Facebook advertising can be an extremely effective way for businesses to reach potential customers. With over 2 billion monthly active users, Facebook’s massive user base represents a huge opportunity for marketers. However, successfully advertising on Facebook requires an understanding of how their advertising system works and how much it costs to run Facebook ads.
Cost per click (CPC)
One of the most common ways advertisers pay for Facebook ads is through cost per click (CPC) bidding. This means you only pay when someone clicks on your ad. You set the maximum bid you’re willing to pay for a click, and Facebook displays your ad to people likely to find it relevant. If your bid is high enough, your ad will receive more clicks. But you’ll only pay the amount needed to outbid other advertisers targeting the same audience. CPC bidding allows you to set a budget cap and maximize your number of clicks.
Average CPC rates
Average costs per click vary significantly based on factors like location, industry, competition level, targeting options and ad formats. Some typical CPC ranges include:
- Facebook ad CPC: $0.40 – $1 on average, but can be $3 or more for highly competitive industries.
- Instagram ad CPC: $0.55 on average, but often lower than Facebook.
- Audience Network CPC: $0.10 – $0.40 on average for in-app ads.
Keep in mind, these averages factors across all advertisers in general. Your own CPC may end up higher or lower for your specific account.
Cost per impression (CPM)
Another bidding option is cost per impression (CPM), which means you pay each time your ad is displayed, regardless of whether it’s clicked. CPM bidding lets you control how many times your ad is seen to increase brand awareness. As with CPC, you only pay the minimum amount needed to outbid other advertisers for each impression. Average CPM rates include:
- Facebook ad CPM: $3 – $8
- Instagram ad CPM: $6 on average
- Audience Network CPM: $2 – $4 for native ad units
Minimum bid requirements
Facebook sets minimum bid requirements for both CPC and CPM based on factors like your audience, positioning and ad format. If your bid is too low, your ads may not run or reach your target audience. Minimum bids are not public, but tend to range from $0.50 to $5 for most advertisers.
Ad placement costs
Where your ad appears also impacts cost. Different ad placements have different pricing due to their visibility and click potential. For example, ads in the Facebook news feed generally deliver the best results and have higher minimums. Some typical placement ranges include:
- Facebook news feed ads: $0.80 – $1+ CPC, $8+ CPM
- Facebook right column ads: $0.40 – $0.60+ CPC, $3 – $5+ CPM
- Instagram feed ads: $0.70+ CPC, $6+ CPM
- Instagram story ads: $0.40+ CPC, $4+ CPM
Ad format costs
In addition to placement, the format of your ad will impact cost. Video ads and carousel ads tend to achieve higher engagement, but also come with higher minimum bids. For example:
- Single image ads: Lower minimums
- Carousel image ads: 10-30%+ higher minimums
- Video ads: 50-100%+ higher minimums
Audience targeting costs
Targeting a more focused, relevant audience allows you to increase conversion rates and decrease costs over time. However, certain targeting factors can increase minimum bids required. For instance, targeting by geography, detailed demographics, interests and behaviors may require higher bids compared to broader targeting.
Calculating estimated CPC and CPM costs
Facebook provides an ad cost estimate tool to help calculate potential CPC and CPM rates based on your audience, positioning and budget. However, actual costs can vary significantly. To increase accuracy, also consider third-party bid estimation tools or use these formulas as estimates:
Estimated CPC formula:
- Audience size estimate X Click through rate estimate X Minimum bid estimate = Estimated CPC
Estimated CPM formula:
- Audience size estimate X Minimum bid estimate = Estimated CPM
It’s also a good idea to start with A/B testing using different bids, placements and targeting options. This allows you to gain real data on actual costs and engagement for optimizing your campaigns.
Ad campaign budgeting
When setting an overall Facebook ad budget, keep these factors in mind:
- Wider targeting and multiple ad sets require larger budgets
- Video and carousel ads have higher CPM costs
- Conversion-optimized goals may increase CPC over time
- Location, competitive, and industry factors impact costs
- Higher minimum bids are required for awareness goals
- Test budgets at different levels to find the right balance
Monitor cost of results data frequently. Most advertisers discover an ideal daily budget range through ongoing optimization.
Reducing average CPC and CPM
Some top tips for decreasing your average cost per click and impression over time include:
- Refine targeting to most relevant audiences
- Create focused ad sets for each product, offer or audience
- Test ad variations to increase click through and conversion rates
- Improve landing page experience to reduce bounce rates
- Remarket to visitors who didn’t convert initially
- Increase ads’ social proof with Likes, Shares and Comments
Ad campaign optimization
Ongoing optimization allows you to find the right balance between your costs, audience reach and campaign results. Areas to monitor and test on a weekly or monthly basis include:
- CPC and CPM rates for each ad, placement and format
- Click through rates and conversion rates by ad, audience and location
- Budget allocations across ad sets, formats and placements
- New audience segments, targeting factors and bid adjustments
- Ad schedules and frequency capping for each campaign
By regularly optimizing your Facebook ads for better performance and cost efficiency, you can maximize your investment and lower CPC and CPM over the long-term.
Conclusion
Facebook advertising costs are based on a combination of your bid, placement, format, audience targeting and optimization techniques. While averages give a baseline, your actual CPC and CPM rates may vary significantly. By A/B testing different options, monitoring data frequently, and making adjustments, you can achieve your Facebook marketing goals cost-effectively.