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The Cost / Price of Facebook Advertising

Inbound Marketing

Friday I went to a small business seminar here in Dallas held by Facebook. The focus of the seminar was teaching businesses how to use Facebook ads to help promote and grow their business. They offered some pretty compelling case studies, but there were two questions everybody wanted to know but didn’t get answered: How much does it cost (Read: ROI), and how do I convert “likes” and other activity on my Facebook into leads? Well, since that’s what we do at Mojo, I’ve decided to write a two-part series answering those questions, and today we’ll focus on the first. What’s the real price of Facebook advertising?

Understanding Facebook’s Pricing Model

Facebook’s advertising model is extremely similar to Linkedin’s. There are two ways to determine the price of your advertising:

  • CPC (Cost per Click)
  • CPM (Cost per Thousand Clicks)

Both systems operate on a bidding model in which you can set the minimum amount you want to pay and the maximum you are willing to pay when someone clicks on your advertisement. Usually this hangs around the $2-3 range per click for small businesses. You’re bidding against other advertisers—other businesses who have selected the same targeting metrics you have and are trying to appeal to the same audience. If someone outbids you that doesn’t mean your ad won’t be shown, but it means their ad will get shown more often and have more exposure during peak usage hours.

One of my favorite features about Facebook’s advertising pricing is that you can control your expenses. When you’re developing your campaign you can set limits of how much money you want to spend per week. If you allocate, say, $50, Facebook will dole out your ads throughout the week and pace their exposure for you. Generally Facebook’s highest user rates are on weekends, and you can expect a majority of your funds to start being eaten up then. It’s a good way to make sure you don’t go over budget with your marketing.

Reducing Costs

The best way you can reduce the cost of your advertisements on Facebook is to hyper-focus your targeting. One of the more common mistakes businesses make is to try to appeal to as many people as possible in hopes of getting more exposure. In reality, all this is doing is opening you up to more competitors bidding against you, which will likely have the adverse effect of lowering your exposure. Get as specific as you can with your targeting so that you have low competition and can appeal directly to the right people. Select a specific city, rather than a state. Make sure if you’re picking out “likes” and “interests” to look for that they appeal as specifically as possible to your industry.

Secondly, Facebook allows you to use A/B testing to determine the effectiveness of an advertisement. For each campaign you can create multiple ads that will be shown at the same frequency of each other. Facebook’s built-in analytics will look at click-through rates for each ad so you can see which ad is working and which ad isn’t. We recommend you make at least 3 ads to get a good feel for what people are responding to. Over time, start refining your ads. Scrap the ones that don’t work so that your ads shown are effective as possible, and every month introduce new ads so that your content doesn’t become stale.

What Are The Returns?

In Facebook’s case study of a small family-owned BBQ restaurant, it was determined that every $1 spent on Facebook advertising generated $66 sales. That’s huge, and that’s exactly what most small businesses dream about. Getting a return that high certainly isn’t normal, but it isn’t impossible either if you’re smart about how you’re running your ad campaign. Because you aren’t paying for a length a time the ad is up, but rather for how many people actually click the ad, your costs will give much more return on your dollar than traditional advertising, especially for small B2C companies.

If you want to maximize your returns you can't stop at just launching a Facebook ad campaign--you need to use smart Inbound Marketing tactics in order to have the most efficient lead conversion path you can. That means having your campaigns go to effective landing pages, having appealing offers, and nurturing leads through the sale process. Getting those visitors to your offer via Facebook is only the first step, and a small part of the story. We'll go over that in our next post.

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