Costs of advertising on Facebook: How Much Should You Pay (UK)

Apart from being one of the most popular social media sites in the world, Facebook has also become the go-to advertising platform for many businesses.That's because the platform's advertising reach is almost unparalleled. The social network boasts over 2.9 billion monthly active users, and its ads reach 34.1% of the world's population over the age of 13.As for the UK alone, this figure is even higher, where the potential local advertising audience is an impressive 60.5% of the nation's teen and adult population.For marketers and business owners alike, these numbers are nothing short of astounding. Equally, the platform has developed Ads Manager, a unique tool that allows advertisers to create, manage and measure their campaigns efficiently.However, all this must come at a cost. After all, the social network is a business, and its goal is to generate revenue. And it does this through advertising.In this article, we'll walk you through how Facebook ad costs are calculated, as well as how you can lower your costs to make the most out of your digital marketing efforts.

Will Facebook ad costs increase in 2022?

This is a common question among advertisers, and the answer is yes. From the moment Facebook entered the advertising space, it has been working to improve its products. And as a result, ad costs have increased throughout the years.Cost-per-click (CPC) and Cost-per-impression (CPM) rates fluctuate throughout the year, with the tendency to always be lower during the first quarter. However, AdEspresso reported that in 2021 the average cost was between £0.76 - £1.06, and £10.77 per 1,000 impressions, respectively. These numbers are 13% higher than in 2020 and are expected to increase in 2022.This is evident when we look at their total revenue, which has been increasing exponentially since 2012 when they earned around $5 billion. And in 2021, that number rose to $117 billion, according to Statista.You might wonder, how much of that revenue comes from ad expenditure? And it’s a lot — 98.2% of the social giant's fortune can be attributed to money spent by businesses in an attempt to promote their products and/or services.This number is expected to increase over time as they continue to improve their products and technology.In fact, Facebook is constantly updating its Ads Manager platform to make it easier for advertisers to create and tailor their campaigns. This includes integrating new features and expanding the ways in which businesses can run ads on the popular social network.Of course, this isn't the only reason that costs rise, and we'll discuss more of that below.Moreover, eMarketer revealed that advertisers in the United States (U.S.) would spend $50 billion, representing a 32.1% yearly increase. Although advertisers in the U.S. spend more in total, a similar rate of increase can be expected in the UK market due to the growing online economy and consumers' preference for digital media.That said, it's clear that the social network has seen its ad prices increase over time, but that's not all there is to it. It's also important to know how Facebook calculates your ad costs in the first place.

What factors determine the cost of advertising on Facebook?

The secret to Facebook's ad pricing is the company's understanding of how people interact with each other and their desire to connect. The social network has been studying its users for years, which enables them to understand their behaviour and preferences.As a result, Facebook has been able to create an algorithm to optimise pricing, which is determined by the next five factors:

1. Your bid

One thing you should know about Facebook ads is that they are not like other forms of advertising where there is a one-off, set price.This is because Facebook uses a bidding system that allows you to spend as much, or as little, as you like.The way it works is by prompting you to enter the maximum amount of money you're willing to pay for an ad in the form of a daily budget over time.Then, Facebook will proceed to evaluate all bids in the auction and show the winning ad to someone in the advertiser's chosen target audience. This happens billions of times in a single day, and bid price is not the only factor determining whether your ad will be shown to the right person at the right time.

2. Your target audience

The second thing that affects your Facebook ads is the target audience. This is a range of people who are likely to be interested in what you have to offer and are most likely to click on your ad.You can get really specific with this, like only showing your ad to women aged 18-25 who live in Australia and are interested in meditation retreats. However, keep in mind that the more people are after your target audience, the more expensive it will be to get your ad in front of them.

3. Your relevance score

The third thing that affects your Facebook ads is your relevance score. This is a number between 1 and 10 that Facebook assigns to each of your ads based on how relevant it thinks it is to your target audience.The score is updated after each interaction with your ad, so if someone clicks on it or likes it, it will go up. If they click on something else instead, then it will go down. The higher your relevance score is, the more likely Facebook thinks that you’re targeting people who are actually interested in what you have to offer.Also, and most importantly, the higher the score, the lower the cost of reaching people since Facebook has the mission to serve its users the most relevant content at all times.

