There are a few key reasons why Facebook ads may be charging you more than expected:
Your Targeting Settings
The more narrowly you target your ads on Facebook, the more it will generally cost you. Targeting by location, demographics, interests, behaviors, and connections allows you to hone in on your ideal audience, but it also significantly shrinks the available audience pool. With a smaller pool of people to show your ads to, competition increases amongst advertisers trying to reach that same group. Thus, Facebook raises the advertising costs.
Additionally, when targeting a smaller niche audience, Facebook needs to work harder and thus spend more to find people within that group to deliver your ads to. Broader targeting parameters cast a wider net, making it easier and cheaper for Facebook to find relevant people for your ad campaign.
Location Targeting
Targeting users in certain countries or cities where advertising competition is high, such as the United States, United Kingdom, or Australia, will be more expensive than targeting less popular areas. The costs for ads shown in different locations can vary significantly.
Demographic Targeting
Targeting specific demographics like age, gender, relationship status, education level, work industry, and income also comes at a premium. For example, targeting 18-24 year olds or people earning over $100k will cost more than targeting all ages and income levels.
Interest and Behavior Targeting
Targeting people who have expressed interest in or exhibit behavior around certain topics, brands, products, and activities is effective but more costly. For example, targeting “tech enthusiasts” or people who have browsed specific product categories.
Connection Targeting
Targeting lookalike audiences modeled after your existing customers or website visitors is extremely precise but more expensive. Facebook gathers data on the people connected to your page or who have visited your website to identify similar users for targeting. Again, the more specific the targeting, the higher the cost.
Your Ad Budget and Bidding
The size of your overall advertising budget and your bid strategies also impact how much you pay Facebook for ads.
Campaign Budget
The more daily or lifetime budget you allocate to your ad campaigns, the more Facebook will be able to spend putting your ads in front of people. Bigger budgets allow Facebook to find additional relevant people for your ads. However, bigger budgets also let Facebook charge you more per result since they know you can afford it.
Ad Set Budgets
Similarly, the higher your budget for individual ad sets inside a campaign, the more Facebook will spend to maximize reach and charge you accordingly. Lower ad set budgets indicate you are not willing to pay as much.
Bid Strategies
The automatic bidding selected for your campaign or individual ads also affects costs. Options like lowest cost or target cost aim to get conversions for the cheapest possible price. However, other strategies like maximizing conversions or reach tell Facebook you are willing to pay more to achieve those goals. Facebook will adjust bids and costs higher when you select more aggressive optimization objectives.
Your Ad Quality
How engaging and relevant your ads are to their target audience also influences the ad costs charged by Facebook. Higher quality ads allow Facebook to achieve better results for your campaigns. Facebook rewards advertisers for good ads by charging them more to run those ads longer and wider.
Ad Relevance
If your ad content like images, headlines and descriptions closely match the interests of the audience you are targeting, your ads will resonate more. Facebook recognizes when ads are performing well and in-demand, and will raise the price accordingly.
Creative Fatigue
On the other hand, if you re-use the same ad creative too many times, a phenomenon known as “creative fatigue” sets in. People get tired of seeing the same ad over and over. Facebook will detect the deteriorating performance and charge you less to show an underperforming tired ad.
Ad Engagement
How well your ad copy and visuals engage users also matters. Facebook monitors metrics like CTR and watch time for video views to gauge engagement. The more engaging an ad, the more it costs to run.
Your Results and Objectives
Facebook looks at the results and objectives you are getting or wanting from your ads in determining how much to charge you.
Conversion Results
If you are getting a high number of conversions from your ads, such as sales, sign-ups, checkouts, etc., Facebook will favor those ads. The better the results, the more Facebook can charge you to keep running those successful ads.
Ad Objectives
Your chosen objective – like getting more website conversions, more video views, more local store visits, etc. – signals to Facebook how you value those results. The more you value a result, the more Facebook will charge you to achieve it.
Optimizing for Multiple Objectives
Running ads to simultaneously achieve different goals like both conversions and reach is extremely challenging. Trying to optimize for multiple objectives tells Facebook your goals are difficult, and hence it will charge you more per conversion or action.
Your Niche and Competition
The niche you are marketing in and the level of competition from other advertisers can impact the costs to advertise on Facebook.
Market Saturation
Some markets are extremely saturated with advertisers, driving up the prices to advertise. Sectors like ecommerce, software, and professional services have lots of advertisers competing for audience attention. Niches with lower business competition will cost less.
Audience Demand
How in-demand your audience niche is also affects costs. Audience segments with more advertisers wanting to target them will be more expensive. For example, targeting tech enthusiasts or homeowners.
Product Margins
The margins and competitiveness in your specific product niche also influence costs. High-ticket items and digital products with large margins enable spending more on advertising. Low-margin products and highly competitive offers limit advertising budgets and thus costs.
Ad Delivery Optimization by Facebook
Facebook employs sophisticated algorithms and AI to optimize how ads are delivered to each person on their platform. Various optimization objectives by Facebook influence the ad costs charged.
Relevance Score Optimization
Facebook tries to optimize relevance scores by only showing your ad to people most likely to find it interesting and engaging. But optimizing for high relevance limits reach and drives up costs.
Conversion Rate Optimization
Facebook also optimizes for conversions from an ad by trying to only show it to people likely to take your desired action. While this increases conversion rates, it also rapidly narrows targeting and significantly raises costs.
Lifetime Value Optimization
For ongoing campaigns, Facebook tries to find people likely to engage with your business long-term, not just once. This lifetime value optimization comes at a premium price point.
How to Reduce Your Facebook Ad Costs
Here are some tips to help lower your advertising costs on Facebook:
- Broaden your targeting to reach larger audiences
- Set smaller campaign budgets and lower ad set bids
- Test different bid strategies like lowest cost per result
- Diversify creative to prevent fatigue
- Simplify your objectives – optimize for only 1 goal at a time
- Advertise in less competitive niches and geographic areas
- Increase budgets gradually as you scale & optimize ads
Conclusion
In summary, Facebook advertising costs are determined by a range of factors related to your targeting settings, budgets and bids, ad quality, desired results, niche competition levels, and Facebook’s own delivery optimization algorithms. By understanding what drives costs and running more streamlined, effective ad campaigns, you can reduce your Facebook advertising spend.