses a number of different methods to measure user value, two of them being the ratio of negative to positive reactions to your ad and the number of users who hide or report your ad.
The other factor is the estimated action rate which is a measurement of expected advertiser value. Facebook mostly measures this based on how well your ad is achieving the objective you set for it. Typically, if an is performing well, it means the user likes the ad.
You can think of the parts that make up the cost of Facebook ads as a formula:
All this processing happens under the hood. As an advertiser, all you need to do is set the budget for your campaigns and keep your focus on finding the right audiences for your product and making the best ads you can. Doing these two things well will drive the cost of your Facebook ads down.
Granted that there are unique factors that determine your Facebook ad costs, we analyzed several hundreds of millions of dollars in Facebook ad spend to see how much Facebook ad costs on average.
Facebook advertising costs 2020
In 2020, the whole world has changed with the COVID-19 pandemic. The question that's relevant to us in this article is, how has this been affecting Facebook ad costs?
CPM impressions April 2020
Overall, we saw a 12% increase in CPM in April compared to March. This could be an indication that more advertisers are jumping back into Facebook ads driving up the costs.
The biggest increases in CPM came from Reach and app-install campaigns. On the other hand, we saw a decrease in CPM in traffic, conversions, engagement, and lead generation campaigns.
CPC April 2020
There was also a 21% increase in cost-per-link click in April compared to March, another indicator that more advertisers are jumping into Facebook ads again. However, it's interesting to see the increase is so much higher than even in January or February. This is something we'll keep an eye on when we compile May data.
We saw an 18% increase in CPC in Traffic campaigns and a 8% increase in catalog sales campaigns, which are the two types of campaigns that contain most of the link clicks.
Cost-per-engagement April 2020
We didn't see too much of a difference in cost-per-engagement in April compared to May, but is still something we'll continue to monitor as a Facebook ad cost indicator.
Cost-per-purchase April 2020
To measure cost-per-purchase, we isolate catalog sales campaigns and looks at the total amount spent divided by purchases. In April, we saw some surprising results.
Cost-per-purchases decreased 17% in April compared to March, continuing the trend we saw from February to March. Since January, cost-per-purchase decreased 35%. This is a very strong indicator to be running more catalog purchase campaigns. It might be a good idea to build a warm audience with auto post boosting rather than hitting cold audience with catalog sales. Like everything else, keep testing.
CPL April 2020
April saw a huge decrease in cost-per-lead from March. This might be due to a large decrease in the amount we saw spent in Revealbot on lead generation campaigns this month, which might be representative of the Facebook ad marketplace as a whole.
In any case, this is an excellent signal for campaigns that need to generate leads that can still operate at or close to full capacity because it means leads will be cheaper to acquire.
Cost-per-app-install April 2020
We see a similar story for cost-per-app-install in April compared to March, which decreased 5%.
Cost-per-thousand impressions 2020 Q1
In April, we compiled over $200M in ad spend data from Revealbot managed Facebook ad accounts from Q1 2020 - January, February, and March. Although you might experience something difference from your individual ad accounts you manage, this is what we saw. Also take note that most of our customers are in the United States and most likely targeting audiences in the US.
China first reported the rise of the outbreak in December and the first COVID-19 case in the US was confirmed on January 20, 2020. Because of COVID-19 or for other reasons, we saw a decrease in CPM of 18% in January and an 11% decline in February compared to 2019.
But the biggest difference comes in March when many states issued stay-at-home orders, which forced non-essential businesses to close or at the every least severely limit their operating capabilities. In March, CPM dropped by 34% compared to CPM costs in March 2019. This, without a doubt, is due to COVID-19, which is causing less businesses to spend on advertising.
Facebook warned last week that while usage of Facebook, Instagram, and WhatsApp have sharply increased in the past couple of months, ad revenue has slumped, which is evidenced in what we're seeing in our data. Lower CPMs are likely due to less advertisers buying ads.
Cost-per-click (link) 2020 Q1
We continue to see the decrease in Facebook's ad costs when looking at CPC, too. In January, February, and March 2020, CPC dropped by 16%, 21%, and 27% respectively compared to 2019.
While CPMs dropping shows ads are getting cheaper to buy, CPCs dropping at the same time shows Facebook users are still likely to click on ads.
For many ecommerce advertisers on Facebook, we see this as a big opportunity. With many advertisers pulling back spend, that decreases the cost of Facebook ads in the auction. And if you're an ecommerce business with products that are attractive for home or indoor use, this is a great time to scale your Facebook ad campaigns.
CPM by campaign objective 2020 Q1
When looking at the differences in CPM by campaign objective, we see further evidence of declining CPM compared to the first quarter in 2019.
What's especially interesting here is the decrease in CPM for conversion and catalog sales campaigns. Before seeing this data, I would have guessed CPMs in Reach campaigns drop the sharpest as advertisers consolidate their budgets to campaigns with direct, high ROI.
Despite this, the data says CPMs in conversion and catalog sales dropped 26% and 23% respectively.
Rather than attributing the decrease in cost to advertisers consolidating budget to bottom-of-funnel campaigns, this could be explained by advertisers pulling their budget completely.
