Why Facebook Lookalike Audiences Are Worth Your Ad Spend

Date
Oct 20, 2021
Dec 13, 2020
Time
13 mins
On this page
Why Facebook Lookalike Audiences Are Worth Your Ad Spend

Facebook lookalike audiences are one of the best tools for any business trying to acquire new customers. Learn what they are and how they work.

Are you looking to expand your customer base?

Wouldn’t it be nice to leverage Facebook’s huge database to find the people who have the highest chance of becoming your customers?

Facebook lookalike audiences provide you with a unique and easy way to acquire new clients, increase sales and revenues, and grow your business. This solution was developed by Facebook a couple of years ago and it just keeps getting better and is outperforming other acquisition audiences.

These audiences are more than worth your ad spend, and this is why I decided to create this article and teach you everything you need to know in order to use them in the most effective way.

What are Facebook lookalike audiences?

Facebook lookalike audiences simply allow you to reach potential clients with similar characteristics to your target audience. This is one of the most commonly used solutions by Facebook advertisers nowadays to increase their reach and expand their customer base.

How does it work? Facebook’s algorithm is able to analyze and understand your business’ target audience and find similarities between your existing customers. Based on these similarities, Facebook finds users with similar interests, demographics, age groups, etc. Then, it combines them into a powerful acquisition audience created just for you.

All you need to do is select your source audience. You can upload your customer list, an email list, use your pixel data to create website-based custom audiences, create an audience of people who engaged with your ads, and more. Then, you can also define the desired size of your lookalike audience and let Facebook do its magic.

Why are lookalike audiences important?

Facebook is the leading social media platform and one of the biggest advertising platforms, which has data over a huge number of users from all around the world. Leveraging this data is priceless, and you can do just that in order to target high-potential customers among Facebook’s 2.74 billion users.

This huge amount of data and in-depth analysis can tell you things you didn’t know about your audience. You may think your target people have a certain interest or they belong to a specific age group, while in fact, the most prominent commonality they share is entirely different.

For example, if you have an eCommerce business for lingerie, who would you expect your target audience to be? Probably women, right?

But what if your most highly-valuable customers are actually men between 35-54 years old that are buying presents for their girlfriends or wives?

Men buying lingerie

By Elizabeth Tigar, Special to GroomsAdvice from Shop-Underwear

If you could find all these commonalities and understand your audience better, you could narrow down your targeting and get to the right audience with much less trial and error. This will directly result in decreasing your cost per acquisition. This is exactly what makes Facebook lookalike audiences so profitable.

Furthermore, pixel-based lookalike audiences are automatically updated by Facebook every 3-7 days. This keeps them relevant even long after you first created them. These audiences will stay up-to-date with your ever-changing customer-base all the time, which makes them even more powerful.

Pro Tip: If you create a lookalike audience based on a customer list you upload to Facebook, make sure to update it manually every once in a while.

In addition, these audiences are extremely helpful is when expanding your business to a new region or country. In this case, you don’t have any data about the audience in your target location yet, but you can utilize all the data you’ve gathered in your original market and find people with similar characteristics in your new location. This kind of audience can be a great base to start with, in the new territory.

Interest-based targeting vs. lookalikes audiences

If you just started advertising on Facebook and you don’t have a lot of customer data yet, interest-based targeting is a good solution to start searching for your audience.

You can begin by testing different interests to see what works and gain some traction. Once you start building your customer base and gather enough Facebook pixel data from your website, you can upscale your targeting methods and use lookalike audiences.

As I already mentioned, lookalike audiences reveal unexpected commonalities among your target audience, which can be much more effective than interest-based targeting.

When creating lookalike audiences, Facebook’s algorithm analyzes many different aspects of your audience. Also, it uses a much narrower pool of people to find your ideal target persona.When dictating a person’s interests, Facebook examines a vast pool of people, and there are of course different levels of interest in the same topics. Moreover, an interest can become irrelevant at some point.

