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Factors that influence the cost of Facebook Ads

Factors that influence the cost of Facebook Ads


A question I get asked a lot is, “How does the cost-per-click of a Facebook ad compare to Google AdWords?” While Facebook ads are generally less expensive than AdWords, there are a lot of factors that affect the cost of a Facebook ad campaign. In today’s video, I’m going to go over some of those factors so you can create ad campaigns with the greatest possible return-on-investment. I’m Adam Arkfeld, owner of ParaCore, a pay-per-click lead generation agency. At the time I’m recording this video, in early 2017, Facebook ads are significantly more affordable than Google AdWords on a cost-per-click basis. As more advertisers begin running ads on Facebook, the cost will continue to increase and you’ll want to stay ahead of the curve to keep your campaigns profitable. I’m going to go over five factors that affect how much your Facebook ads will cost. They are:
1. Your Bid
2. Ad Quality and Relevance 3. Estimated action rates
4. The audience you’re targeting
5. The placement of your ads Ok, let’s start with the first one, your bid. The first thing you should know is that you aren’t just buying an ad on Facebook like you would buy another forms of advertising, like space on a billboard, or a newspaper ad. Rather than paying a certain set amount for an ad, Facebook ads operate with a bidding system. That’s one of the reasons there’s no set number to the cost of Facebook ads. You, as the advertiser, set a bid by entering how much you’re willing to pay for an ad. If you don’t do this intentionally, Facebook will automatically calculate your bid based on your budget. So if you have, say, a $20 daily budget for Facebook ads, Facebook will automatically calculate a bid and you’ll only receive the number of clicks that roughly fit within that $20 daily budget. The advertiser that wins the auction is determined by the overall value the ad creates for its targeted users. The overall value is determined by the bid, quality, relevance, and the estimated action rates of Facebook users. I’ll get into each aspect of the overall value in one minute. The winning ad is then charged the lowest amount Facebook has set to buy the ad space. The good news is that the biggest budget doesn’t always win. That’s because of other factors that determine the cost of your ad like quality, relevance and click-through-rate. The second factor that determines the cost of your Facebook ad is Ad Quality and Relevance Ad quality and relevance is decided by how interested Facebook thinks a person will be in seeing your ad. Facebook gives your ad a score of between 1 to 10 based on how relevant it is to your target audience. The higher the relevance score, the lower the cost. Relevance is based on both positive and negative actions from your target audience. This is determined by how many people took positive action on your ad, like clicking on it, liking it, or commenting on it. And how many people took negative action, which is how many people said they don’t want to see your ad anymore or that it’s not relevant to them. Relevance and Quality is also calculated by the click-through-rate, which is the number of impressions divided by the number of times it was clicked on./ The higher the CTR, the lower the cost. The third factor that affects your ad pricing is the Estimated Action Rates Estimated action rates are how likely a person will act on your ad. When deciding whether to show your ad to a person in your target audience, Facebook estimates how likely that person will take the action you are optimizing for with your ad. So, for example, if you’re wanting people to download your free e-book, and a high number of people take that specific action, then that will positively affect your cost. The estimated action rate is an important, yet subtle metric you have to be aware of. For example, if you are wanting people to ultimately buy a product, your ad is linking to a landing page for a free ebook download, you’ll want to optimize for the ebook download. If you optimize your campaign for the product purchase, it won’t be converting very high because it’s further down the funnel. Facebook will think that your campaign isn’t doing well because you’re optimizing for a down stream conversion that’s not happening as often as the ebook download. Not only will your ads cost more, but your campaign might not hit budget for your audience because Facebook thinks it’s not doing well. The fourth variable is the audience you’re targeting Who you target and how many people you target affects the cost, as well as how many other advertisers are going after that same audience. There can be a lot of competition to reach a certain target audience. Your specific audience may be especially popular, which can drive up the cost of the ad. It’s important to note that your audience may be targeted by other advertisers who don’t work in your industry. For example, let’s say you’re selling high-end environmentally-friendly cleaning products. You’ve chosen a target market audience of Green Moms with a household income of $50,000 living in at least 2,500-square-foot homes. Other advertisers might also want to go after this target audience to sell them energy-efficient appliances, organic snacks for kids, and so on. This type of competition for the audience will drive up the cost of the ad due to the demand. The fifth and final factor that affects ad cost is the placement of your ads Where your ads appear on Facebook influences the cost. When creating a campaign, you have a number of different placement options like the news feed, right-hand column, mobile only, Instagram, and the audience network. Each of these placement options generates different cost-per-click numbers. But remember, just because a certain placement has a lower cost-per-click doesn’t mean that placement will convert as well as more expensive placements. Just to recap, there are five main factors that affect the cost of your Facebook ads when running a campaign. They are:
1.Your Bid
2. Ad Quality and Relevance 3. Estimated action rates
4. The audience you’re targeting
5. The placement of your ads Next time you’re looking analyzing your Facebook campaign, keep these factors in mind to try and improve your ROI. If you’ve found this video helpful, please hit the “like” button or share a comment with me below. Don’t forget to hit the subscribe button because we’ll be posting a lot more videos just like this for marketers just like you.

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