CPC by campaign objective 2020 Q1
Again, something peculiar is happening with Reach campaigns, and we're not completely sure why. Upon investigating the data, it's calculated correctly and we can only label this an outlier. As we continue to monitor Facebook advertising costs, we'll keep an eye on Reach campaigns.
But what we continue to see is again, CPC in both conversion and catalog sales dropped by 24% and 45% respectively.
This drop in CPC for both of these types of campaigns continues to show that although Facebook advertisers are buying less ads, Facebook users are still clicking on them. And if you have a product that people want during this time, this is an excellent opportunity to scale your campaigns.
Facebook advertising costs 2019
In 2019, Revealbot as a Facebook ad automation platform managed over $300 million in Facebook ad spend. We compiled and anonymized the data to see how much Facebook ad costs were month-to-month and quarter-to-quarter. Here’s what we found:
Cost-per-thousand impressions 2019 by month
We saw varying cost-per-thousand impressions (CPM) throughout 2019 between $10.42 and $11.92. Naturally, CPM’s increased in the holiday season to $12.64 and $12.58 in November and December respectively.
The increase in CPM’s at the end of the year is expected when there are more advertisers increasing their budgets to capture holiday shoppers’ attention.
Cost-per-click (link) 2019 by month
Cost-per-click (CPC) for outbound links in 2019 had a different story than CPM. We saw CPC at its highest between February and June with costs about 13% lower during November and December.
While ad costs might be increasing during the holiday shopping season at the end of the year, Facebook users may be more likely to click an ad. This might also be caused by advertisers offering more appealing ad creatives and offers to capture holiday buyers.
Cost-per-post-engagement 2019 by month
Throughout 2019, there wasn’t much of a difference in costs-per-engagement with only a $0.02 range between $0.09 and $0.11.
Calculating cost-per-conversion for Facebook ads is difficult as Facebook’s API doesn’t offer a cost-per-result, result being the selected type of conversion the advertiser chose for the campaign. To rectify this problem to at least get some insight into the cost of conversions from Facebook ads, we looked at the cost-per-purchase from campaigns with the objective for catalog sales.
The cheapest cost-per-purchase came in the fourth quarter, which is expected with advertisers offering the best discounts and users buying more than usual at this time of the year.
The first quarter wasn’t that much more expensive than the fourth quarter, and quarters two and three ($8.78) were about 12% higher than the average of quarters one and four ($7.86). It’s important to note that the cost-per-purchase for each advertiser will be significantly different based on the products they’re selling. You might have a far lower cost-per-purchase or far higher based on the prices of the products you’re selling.
Don’t miss our guide on Facebook ads for ecommerce to make sure you’re not missing anything critical that could make your Facebook ads more expensive than they need to be.
Calculating the cost-per-lead (CPL) from Facebook ad campaigns with the objective of lead generation is much more straightforward.
We didn’t see a big difference in CPL in quarter four from other quarters showing that the holiday shopping season doesn’t affect lead generation campaigns.
Surprisingly, we did see a much lower CPL in the second quarter compared to others, and we will see in 2020 if this is a trend we can expect for lead generation campaigns.
Cost-per-app-install 2019 by quarter
Another straightforward insight we can calculate is the cost-per-app-install for Facebook ad campaigns with the objective of app installs.
In 2019, we saw the cost-per-app-install vary widely between the first and second quarter to the third and to the fourth. The cost-per-app-install was most expensive in the fourth quarter ($2.95), 123% more than the average of the first and second quarter.
This might be due to the increased ad auction competitiveness in the fourth quarter driving costs up for mobile app advertisers. This is another insight we will continue to monitor in 2020 to see if this a trend mobile advertisers should expect to see.
CPM by campaign objective 2019 by quarter
The best way to determine the cost of Facebook ads might be to look at CPM by campaign objective, which can give you a better idea of how much it costs for 1,000 Facebook users to see your ad based on your campaign type.
We looked at CPM costs by reach, traffic, conversions, engagement, catalog sales, app installs, and lead generation campaign objectives.
Naturally, reach campaigns have the cheapest CPM with the first and fourth quarters being the most expensive. Engagement campaigns, while seemingly not too far behind, are around twice as expensive.
Most facebook ad campaigns for ecommerce will be running conversion and catalog sales campaigns, which have significantly higher CPM’s than reach campaigns, but that isn’t at all surprising - it’s going to cost money to reach buyers. What is surprising is how much more expensive CPM’s were for catalog sales campaigns in quarter four. While catalog ads might be more expensive to deliver, advertisers are likely making up for the cost directly through sales.
CPC by campaign objective 2019 by quarter
Another metric to determine potential Facebook ad costs is looking at CPC by campaign objective. While reach campaigns had by far the cheapest CPM, it’s nice to see traffic campaigns have the cheapest CPC - a great example of Facebook’s algorithm finding the best audiences for your campaign objectives.
And as we saw high CPMs with catalog sales campaigns, we see very low CPCs, showing that advertisers are reserving catalog sales ads to small, bottom-of-the-funnel audiences that might be more expensive to deliver ads to (see above), but are much more effective in terms of cost per acquisition.
