Revenue and Features Editor, Co-host of Content Lab, 15+ Years of Writing and Teaching Experience
November 18th, 2019
What do Facebook Ads cost on average?
The cost of advertising on Facebook can vary widely, but you should expect to spend at least $3,000 per month. If you spend less, you won't have enough data to effectively plan your ongoing and future campaigns.
We've all heard stories of impressive returns on ad spend (ROAS) on Facebook, but it can be hard to know how to get started on the platform. How much should you expect to spend? What if your site is not heavily trafficked? Do Facebook ads still make sense?
With a tremendous range of options, Facebook ads can be an important strategy for businesses of almost any size, but you should expect to spend at least $3,000 per month on the platform. That's according to Facebook Ads Specialist Ali Parmelee, who came along to hold my hand through some of the basics.
Me: So, this is the big question we have to start with. How much does it cost to get started with Facebook ads?
Ali: If you are just starting out and you want to do more than just basic amplification, you have to really be able to afford a minimum of $3,000 a month in ad spend.
Otherwise it's going to take way too long to get any metrics. I audit accounts, and when I see people doing a dollar a day on different ad sets, I see that it takes them nine months just to get any data to know what they need to do next.
If you’re able to spend at least $3,000 a month, depending on your site traffic and other things, within six to eight weeks you should have some benchmarks to know what your next plays should be.
Now with that said, I don't really have any clients that I only spend $3,000 a month for. On average, any of my tier one clients, they're spending more like $6,500 to $10,000, and then some of my clients are spending at least $15,000. One client is spending at least $15,000 per day. So it’s a pretty wide spectrum.
Me: That's a huge range.
Ali: Yeah. One of the important things to think about is how are you going to utilize this platform? Depending on niche and industry, it's all going to be different.
I was speaking with a client recently, and it was costing them about $9,000 per customer they were getting through Facebook. However, they are making around $12,000 per customer, so they are still positive.
For other industries, it’s going to be totally different, and it may only cost $9 to acquire a customer.
The question is, how are you going to use the channel? If you're e-commerce, of course you want to sell. You need to make sure that you're spending enough to make enough. You want a good ROAS.
Others might be doing lead gen. They don't have a shopping cart, so to speak. In those cases, your ads are trying to lead a horse to water. The ads are hoping to generate calls with sales people. In those cases, we measure the cost per acquisition, or CPA.
It's really important to understand, number one, the industry that you're in, and number two, how you want to utilize Facebook ads. And most important, you need to know your profit margins and spend to sales ratios.
Website traffic and retargeting
Me: How does web traffic play into the equation?
Ali: If I'm looking at an e-commerce site that has daily traffic of 5,000 visitors, and then I'm looking at another one where they have hundreds of thousands of visitors every day, and I'm trying to re-target site traffic, then I'm going to need a lot more money to re-target all of that traffic versus the smaller traffic.
Me: Can you talk about the different ways that ads are displayed on Facebook and how that varies in what businesses choose?
Ali: What's important to think about with this is the stage of the funnel. You have to look at it as your top, middle and bottom of funnel. The top of the funnel is always going to be 100% ice cold.
Middle are people who have started to engage with your business. They know who you are, or possibly they've even purchased before, but not in a while.
And then bottom of funnel is like they're ready to take an action right now. You just need to get them across the line.
We actually have formulas of how we'd like to focus the ad spend. Again, you have to think of it like an actual funnel. You need the biggest at the top, and you need to get down to the smallest.
We actually spend the most money at the top of the funnel. And then middle funnel and bottom of funnel, it gets proportionally smaller.
Me: Because at the bottom of the funnel they just need a little nudge?
Ali: Exactly. So if you're thinking, "Wait, why am I spending 60-70% of my budget top of funnel?" it's because if you don't, you're not going to have anyone get to the bottom of the funnel. We've got to get them in the funnel to keep nurturing them.
Me: So, you're spending proportionally to the number of people you're influencing?
Ali: Yes. And this is where something called frequency comes in. One of the metrics that we're constantly monitoring is how many times an ad is being shown to people. If you show it too many times, people will become irritated and give you a negative emotion. And every time you get those negative emotions, it actually hurts your bidding, and Facebook begins to think of you as a bad advertiser.
There's good rules of thumb, but again, the wider your audience, the easier it is to have lower frequency. So usually at top of funnel you're around a [frequency of] one. You should be under a two frequency. You should never have a top of funnel frequency that's over two. If you are, then you're spending too much on the size of that audience.
