Not sure how much to budget for your Facebook Ads? Read on to learn how much Facebook ads cost in 2022 and 3 strategies to lower your cost per conversion.
If we were to sum up 2022 so far in one word, it would be 'inflation'—and the same can (unfortunately) be said for Facebook ads.
In this guide, we'll break down how much Facebook ads cost in 2022, as well as how to distribute your budget across your sales funnel and decrease your overall costs in the process.
Let's dive in!
How does the Facebook ad auction work?
The first step to understanding how much your ads will cost is knowing how Facebook comes up with the figure in the first place, and a large chunk of that is wrapped up in the Facebook ad auction.
When you click the publish button on your campaign, Facebook pits your ads against other advertisers who are bidding on that same audience—just like an auction house. The person who has the highest bid (amongst other factors) wins the auction and has their ad displayed to the target audience.
Your bid relates to the specific action you chose to bid on, which can be either:
- CPM Bidding - Bid per 1,000 impressions
- CPC bidding - Bid per click
- Conversion bidding - Bid per specific conversion
We have an entire article dedicated to understanding how the bidding process works and how you can guarantee your ads will win the auction here for those who want a deep dive into the topic.
What determines Facebook advertising costs?
While money does rule the world, there are a few other factors that can determine your Facebook advertising costs aside from the bid we just mentioned.
Estimated value. Estimated value is Facebook's way of estimating if the people you're targeting will take the action you're bidding on. The more likely they are to do so (based on their previous engagement history with similar ads/your previous ads), the higher you rank in this category.
Ad Quality. High-quality ads are better for your audience, and in turn, for Facebook's profits. Therefore, creating ads that are deemed as high-quality gives you a bonus in terms of deliverability and chances of winning the ad auction.
Time of year. Supply and demand are the two primary governing forces of the cost of any product, and Facebook ads are no different. Given that there is only a finite amount of ad space available on Facebook, high traffic seasons will affect the cost of advertising on Facebook. The cost of Facebook advertising tends to skyrocket during Q4, and during Black Friday/Cyber Monday in particular.
How much do Facebook ads cost in 2022?
It's now time to get into all the juicy details and explain the cost of Facebook ads once and for all.
Cost per result (CPR/CPA)
Next up is your cost per result (CPR) or cost per acquisition (CPA). While every advertiser has a different objective for their campaigns (sales, leads, etc.), let's take a look at some of the most popular ones like cost per purchase, cost per lead, cost per add to cart, and cost per landing page view.
Facebook ad cost per purchase benchmarks
Cost per purchase (CPP) is one of the most important metrics for eCommerce advertisers, so let's take a peek at this data first.
Cost per purchase is calculated as the total amount of ad spend divided by the number of purchases.
For cost per purchase, we were able to see highs of around $64.01 per purchase and lows of $29.94 with an average of $46.55.
We clearly see the impact that the holiday season has on ad prices here. Since it's much easier to get purchases during the major shopping seasons, you'll see the prices drop during Q4/Q1 and then begin to rise as the year moves on.
Facebook ad cost per add-to-cart benchmarks
Cost per add-to-cart is another important metric for those looking for product sales, so we'll dive into that next.
Cost per add-to-cart is calculated as the total amount spent divided by the amount of add to cart events.
For add-to-cart benchmarks, we saw highs of around $11 and lows of $3.80 with an average of $7.55.
While there's a bit more fluctuation for this metric, it does follow the same pattern as CPP - with lower costs during the busier seasons.
Facebook ad cost per landing page view
While you may be inclined to put a focus on clicks, your cost per landing page view is also an important metric. Clicks (outbound and regular) simply count the number of times the ad was clicked, not if the user visited your landing page.
Landing page views, on the other hand, represent those who have clicked and loaded your website, which is a slightly better indicator of intent than clicks alone.
Cost per landing page view is calculated as the total amount spent divided by the amount of landing page views.
