Do not overpay for Facebook ads: practical guide for Facebook ads, Part 4

Choose CPC model and lower bid

Designing your Facebook ad is not an easy job (if you want it to be effective), but the real tricky thing is pricing. In the end, you want to achieve good results with the minimum budget, right? So determining your ads budget and CPM or CPC is as important as their design. Let’s explain quickly what this CPM and CPC are. CPM and CPC are the two options for how you can pay for any internet advertisement. Advertising on Facebook is no different. CPM (Cost per Mille) means that you pay for every 1,000 impressions – i.e. for every 1,000 times that your ad is shown to users.  CPC (Cost per Click) means that you pay for every click on your ad – i.e. when a user actually clicks on the ad, not just when they’ve viewed it.

Which model you choose depends on the goals of your campaign. CPM makes sense when you want your target group to understand a message or you want to create general awareness. CPC is more suitable when you want users to go to your page – and then you pay only for people who have actually interacted with your ad and taken action, rather than those who may or may not have seen the ad (as with CPM). CPM is cheaper than CPC, but keep in mind that you can receive a lot of impressions on Facebook, and this doesn’t mean that every user has actually seen your ad. Users can be distracted by a lot of other things on Facebook, and despite the fact that your ad may have loaded on pages 4,567 times, only 100 users might’ve actually seen it. And if this happens, you’re wasting your money. In short, try to avoid CPM ads and use them only in cases when you’re sure they’ll be more effective than CPC ads in terms of budget and results. CPC guarantees that you get as many users on your page as you pay for. And another thing for CPC: Facebook will want to have its money, so it’ll make sure that your ad gets as many impressions as it needs to, to assure the ad generates the needed clicks to get the maximum exposure for your budget. CPC Facebook ads in general generate more impressions than CPM ones.

The next step in Creating your ads page is Campaigns, Pricing and Scheduling. The example which will help us explain Facebook pricing is aimed at the following target group (inspired by last week’s Champions league final): we want to advertise to men, who live in the UK, are between 27 and 32 years old, are single and interested in women, and who are supporters of Chelsea F.C. This target group contains 32,820 people and we’ll assume we want to advertise a subscription for Chelsea TV to them. Firstly, you need to determine your account currency and account time zone.

Campaign & Budget

Every Facebook ad is associated with a campaign so that you can manage your ads more easily. Give your campaign a name and be aware that you can change this name later; don’t spend too much time inventing it. You have two options for the campaign budget – Budget per day or Lifetime budget. If you choose Lifetime budget, Facebook will distribute your ad budget throughout the duration of your campaign. If you choose daily budget, this means that on every day of your campaign this amount of money will be spent. Once you hit your budget total (per day or for the whole campaign) your ad stops appearing and you’re no longer charged. You can always increase the budget though.

In Schedule you have the option to run your campaign continuously or for a fixed period of time – you can specify start and end dates. Continuously running campaigns can be set only with daily budget. Be very careful with the schedule.  You can change it at any time during your campaign, but still, check it twice when you’re setting it up, especially when you’re dealing with Time Zone differences (e.g. if you live in India and you want to advertise in the USA, be sure that you’ve set the right hours).


Pricing

Now we come to the trickiest part of Facebook advertising. You need to be aware of how Facebook ads pricing works before running a campaign and determining your costs. You’re “fighting” with all the other advertisers for the attention of a particular user – it doesn’t matter what you’re advertising. Let’s say that Tom, 30 years old, single, living in London, Chelsea FC fan, is a member of our example target group. But, Tom is also interested in fashion, loves BMWs, drinks Heineken and likes travelling. Because of this he’s also in the target groups of a new man boutique in Oxford Street, of the new BMW 3 Series, of Carlsberg (who want to advertise directly to competitor’s fans) and of a tourist agency that offers cheap vacations in Hawaii. So you see that even though Chelsea TV doesn’t have anything in common with the other four advertisers, our ad will still have to compete with them in order to be shown to Tom and to win his attention.

What does competing mean in this case? Facebook advertising is a bid-based system. You determine the maximum amount that you’re willing to pay for your ad (for CPM or CPC) and the other advertisers do the same. You compete with their bids when you want to advertise to Tom, for example. The larger your bid, the greater the chance that your ad will be shown. But all the bids are very dynamic. They are dependent on a lot of factors and they change every minute – one of the reasons is that the number of ads and their bids change every minute. So what is the right bid? Facebook helps you with this by suggesting bids.

You have two options for Pricing: Simple Mode and Advanced Mode. With Simple Mode (shown below) Facebook suggests a bid for your ads and your campaign running with it. Facebook guarantees that you will never pay more than the maximum bid, and the likelihood is that you will pay less.


You have another option, which I strongly recommend that you use – Advanced Mode. With this option you see a range of Suggested Bids and you manually choose your Max Bid. The bid ranges for CPM and CPC for our target group are:

Tip: use the suggested bid range as a clue – you can set a bid below the range or above it. As I mentioned, the higher your bid, the more likely it is that your ad will be shown. However, the highest bid doesn’t always make the best sense. Why? Because you can get great results with the lowest bid that Facebook offers you, although this depends on the creativeness of your ad’s design and how precisely its targeted. So go low as a start – if you choose CPC in our example, select a bid in the range of 0.60 – 0.63 USD. You can always increase the bid if you see that your ads are not running well with it, but if you choose a high bid in the beginning you will not be able to determine if you could have achieved the same results with a lower price.

Place order

After you’ve placed your bid, you need to review your ad. Check once again that everything’s the way you want it to be and then place your order with Facebook. This means that you send your ad to Facebook, so that Facebook can approve it. The approval may take up to 24 hours. Facebook checks to see if the ad content is appropriate according to its guidelines. For example, if the content of the ad is of a sexual nature or about weight loss, you won’t be allowed to run your ad. If disapproved, you’ll receive an e-mail with the reasons for disapproval and an option to “correct” your ad via the button “Edit Ad”. If you don’t see this button, you’re not allowed to correct it and you need to create a different one that adheres to Facebook ads guidelines. When your ad is approved, your campaign starts running.

Click-through rate (CTR)

One of the most important Facebook pricing factors is the Click-through rate (CTR). CTR is a fundamental indicator for measuring the success of online ads. It’s defined as the number of clicks on a particular ad, divided by the number of impressions and expressed as a percentage: the higher the CTR, the more successful the ad. CTR is the factor upon which the price of your Facebook ad depends most. If your ad has a high CTR, you’ll pay a lower price for it: the more effective the ad, the less it costs. To get high CTR you need to design eye-catching ads and target them precisely so that you can increase the odds that users will interact with it.

As you can see, creating a Facebook ad is a complex process and everything is inter-connected. Monitoring of the ads needs to be done continuously. How to successfully manage and monitor your running campaigns to get maximum results from your ad budget, we’ll see in Practical guide for Facebook ads, Part 5: Managing and monitoring.

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  • Mirjana Tomic

    Great and very useful article, thank you guys for sharing your know how!