How much should I spend on my Facebook ads?

When I surveyed my email list about what their big question regarding Facebook ads - this was the number one item.

How much should I spend on my Facebook ad?

And I hate to say this next bit, but my answer is “it depends.”

It does depend on several different factors, and I am going to outline for you what those factors are so that you can make good budget decisions. 

Advertising inside Facebook is different from paying to advertise in the paper, or on the radio or TV in that there is no particular amount you need to spend on an ad. When we set up an ad on Facebook, it is not like there is a price list that we can choose.  We can't select an option where your ad is shown to people three times a day, between the hours of 8-10,  as we might do for TV or Radio. We don't select an option for our ad to appear on a set day, for all people logging on, as we might do for a print ad.

With Facebook, we choose our budget.

Facebook will let you spend as little as $1 per day. But should you spend that?

Well, you guessed it - it depends. 

Let’s look at some of the factors that we need to consider when we make that choice.

Facebook Audience size

How much you spend, will depend to a large extent on the size of your audience. When you set up your ad inside Facebook, one of the areas you need to define, is who do I want to see my ad, who is my audience. 

You might choose an Audience that looks something like this. 

• Small Business Owners
• Australia
• Female
• 25-50
• Facebook Page admins interested in social media

The audience size for this group of people is 340000. So if I set my budget at $20 per day, Facebook is only going to be able to show my ad each day to a potential audience of between 660-3900 people. 

These daily results will vary depending on the kind of niche you are targeting, how much competition there might be in this area. 

Facebook tells us the following regarding how they work out what your daily reach might be.

• Your budget. This tells us at what scale your advert set can get results.
• Your bid. This gives us an idea of how many auctions you'll be able to win (and, by extension, how many people we'll show your advert to).
• Your past performance data.This gives us an idea of how people may respond to your adverts.
• Market data. We run a simulation to estimate how the campaign would've performed if it had the same budget, bid, and audience, but ran in the past.
• Characteristics of your target audience. This includes cost per 1,000 impressions (CPM), conversion rate and other factors.

At the start of a campaign - these are just estimates, as Facebook learns from your ad content and your audience responses to show your ads to more of the right kind of people. 

You can manipulate your budget to reach more people, but at the start of the campaign, you want to wait and see how it converts before you dive into spending more money per day. Understanding how many people actually might see your ad each day is a crucial first step to understanding your budget. 

The next essential item is to understand a little more about what conversions mean and how low they are. How much you spend daily to build your audience size goes hand in hand will how many people are likely to do what you want from that audience. 

Facebook Conversion Metrics

As business owners we know we need to focus on sales. When I am working with clients, I like them to tell me how many sales either in dollar terms or number of widgets that they need to hit a target. 

Then I ask them - what your conversion rate? How many leads do you need to get - so that you secure those sales? How many people need to see your form or ad to get on your list.

We work backward from our end goal to the starting point of traffic by making some assumptions about what we are converting at. 

Let’s just say that a business knows that they win 20% of their leads and they are generating those leads from 5% of all website visits. 

If we want to secure 20 new paying customers, then we need to understand this 2 step process of lead generation. 

To obtain customers, I need to generate leads.
To secure leads, I need to generate website traffic. 

Hubspot has a great little formula to help understand what that means regarding numbers. Lead Generation Goal = New Customer Goal / Lead to Customer Conversion Rate

In the case of this business, they need to generate 100 leads to secure their customer goal of 20. 

To get those leads, they need to generate a certain level of website traffic.

Very helpfully here is Hubspot’s formula again
Visitors Needed = Leads Needed / Visitor to Lead Conversion Rate. 

In this case, the website lead conversion rate is 5%. This is good. For businesses that don’t know how to do this well, this will be anywhere between 1-3%. A business that gets lead generation online can secure 5-10%. 

So for me, if I want to secure 100 leads I need to have generated 2000 visits. To one particular page - my signup page. 