With landing page views, we saw highs of $1.83 and lows of $1.05 for an average of $1.50. In a similar pattern to the previous metrics, it's easier (and cheaper) to get these clicks during peak advertising seasons.
Facebook ad cost per lead benchmarks
Cost per lead benchmarks, however, will be completely contradictory to everything we've seen so far and have some of the most volatile highs and lows in this article.
Cost per lead is calculated based on the total spend divided by the total amount of leads.
As you can see, the highs are incredibly high, and the lows are very low in comparison. We saw the cost per lead rise to around $153.48 for leads during peak advertising seasons and drop down to $51.16 after that season ends. This gave us an average of $81 per lead.
Since Q4 sees an incredible amount of traffic from audiences looking to purchase and advertisers looking to sell, those who have lead generation-based goals would do well to decrease their budget or even pause their ads during this time as the cost per lead increases over 3x during this time.
Cost per mille (CPM)
Cost per mile (or CPM) is the cost per 1,000 impressions, which is another great benchmark to gauge how much it will cost to get your ads seen by your audience.
CPM is calculated as the total amount spent on an ad campaign, divided by impressions, multiplied by 1,000.
CPM is a slightly different animal here, however, the costs do generally stay in the same range throughout the year. In this case, we saw highs of $11.79 and lows of $5.11 for an average of $7.58.
How much should I spend on Facebook ads?
Looking at benchmarks is a great way to learn the general cost of Facebook ads, but they will always be just that—a generalization.
If you want to know your personal Facebook advertising costs, an easy way to do so is simply by reviewing your current and previous campaigns.
A good way to budget your ad spend would be to look at the average cost per result/cost per acquisition of your campaigns and start with 1/3rd of that as your daily ad set budget. If these are successful, you can gradually scale that budget in relation to the results you're seeing.
Be mindful though: scaling your Facebook ads isn't as easy as just throwing more money at it. If done incorrectly, you can tank your performance entirely.
In addition, you can take advantage of Facebook's ad set budget optimization and Advantage Campaign Budget (formerly “Campaign Budget Optimization”). These tools help you allocate your total campaign budget amongst the audiences you're targeting.
If you're just starting out and don't have an average CPR to go by, you can review our section below about how to calculate a breakeven cost. Once you have that number, you can then use 1/3rd of that budget and follow the same steps as above.
How to calculate your breakeven ROAS
After we've determined how much Facebook ads cost, the next step is absolutely critical—ensuring your ads are actually profitable.
The best way to do that is by looking at your return on ad spend (or ROAS) metric and using that to find your breakeven ROAS.
In order to see this data, you'd need to ensure that the conversions you track have value added to them. Traditionally the value comes from the purchase event which is passed through the Facebook Pixel.
If you have that already assigned and are tracking revenue through it, just head over to Ads Manager. Unfortunately, ROAS isn't included in the default metrics list, so we need to do a little work to see that data.
To start off, click on the columns tab and select customize columns at the very end of this list.
On the pop-up, put 'ROAS' in the search bar and click the checkbox next to total for the Purchase option.
If you like, you can choose to move the metrics around in any order you like using the right-hand column. Once you're ready, click apply, and you'll be able to see that data inside Ads Manager.
As we explained above, this figure will let you know how much you made per dollar spent. If your ROAS figure is 2, that means you made $2 for every $1 you spent. With this data, we can now calculate our breakeven ROAS, which is a little different.
The ROAS from Facebook is only taking into consideration the cost of Facebook advertising vs the return you're seeing. This does not factor in any costs that are involved in the sales of the product itself.
For example, if you have a $40 product, and it costs you $20 to produce that product, your revenue is only $20 per purchase. Facebook will be looking at the full $40 as pure revenue, but your accountant probably has a different take.
That's why it is important to calculate breakeven ROAS instead.
To do so, you need to take the amount of revenue you get from a sale and divide that by how much you actually make from that sale to see your break even point.
If we're using the same numbers as above, that means we need to make at least $2 for every $1 we spend on Facebook ads.
