Setting up a budget for your ad campaigns is crucially important. If you go into an ad campaign without having the sense to draw a budget for it first, I can guarantee you’ll lose a lot of money.
When starting your Facebook ad campaign, this is a question you should be asking yourself: How much should I spend? Whether you already have a number in mind or don’t, make sure you understand the information in the list given below to ensure you create budgets that actually work.
Understanding Cost Models
Among all those important factors you can maneuver to determine your campaign budget on Facebook Ads, it’s important to understand the cost models first.
Facebook Ads offers you two options to pick your cost plan from:
- CPC, which stands for cost-per-click
- CPM, which stands for cost-per-thousand
CPM uses a thousand impressions of your ad as the unit of payment. In short, you pay a certain amount of money for every time a thousand people have seen your ad.
The best way to check which one works best for you is to test them in your campaigns. Generally, however, CPC is known to generate a higher click-thru rate (CTR). Of course, CPM gives you a cheaper per-click cost, but, if it comes with low CTR, don’t choose it.
Whichever one of the cost models you pick, you’ll be required to submit your bid.
How That Bidding System Works
It’s not that difficult to get. Let me show you how it works.
When you create an ad and submit it to Facebook, the algorithm generates a max bid for you. Facebook calculates this max bid using your target demographics and what other advertisers are willing to pay Facebook to show their ads to the same audience.
Why You should Focus on Creating the Best Ad Possible
Let me tell you a secret. You can rig the bidding for your ad campaign in Facebook Ads.
What you need to do to win the bidding even with lower bids than others is to create ads that are clicked on more than the rest.
Your CTR determines how much value Facebook’s algorithm will give to your bid. If you’ve had high CTRs with your ads, you’re likely to win the bid even if you’re bidding against somebody who’s willing to pay higher.
So, use the best version of your ad. Work on your CTR. Win that bid.
Now, you can set the limit for your max bid using the available settings. By comparing the suggested max bid with the average CPC for your Facebook ads, you can find the perfect price for your ad.
Didn’t get what I said up there? Let me give you a cheat. All you have to do is keep your max bid close to your average CPC. If there’s a big difference between the two numbers, you’re paying higher than you should be.
Ultimate Objective: Get a Higher Quality Score
Based on your CTR (which depends on how much appealing people find the ad to be and click on it), Facebook will assign your ad a quality score when you enter an auction. Your job is to create great ads and achieve a higher quality score so you can increase your chances of winning auctions.
If you’re looking for other things to take care of before you start your Facebook ad campaign, have a look at my 6-point checklist for Facebook Ads campaigns.