It’s an excellent question, but unfortunately, there is no definitive answer. Let’s explore this topic together! This question has become more common nowadays, and it’s discussed frequently in professional circles among advertising experts, marketers, and clients. Although it’s a legitimate question, there isn’t a precise or “right” answer. The most appropriate response would be “It depends.” Bidding is only one of several factors that contribute to Facebook advertising prices, and the platform’s intricate and somewhat secretive system may only be fully understood by Mr Zuckerberg. However, here are some factors that impact Facebook advertising prices.

Facebook as an auction marketplace

Facebook operates as an auction marketplace where advertisers compete to win users’ attention. This means that there is no exact answer to how much an ad on Facebook costs, as the price is heavily influenced by the level of competition for the target audience and the offers of other advertisers. With the platform’s increased popularity, ad prices have naturally increased as well. Nevertheless, there is still hope for effective Facebook advertising.

Who is the target group?

Facebook advertising is based on target groups. Unlike Google Ads, where competition is limited to those advertising on the same keyword, on Facebook, everyone is a competitor to everyone else. This is because the target audience determines the competition. Therefore, it is essential to create ads that are well thought out and well designed, or else another advertiser will grab the target audience’s attention. To illustrate this, suppose Facebook knows that a user likes buying stylish clothes, has a dog and three kids, and learns programming in their free time. In that case, ads from all advertisers targeting the same audience will compete for their attention. This means that advertisements for women’s clothing stores will compete directly with advertisers promoting programming courses, dog food, and children’s programs. Therefore, it is impossible to estimate campaign costs accurately. Nevertheless, many algorithms influence the budget.

In what period do you advertise?

It is common for businesses to experience fluctuations in their business, which can differ by industry. However, regardless of seasonality, it is almost certain that towards the end of the year, more companies will advertise than during the rest of the year. It is a common trend that advertising prices increase from late October to Christmas, as more advertisers mean greater competition and higher costs, as a result of the bidding system mentioned earlier.

What is the quality of your ads?

Facebook’s advertising system prioritizes high-quality ads to provide the most enjoyable experience for its users. To determine ad quality, Facebook considers a variety of factors, such as user feedback (e.g. hiding or reporting an ad), and quality-degrading features. Ad Relevance Diagnostics has three aspects: Quality Ranking, Activity Rate Ranking, and Conversion Rate Ranking. Regularly addressing these factors can influence whether your ad ranks average, above average, or below average for non-conversion results. While adhering to quality standards can make your ad rank above average, conversion and activity rates are influenced by other factors like image appeal, readable textual content, and relevant landing pages for users.

CPC, CPA, ROAS

CPC, or cost-per-click, refers to the cost of one click on your landing page and is a crucial metric for measuring campaign success. Without clicks, conversions cannot occur, making CPC essential in calculating CPA (cost per acquisition), which represents the cost of each conversion. The conversion metric is defined at the beginning of the campaign and can vary depending on the campaign’s purpose, such as downloads, purchases, or subscriptions.

ROAS, or return on ad spend, is a metric that shows a campaign’s return on investment. To illustrate this, let’s consider an example: if the CPA is $2 (paid for a download, newsletter sign-up, etc.) and every fifth person who signs up is likely to purchase, then the cost of acquiring a customer is $10. If the profit on each purchase is $5, and the advertising cost has already been deducted, then the campaign’s ROAS is $5 for each dollar spent.

About CPC in more words

The cost per click (CPC) on Facebook in Australia can vary depending on various factors such as the industry, audience targeting, ad placement, bidding strategy, and competition. However, according to a recent report by AdEspresso, the average CPC for Facebook ads in Australia is around AUD 0.97.
Once the clicks have been generated, the success of converting those clicks into purchases, downloads, or subscriptions is determined by the CPA. This is a large and significant topic that will be discussed in another post. Notably, during a busy segment this summer, I achieved a $0.12 CPC over several weeks with a remarketing campaign. This is typically even more expensive. The CPC eventually peaked at $0.24, which is still an excellent result and one I am proud of.

Still, how much should your monthly budget be?

The appropriate monthly budget for Facebook advertising depends on the industry and competition. In my opinion, if you seek external assistance, a monthly budget of at least $1000 is recommended. This would provide an opportunity to cover the service cost while generating revenue through well-placed ads. For a monthly budget of $500 or less, it may be beneficial to opt for a one-time consultation and manage the ads in-house, allowing the allocated funds to be directed towards advertising expenses. I hope this article has provided some useful insights into Facebook advertising and advertising costs calculation.