Me: Explain what that “two” means.
Ali: It’s the average number of times each person saw your ad. It's an estimated metric. But when you're in middle of funnel, you can go higher. It's more acceptable to be at a two or three frequency. I even have some clients who go higher.
And then bottom of funnel, honestly, frequency is even higher because you just want people to purchase. You're going to give it to them often. They're only going to be in that part of the funnel for a short window — anywhere from two to seven days, usually.
This is exactly why we create “stacks” at bottom of funnel. By that I mean we may target people with an ad for one day, then they’re served a new ad when they added to their cart but didn’t buy. Next, they get a third ad when they are in the four to seven day window and then finally the “Hail Mary” ad from eight to 14 days. Then they're going to cycle out.
Since we’re guiding them strategically through the steps of the conversion funnel, the window is so short that if they’re seeing an ad way too many times for a few days, so be it.
How to break down your ad spend
Me: Can we go back to the $3000 per month? Can you break that down in terms of purchase allocation?
Ali: I would suggest putting 70% of that budget to top of funnel. Then, likely it's going to be 20% middle of funnel, 10% bottom of funnel. The only time that really changes is Black Friday, Cyber Monday, holidays, things like that where we actually reverse it.
In October, we even going a little bit more like 80% top of funnel, because we're just trying to fill the funnel as much as possible.
Then, when every Tom, Dick, and Harry is out there advertising in November, we can cut how much we're going after top of funnel, and then just simply re-target.
Me: This all sounds really fun. You’re behind the curtain, pulling all these levers!
Ali: It is. It's a lot of fun. I don't think that people realize that it's true media buying. There's a lot of strategy and the documentation that I do, with detailed spreadsheets and plans so I can see exactly what I'm doing. I'm updating daily, so I can see exactly where I am and so I can monitor trends every single day.
So it's a lot of math. It's a lot of data that we have to be monitoring and managing.
Me: Are there any other key metrics?
Ali: Another really big one to think about is ROAS. This is how you know if you’re doing Facebook ads well.
It's important for companies to understand what's their target ROAS. What are their benchmarks? This might be skewed a bit if you’re really trying to grow, but generally, you want to make sure you’re making a certain amount in revenue for every dollar you spend on ads.
Facebook ads in concert with other paid ad platforms
Me: Do you handle Google ads too?
Ali: I do not, but that's why Jason [Linde] and I are on calls all the time together.
Me: So a company is working with both of you, and you're working together to make sure that it's all coordinated?
Ali: Yes. We spend a lot of time together sharing data, comparing trends and strategizing. We see some huge results from our combined effort.
Think of it like this — you’re on Facebook or Instagram and see an ad and it intrigues you. But you don’t click yet. Then you get busy and later on think about that product or service in that ad. And you think, “dang...what was that again?” So you Google it. Boom — now my top of funnel ads have you being served Google ads from Jason. Then you click through his ad and are on the site where I have the Facebook pixel installed. Now you move into my middle of funnel retargeting, as well as Jason’s.
There’s this beautiful synergy between how we create an omni-channel strategy.
Me: If you were to generalize, how does a company’s Facebook ad spend compare to its Google ad spend?
Ali: It can really vary. This one client I’m working with today has largely built their business with Facebook and Instagram, so the lion's share of their spend is there. But they do Google ads with us, too.
For November, about 85% of their budget goes to Facebook and Instagram, and the rest goes to Google. However, Jason and I work so closely that if we see something working well in Google, we can shift budget accordingly. We’re checking in daily.
Me: And the client trusts your expertise.
Getting started with Facebook Ads
Me: So, how do companies get started?
Ali: When I start onboarding a client, I start with a few questions: What’s your profit margin? That helps us understand what a true CPA should be for them — and what it should cost.
I have this calculator that I use when I start talking to people, I'll pull this up and just say, "What's your target revenue? What is your average order value? What's your website conversion rate?”
Are you in growth mode, or are you in performance mode? Do you need to make a four to one return on ad spend? Or are you fine with a one-to-one, because you're using Facebook as an awareness channel that's going to give your brand keyword lists for your Google ads marketing?
Because once I have some of these key indicators, I can say, "Okay, great. Then we should be able to hit a two ROAS if you spend $10,000." I actually go through and calculate that with them knowing some of these key points.
It's always going to be a little bit different here or there, but for the most part, this is the right data we need to get started. And, like I said before, once you begin with Facebook ads, you quickly gather enough data to draw some conclusions — and these will help shape your future strategy.
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