If you're doing the calculations and see that your ROAS is lower than your breakeven ROAS, you're actually spending more than you're earning. In just a minute, we'll explain how to decrease the cost of advertising on Facebook and create a positive ROAS.
How to distribute your Facebook ads budget
Many businesses tend to only create campaigns focused on purchases when they just start out with ads, which seems logical on the surface as of course our main goal is to generate sales.
But think of it like a relationship: you wouldn't ask someone to marry you on a first date, right? So why would you ask for a purchase from someone who doesn't know who you are or what you do?
In reality, you should be using your Facebook ads to create an entire sales funnel that takes your audience on a journey from a cold prospect to a repeat customer. It should look a little something like this:
Let's break down each of these steps and how you can set them up for success.
Acquisition Prospecting - 56% of total ad budget
The first step of this funnel is the prospecting stage. At this step of the funnel, we're trying to find people who do not know about our product or service and are giving them info on who we are and what we can do for them.
This step gets a large chunk of our ad budget as it will fuel the rest of the funnel that comes after it.
Here, you'd want to focus on creating audiences using interests, lookalike audiences, location-based audiences, and broad targeting. The goal here is to cast a wide net (while still being relevant) and warm up the audience.
Some great ways to educate cold audiences would be through video ads, which give a quick overview of what you offer, or through carousel ads for those who have more traditional eCommerce goals.
Acquisition Re-Engagement - 14% of total ad budget
The next step is re-engagement. Since we're working down the funnel, we want to reach those who have engaged with our previous ads in the prospecting stage, but who have not yet taken the next step to visit our website and encourage them to do so.
To this end, we can take advantage of Facebook's engagement-based custom audiences:
- Video engagements - Those who have watched videos from our campaigns
- Facebook page likes - Those who have liked our Facebook page
- Instant experience - Users who have interacted with Instant Experience ads
- Shopping - Those who have viewed or interacted with your Facebook shop
Since we've warmed these audiences up with our previous campaign, they're more likely to visit our website and take the next step (becoming a customer or a lead). The goal of these campaigns should be to drive them to your website for a purchase or to a lead form.
For the targeting setup, we should include any of the custom audience types above and exclude website visitors from the campaign to ensure we're only targeting those who have not visited our site yet.
Retargeting - 20% of total ad budget
In a perfect world, everyone who visited your website would convert—unluckily for us that isn't the case. Therefore, we want to move on to the next step, which is the retargeting stage of the funnel.
Here, we want to target those who have visited our website (or viewed our lead form) but have not yet purchased or become a lead and turn them into happy customers or prospects.
You can do this by creating a custom audience based on website visitors who have viewed your store page but have not purchased, those who have viewed your lead form but have not completed it, or by using product catalogs with Dynamic Product Ads.
At this stage, you should be heavily pitching your product or solution and using discounts like free shipping or additional items to incentivize users to complete your desired action.
Retention - 10% of total ad budget
The easiest customer to sell to is one who has already purchased from you in the past—which is coincidentally the next stage of the funnel.
In the retention stage, we can use the product purchase information we already have from customers to cross-sell or upsell relevant products or services that will add value to their previous purchases.
For example, if a customer has just purchased a mobile device from you, you can use these campaigns to advertise a carrying case or other related accessories.
Facebook has the perfect campaign type for this - Dynamic Product Ads. By using your uploaded product catalog, Facebook can use the Pixel to automatically suggest relevant products from product sets that you create.
Special note for LeadGen advertisers: The retention phase of the campaign doesn't really apply to those who have lead generation goals. Instead, you can add this percentage of your budget back into the retargeting section.
Those who are new to Facebook ads might be a bit overwhelmed with managing 4 different campaign goals with entirely different budgets, and that's a completely valid sentiment.
If you need a little extra help, Madgicx's Autonomous Budget optimizer uses an AI modeling system that will automatically assign and reallocate your total budget to your different funnel stages based on the main goals you select.