Facebook helps us see this happen in real time. We can not only see how many people see our ad but also how many people are responding to our ad and taking action. We can see our conversion rates and adjust our budget to help us meet our target signups, sales, visits.

Whatever your objective is - Facebook can help you decide how to achieve it. 

I teach inside my program what CTR (click through rates) you need to benchmark from for your industry, but here are just some headline data for you to start reviewing your results. The average click-through rate (CTR) for Facebook ads across all industries is 0.90%.

How did you last ad perform inside Facebook? We look at both performance clicks ( i.e., people doing any action on your ad, clicking through to your FB page, or expanding your ad text or clicking through to your link) as well as looking the one that is so important - people clicking through to your landing page. 

A/B Testing inside Facebook

So we now have two areas that we need to be aware of when setting up our ads - Audience size and Conversion metrics. So does this mean that our ads are going to go gangbusters? 

Potentially.

Facebook wants you to succeed, so they will seek to show your ads to the best people within the group that you are targeting. But how can we make sure that people will respond?

An excellent way to do this is to make sure that you do what is known as AB testing of either your ad image or your ad copy. To see what resonates best with your audience. AB Testing simply means testing one version of an ad against another to see what resonates with your audience the best. 

In my Facebook Frontier online training program, I teach and show people how to set up an ad so that you can test images, tests and different audience groups to see what converts best. Facebook will show you this in your data. 

Once you know what is working best on a small budget ( say $5 per day ) - then I show you how to turn off the underperforming ads and then put your budget into the better performing version of the ad to reach your lead generation or sales goals (as we outlined in the Conversion area)

You might find that more people click on an ad with one image over another. You might find that text in one ad ( say a headline ) works better than another. You might find a particular audience converts better than another.

When you watch what happens at a small spend - then you can make decisions about where to spend the money. 

I never spend big in the first 72 hours of a campaign. Watch and learn how your audience reacts to your ads and then increase your daily spend when you know more about what works best for your product/offer and market. 

Another key metric to watch here to help you understand how well your ad is tracking with your target audience is the Relevancy metric. Relevancy is a number from 1-10, with ten being the best. Once your ad has been seen by >500 people, Facebook will start showing you how relevant your ad is to your audience. This is higher this is the better and the cheaper you ad is likely to be to reach more people. 

Warmth of your audience

Finally, we also need to look at conversion metrics and results from the perspective of how warm our audience is.

It is never a good idea to try and sell directly to a cold audience - i.e., people who have never heard of you, your product or visited your website. 

It takes time to build up that KNOW, LIKE, TRUST factor.

Facebook helps immensely with this. 

If we start with sharing value for free inside Facebook

• It could be a video how to
• It could be a blog post
• It might be a discount code for consumer goods

And we promote that item - that helps us build an audience that can start to know who we are. 

We need to focus on brand awareness advertising first to create a retargeting audience that will be receptive to our sales ad. So when advertising inside Facebook - keep one eye on building up your audience with FREE and VALUABLE stuff that they will care about, and the other eye can then be focused on targeting these warm prospects with the more sales oriented ads.

Of course, your warm audience will still love to find out about your free stuff, but we need to think about how receptive our audience might be to our ad before we drop the big bucks inside Facebook and then wonder why we aren’t getting any nibbles. 

So back to that question

How much do I spend on a Facebook ad? 

You will spend as much as you want to spend, but thinking about the outcome you want to secure is the most important thing to focus on. 

Understanding how big your audience needs to be based on your conversion estimates, the results of AB testing of different versions of our ad, plus how receptive your audience is likely to be will help you set your daily budget to get the results you want. 

If you would like to know more - I am opening up the Facebook Frontier advertising program for one last time in 2017. This is also the last time that you can secure unlimited access to the program and all its updates. 

From 2018 - I will be restricting access to 12 months only.

So now is the time to get in. If you would like to know when it opens - get on my VIP list today.