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Facebook ads are a staple of many small business marketing plans. There are 3.7 million businesses running Facebook campaigns and spending a total of $5.5 billion to reach potential customers using the social media platform.

Those numbers are impressive…but scary. Too much competition for attention on the platform means increased costs. This does not mean that you need a million dollar Facebook advertising budget to increase traffic, leads and sales through your app.

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This guide explains how much of your budget you should spend on Facebook advertising, with tips for reducing campaign costs without sacrificing results.

Whatever you see in your news feed, Facebook doesn’t want to overload your audience with ads. A limited number of places are available for sponsored businesses on Facebook and Instagram.

Each advertiser sends a campaign, which competes for the placement of a specific ad in front of the target audience. For example, if two beauty brands reach millennial women in their news feed, they will compete together in an auction.

Price is not the only factor considered when determining the auction winner. To determine an ad’s position, Facebook determines the total value of the ad – in other words, the degree to which the target audience wants or engages with the ad.

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The algorithm takes into account the quality of the ad (including previous responses) and the estimated action rate (how many people will act – like, share or comment – on the ad). The advertising campaign that fills out the three columns the most gets the most points and wins the advertising space.

The more advertisers competing in the auction, the higher the cost of your Facebook ads. Facebook ads in industries like finance, insurance, and home improvement tend to cost more because of this.

Seasonality also plays a role. Advertising costs historically rise in the last few months of the year. Black Friday and Christmas online shoppers attract more advertisers to the platform, increasing the number of competitors in the ad auction.

Research shows that advertisers should pay: $0.94 per click or $12.07 per 1000 impressions. Facebook charges advertisers based on two metrics: cost per click (CPC) and cost per thousand impressions (CPM) – also known as cost per 1,000 impressions.

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As mentioned above, both seasonality and competition play an important role in the cost of winning a Facebook ad auction – especially if site visits are the desired outcome for many advertisers. Launch an advertising campaign in the first half of the year if you are worried about expensive advertising costs.

Many online stores use Facebook as a platform to build brand awareness. It makes sense – the app has 2.8 billion monthly active users, many of whom use social media platforms to interact with their favorite brands.

If your goal is reach and visibility, it will cost you $12.07 to reach 1,000 people through the Facebook application.

While there are only two metrics that determine how advertisers pay for ads, other financial metrics come into play when understanding the cost of your Facebook ad campaign. Brands use the platform to generate email subscribers – leads that can be sold in the long term, regardless of the cost of repeat advertising.

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The study found that the average cost per lead for Facebook ads was $5.83. But target the right audience and you can reduce this significantly.

Alex Trpkovic, head of marketing at Growbuds, explained how the brand ran “a major Facebook ad campaign in early to mid-October, before Black Friday and Cyber ​​​​​​Monday.

“The goal of the campaign is to get as many people as possible to sign up for the e-newsletter,” Alex said. “We spent more than $4,000 and got more than 2,600 new email subscribers who recently spent 7x more on this campaign. We have a special segment for these subscribers to track their earned income.

“Because we don’t care about CPC or CPM, the metric we value most is CPA—we’ve been tracking around $1.55 per customer.”

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💰 Worried about spending too much? As part of your bidding strategy, set a maximum daily budget and bid limit for your campaign. You’ll only enter the auction with the highest bid, so you won’t pay more to show your ad.

As long as Facebook is a reliable source of new customers, playing with your digital marketing budget seems risky. You don’t want to turn off the faucet and let your competitors take an ad slot that has been proven to work for your business.

The good news is that by making a few small adjustments to your campaign, you can reduce your advertising costs without affecting your results, giving you a better ROI. Here’s how to do it.

The first step in creating a new Facebook ad is to choose a campaign objective. This is the overall goal of your campaign – the results you want to achieve by buying ads on the platform.

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Experimenting with these goals and determining the results you want to achieve will affect the cost of your Facebook ads.

Algorithms match your targets with users who match the criteria. For example, if you’re offering a sale, your ad is more likely to be shown to Facebook users who have already purchased through the platform.

As a result, the average CPC will be different for each campaign objective. AdEspresso found that awareness campaigns pay $1.85 per link click. But choose target link clicks and Facebook will find users in your target audience with a history of clicking your ad – so the CPC for the campaign is just $0.21.

David Sweet, vice president of marketing at Eterneva, added, “Choosing the wrong advertising goals, such as choosing lead generation when your goal is brand awareness, can have negative effects.

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“This mistake is often due to not knowing your target audience before choosing a campaign. Taking care to identify your target audience and align your marketing goals with your campaign goals before you start will increase engagement, increase value and reduce costs.

Facebook’s algorithm takes ad relevance ranking into account when calculating bids. The smaller and more relevant your audience, the better your chances of winning an ad auction.

“Start targeting a little more than you think,” says Josh Jurrens, founder of Caliper Marketing. “This gives Facebook more room to find users who are most likely to take the desired action before narrowing down your target. Starting too narrow leads to high

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