Understanding Facebook’s Ad Pricing System

Finding Facebook’s ad pricing system a little complicated? Then read on for everything you need to know…

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Ramzi Chamat / 8 Ways Media
2018-01-25 09:17:00

A mobile phone opened up to the Facebook app login page. There are 2 small notepads and a pen beside it

We’ve all been exposed to content on Facebook that we haven’t subscribed to or followed. These posts might grab your attention because they’re relevant and similar to your interests.

Initially we were struck with how unusual it was to be exposed to such interesting content, but the truth is, Facebook advertising is so powerful that it’s able to target super specific audiences.

With two billion people logging into Facebook every month, it would be foolish to ignore the platform’s powers. So with that in mind, let’s take a look at the costs in place for advertising on there:

Facebook ads are powerful, revenue-generating tools that all businesses should be taking advantage of. You can run adverts on Facebook, Instagram and the Audience Network (Audience Network is Facebook ads running off of Facebook). Some people spend less than $10 each day, while others spend tens of thousands per week. The amount you spend really depends on your goals and budget.

Understanding the exact costs

The exact cost of a Facebook ad is determined in an ad auction. Different variables go into ad cost, but the main contributing factors are budget, bid and targeting. From there, Facebook estimates the number of people you can reach and the results you can expect to receive before your ad has even been ordered (you will find this information on the right-hand side of the ad billing tool).

Understanding bids

A bid is a price associated with an ad. It represents what you’d be willing to pay for the ad delivery and result you chose, within the audience the ad set is targeted to. Typically speaking, results from highly-qualified audiences are more expensive than less-qualified ones, which makes sense. The structure is similar to Google’s AdWords tool, where you have to bid on keywords, however, on Facebook, bid pricing is determined by ad type, audience targeting and budget. See here for a comparison on Facebook ads versus Google AdWords.

A laptop opened to the Facebook login pa

Different bid types

There are two general types of bidding on Facebook: automatic and manual.

With automatic, you’re telling Facebook to adjust your bid pricing in order to gain the best results possible for the daily or lifetime budget you specified. Here you can track your average cost-per-result using the analytics tool, enabling you to manage your cost-per-acquisition and therefore determine your ROI.

With manual bidding, you can specify the maximum amount you’re willing to pay for the desired result. Average cost bidding enables you to control your average cost-per-result, but is only for App Install Campaigns, Conversion Objectives and campaigns that charge by impression.

What should I bid?

Since you are advertising to make money, its important not to bid more than the cost of generating a customer. If you know what the exact cost of a result is worth to you (lead, click, customer, view, app install), then bid that. If you have no idea what to bid, you could use automatic bidding. However, bear in mind that Facebook will optimise for clicks and this might not be profitable for you.

Closing thoughts

Facebook advertising has come a long way since it was first launched, but due to its highly specific targeting and bidding capabilities, it can be complicated to get your head around and very time consuming.

For this reason, it makes the most sense to use a digital marketing agency that offers Facebook advertising, as this way you will gain the expertise not just of a Facebook advertiser but also of an entire agency (plus you will not have to hire a new employee to take on this responsibility for you).

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