How to determine your personal Facebook ad cost benchmarks
Even with all the information we've given you so far, it can still be hard to predict what you need to spend to make your personal revenue goals.
Luckily, Madgicx's free Facebook Ad Cost Calculator can help you determine exactly how much you need to spend to meet your goals using the data you have from your current Facebook campaigns.
All you need to use this tool are the following data points:
- Your monthly revenue (or profit) goal
- Average product or service price
- Cost per impression (CPM)
- Click-through rate (CTR)
- Cost per acquisition/result (CPA/CPR)
Once you have all of this data, you can input it into the calculator, and it'll tell you exactly how much budget you need, as well as your daily and monthly requirements for clicks and sales.
We'll also let you know how much of said budget you need to assign across your acquisition, retargeting, and retention campaigns.
Pair this with all the data we've given you above, and you have all the information you need to create a full-fledged Facebook ad funnel that gives you the exact results you need.
How to lower your Facebook ad costs
While Facebook ads will never be free, there are a few ways you can reduce your Facebook advertising costs across your funnel to increase profitability.
Refine your audience targeting. If you're seeing that your campaigns have higher than normal costs (and a low click-through rate), one of the first things you should do is to review and refine your audience targeting.
While you may think your product or service is useful to everyone and anyone, even universal items have specific selling points that speak more to some demographic audiences than others. In order to refine your audience targeting, ask yourself the following questions:
- What are some common demographic traits across my list of successful customers? (Age, location, interests, etc)
- What unique pain points does my solution solve?
- What other interests are common to people looking for my solution?
Once you have this information, you can use Facebook's interest targeting to find a more niche audience that resembles your current customers who are successful with your offering. This, in turn, creates a more relevant ad that results in a higher CTR and lower cost of Facebook advertising.
Test your images and copy. If you already have your audience nailed down and are still seeing average to below-average results, another factor to review is your ad creative itself.
Your offering might be perfect for the audience you're targeting, but if you can't quickly and effectively communicate why your solution is better than your competitors and what value it can add to your audience's life, your chances of getting those coveted clicks are low.
In a recent blog post, we revealed some incredible findings regarding split testing your ad creatives. By shortening ad copy for one of our agency clients, we were able to increase purchases by 4.5x and achieve a 1.25x higher ROAS and a 3.87x higher CTR.
In short (🥁), testing both the image and ad copy can help uncover hidden savings.
Set bid caps. The last strategy here is to use bid caps to reduce your Facebook ads cost—but be aware that this method isn't a magic wand.
With bid caps, you can set a limit for the actions you choose to bid on. If you're working with a low profit margin (think drop shipping or similar business models), a $1 difference in cost can make or break your campaign.
In these cases, using a bid cap can force Facebook to keep your costs under a certain amount, reducing the chance of you creating a campaign that costs more than it earns.
A word of caution, though: this does not mean that it can turn a CPA of $10 into a CPA of $1 overnight.
This method is best used for businesses that have a strong understanding of what is achievable with their ads (and they have a history of being able to meet this number), and who just need to guarantee it will always average around the same cost. Keep in mind as the cost of Facebook ads increases over time, your bid cap will likely need to be raised—especially during peak advertising seasons.
If you're still reading this article, congrats! You made it all the way to the end (and likely deserve a cocktail of your choice for doing so).
Now you're prepared to answer any detail about Facebook ads cost, including how much you should budget, how you should be dividing that budget across your funnel, and how you can cut costs in the process.
As long as you follow all the advice we gathered here today, your Facebook ad costs will remain manageable and profitable for your business for as long as you run them.
No more worrying about sudden spikes in ad costs. With a one-time setup, Madgicx can automate the entire budget management of your ad account and keep it optimized 24/7.
Tory is a digital marketing specialist and the current Marketing Manager of Breadcrumbs.io. She's been featured in various high-profile marketing blogs like Hootsuite, AdEspresso, and Databox and holds certificates for both Google and Facebook Ads. In her spare time, she gardens and paints from her house in the Florida panhandle.