Cost-per-post-engagement by campaign objective 2019 by quarter
Cost-per-post-engagement has been incredibly low in 2019. In our post, how to hack social proof in Facebook ads, we recommend running ads under the engagement objective to create social proof and then reuse those ads in click or conversion campaigns. This shows this can be an inexpensive trick to get hundreds of reactions on your ad to make your ads not look so dead when going after conversions.
Interestingly, catalog ads require the most spend to get engagement, far higher than conversion campaigns. Unfortunately, you can’t run catalog ads in an engagement campaign so this low engagement on catalog ads is just something advertisers have to deal with.
However, you can still run eligible ads under engagement campaigns for a short time to build social proof and then use the ad’s post ID to run it in a conversion campaign, where cost-per-post-engagement is nearly 10x higher.
How to lower your Facebook ad costs
Starting around Halloween through Black Friday and peaking at Christmas, it’s the magical time of record high consumer activity — and skyrocketing ad costs.
In general and overall, CPMs increase by around 12% during this time period, but it's not uncommon for advertisers to see their CPMs double, which means you’re going to have to spend significantly more in November through December to take advantage of the shopping season.
Fortunately, there are ways to get cheaper CPMs and CPCs with Facebook ads.
Apart from making sure your ad creatives are scroll-stopping and get the message across effectively to the right audience, here's what you can do to prevent growing ad costs:
1. Go heavy on remarketing
Warm leads are a better use of ad budget because they’re way more receptive to brand communication and thus more likely to purchase or at least to engage with an ad (which seems to a factor all of its own in bringing down Facebook ad costs).
Practically all online users are getting so much cold messaging around holidays that it’s extremely tough to get through that noise. So showing them something that is so personalized that it shows you know their interest in you is your best bet.
During the end of quarter three and in October, you can run traffic campaigns to top-of-funnel audiences to blog posts. This will not only build brand awareness in preparation for the holiday season, but it will aso build the size of your retargeting audience.
2. Automate ad management routine
Automate as much as you can — because during holidays, your expertise is especially needed and you don’t want to waste your time on routine tasks. So it’s high time you set up automated rules via a specialized management tool like Revealbot.
Obviously, we recommend using Revealbot for more complete Facebook ads automation, but at the very least use Facebook’s native automated rules to help you automatically pause ads, adjust budgets/bids of an ad and more — all based on an ad’s performance.
We wrote the ultimate guide on Facebook ad automation to help you get started.
3. Use your Facebook Pixel data
You probably have a sizable chunk of audience that has visited your website. Even better: users that tried purchasing your products, subscribed to a newsletter, or just heavily engaged with the website.
During holidays, focus on retargeting them by creating a custom audience made up entirely of users that already know who you are:
The best event to choose is of course the one closest to (but just before) the final conversion event — as those users will probably be most interested in your product.
For instance, try users that have added your product to cart or at least viewed a product page. They will probably find an ad about your current offer or even just your brand in general quite appealing.
Using your Facebook pixel data intelligently is critical if you want to scale your Facebook ad campaigns.
4: Use content to grow warm audiences
Keep creating engaging content for your Facebook page and use its performance on Facebook as an engagement condition for remarketing.
What’s working with Facebook content now are short videos made specifically for social media, particularly low-budget and user generated appearing videos.
You can also try automated text-to-video production tools that will even take video creation off of your hands. Once posted, a 10-sec view of the video within Facebook is an achievable metric to grow your retargeting audience.
For images and text-based posts, now’s the time for truly irresistible creatives if you want to break through the usual clutter of holiday-themed discounts and free shipping offers. Use your best creatives and the most concise and single-minded messaging that just begs to be clicked on.
You can set up Auto Post Boosting that will automatically boost organic page posts if they receive a good level of organic engagement. Check out the guide we wrote on how to automatically promote Facebook posts.
5: Optimize spend via micro-targeting
For those cold audience campaigns where you’re not using remarketing, use these tips to refine targeting and shave off those inefficient users at the edges of your core audience.
- interests: on top of media they read and influencers they follow, include your competitors if they’re selectable
- demographics: based on current user data or even an informed guess, try and imagine what kind of life your users are living. A lot of users out there might be interested in your product, but what segments of them will actually be prepared to pay for it — with the reality of their work, family, and studies taken into account.
- behaviors: devices, purchase history (available in a few countries only), travels can all be good indicators of your users' income.
Use our guide on Facebook audience insights to fully explore opportunities to find your right cold audience.
More ideas on keeping Facebook advertising costs down
Be prepared that you will probably still have to increase your daily budgets (and bids, if you’re managing them manually) to get as many conversions as what you were getting before the holiday season.
But you can implement a few strategies to mitigate the costs:
- build retargeting audiences before the holiday season
- use pixel data to create micro audiences based around key events
- avoid ad fatigue by making and stocking up on new ad creatives before the holiday season
- use Auto Post Boosting to auto promote your best organic posts to further build your retargeting audiences
- use ad automation to seize opportunities and avoid underperformance
- if you need to brush up on your Facebook ad knowledge, check out our guide on how to study for and pass the Facebook Blueprint exam to learn the fundamentals