4. The ad's estimated action rate

Facebook’s estimated action rate is the percentage of people who will take an action after seeing your ad. This can be anything from clicking on your link to making a purchase or signing up for a newsletter.The higher the number, the lower your costs, and the more likely your ad is to be successful. Additionally, it's essential you pay attention to this number because you can use it to optimise your ads for certain conversions, which can help you achieve your business goals and improve your bottom line.

5. The ad's placement

You can choose to show your ad on Facebook's News Feed, in its right-hand column or on the mobile app.The News Feed is where most people spend their time on Facebook, so it's generally the best place to show your ad. However, if you're targeting a niche audience who doesn't use Facebook much or if you have a mobile-only campaign, another placement may be more effective.Each placement has unique benefits and costs, so it’s important you know exactly where your ads will be displayed.

Ways to reduce CPC and CPM costs

If your business relies on Facebook for new customers, you don't want to take the risk of letting a competitor claim ad spots that have proven to work for you.However, you also don't want to pour money into Facebook ads that aren't delivering results. To avoid this, it's important to track the performance of each ad and make changes based on what you find. Here are some ways to reduce costs:

1. Identify the appropriate campaign objective

Ad prices vary significantly across campaign objectives —from £0.20 per click for a link click goal to £1.85 per click for an awareness campaign. If you're not using the right objective, your ads may be costing you more than they should.This is why it's important to choose the appropriate campaign objective for each ad set you create. If you're not sure which one is best, check out Facebook's guide.

2. Narrow your focus to target specific audiences

You can reduce your costs by targeting the right audience. This means using specific interests, behaviours and demographics to reach the people who are most likely to click on your ads.If you're not sure where to start, try running a search campaign first. You can also use Facebook's Audience Insights tool to learn more about your audience and create custom audiences based on their data.

3. Run retargeting campaigns

This is another way to get more bang for your buck. Retargeting allows you to reach out to people who have already visited your website or interacted with your business in some way.It's a great way to remind people that you're out there, and it gives you another chance to get them to convert. You can do this thanks to the Facebook Pixel, which is a tool that lets you track website visitors and use that data to create custom audiences.

4. Work on improving your relevance score

As we explained above, the relevance score is a way for Facebook to measure how relevant your ads are for users. If you see a low relevance score, it means that your ads aren't very relevant to people who view them. This can result in lower click-through rates, higher costs per click and more wasted money on ads that don't perform well.A good way to improve this is by focusing on the interests and behaviours of your audience. For example, if you're advertising to women on Facebook and targeting those who have kids, it's important that your ad reflects this. The same goes for any other demographic or interest group that you're trying to reach with any campaign.

5. Conduct A/B tests for ad placements

You can improve your ad performance and save money by testing different placements for your ads. For example, does a top placement perform better than the right column? Or is it best to place an ad in both places?The only way to know for sure is by running experiments that help you determine which placement gets you the most conversions and performs best for your campaign, giving you the highest ROI.

6. Optimise your ads for conversions

Ads that convert well are more likely to be approved by Facebook. To do this, you need to create multiple variations of your ad copy, images and calls-to-action (CTA).This goes hand-in-hand with A/B testing because then you have to experiment with your variations by running each one separately to see which performs best. Remember to be clear about what you want your audience to do, for example, “Download our free ebook” or “Sign up for our newsletter”.If your ad gets a lot of conversions, not only will your ROI increase, but Facebook will also begin to show your ads more often. This is a good thing because it will give you more exposure and make it easier for your business to grow.

7. Hire experts

Facebook ads are a great way to drive traffic and increase sales, but they can also be very time-consuming and confusing.If you’re just starting out with Facebook ads, it may be worth hiring an expert who knows how to set up and manage campaigns so that you don’t have to deal with this aspect of your business.Although this can take some of the responsibility away from you, it will also allow you to focus on other core areas of your business. You’ll be able to cut costs and increase profits by outsourcing this task while still getting the results that you want.We hope we've answered all of your questions about the costs of advertising on Facebook, and if you want to optimise the amount of money you'll be paying, contact us for a chat with one of our expert consultants.