However, when Facebook examines only the specific set of users that you are interested in and thoroughly analyzes all of their characteristics, it creates a very powerful targeting tool. This is the main reason lookalike audiences outperform interest targeting when it comes to acquiring new customers.

How do lookalike audiences work?

Although Facebook doesn’t really provide an answer, as it wishes to keep its secret tricks to itself, many Facebook experts try to assess how lookalike audiences are created.Most of them agree that these audiences are probably based on the following characteristics:

  • User behavior on Facebook and Facebook’s services, including activity in groups
  • Demographics, age group, and gender
  • Page likes, videos watched, and ad interaction
  • Activity on websites equipped with Facebook pixels
  • Interests (of course)

You probably agree that all these data points can create a pretty accurate user profile, right?Now that I’ve shown you how helpful these audiences are, we can move on to creating your first lookalike audience.

How to create a lookalike audience

  1. Go to Facebook Business Manager and click on “Audiences” in the left-side panel.
Create an audience in Business Manager
  1. Click the “Create Audience” dropdown and select “Lookalike Audience”.
  2. Choose a source audience as a basis for your new lookalike. This will be a custom audience created based on your pixel data, app data, a customer list, offline events, page fans, or people who watched your videos.
Select source audience
  1. Now you need to select your audience’s location. This can be one or more countries or even a whole region. For example, the European Economic Area or iTunes App Store Countries. Moreover, you can also save a set of your commonly-used locations to save time when creating your next lookalikes.
Select audience location
  1. The last thing you need to select is your audience size. This will be calculated as a percentage of the “population” of Facebook users in your selected locations altogether. You can create up to six lookalike audiences at once, and they can all have different percentages (up to 10%).
Select audience size - lookalike percentage
  1. Click “Create Audience” and that’s it - your new lookalike audience is ready to be launched into your next campaign!

Powerful lookalike audiences you should test

The most important thing about your lookalike audience is having a solid source audience as a base. It’s important to note that your source audience needs to contain at least 100 people.

Let’s look at some custom audiences you should test, which can be very efficient as source audiences to lookalike from.

#1 Value-based lookalikes

Value-based lookalike audiences have one simple goal: help you reach more people who are similar to your high-value customers.

The basic way to explain customer values to Facebook is by adding arbitrary numbers to your customer list. You can upload your customer list (as a CSV or TXT file) including a customer lifetime value column in order to provide Facebook with this information.

A good example of a solid value-based audience is your “big spenders”. This audience has great potential for increasing website purchases and ROAS. However, this audience won’t be relevant forever, and you need to make sure you update it regularly. This is true for any kind of audience you create based on a customer list.

via GIPHY

However, Facebook also lets you create value-based audiences from your pixel or SDK data. These audiences are automatically updated, so you don’t have to worry about their relevance. It’s very simple for Facebook to dictate the value of a certain customer for your business, as it tracks all the purchases done on your website via the pixel.

#2 Video enthusiasts

People who have watched your videos, and especially ones who watched at least 75% of a video you posted, have shown a clear interest in your brand. Creating a lookalike audience based on these people is a good way to identify potential customers.

Furthermore, you can also split test lookalikes based on people who watched 50% and even 90% of your videos. Video lookalike audiences are a great way to start, even if you don’t have a lot of customer data yet.

Although these audiences, unfortunately, include people who have skipped to the 50%/75%/90% point in your video and didn’t watch it all the way, they’re probably a small minority, especially in a large audience. So, don’t lose any sleep on that.

video viewer lookalike audiences

#3 Website converters

This type of lookalike audience is best suited to profit from your company’s success. It is based on a website audience of visitors who completed a conversion event. This can include purchase, add to cart, lead, subscribe, and many more.

Before creating these custom audiences, it is necessary to install a Facebook Pixel on your website and set up the conversion events you wish to track.

Specifying a certain conversion will help you segment your audience for a specific goal and tailor your content to this audience to increase the conversion rate.

#4 Email-list lookalikes

This is arguably the most accurate audience because it is almost like cloning your existing customer list. Therefore, it can deliver the best results for your business.

This method also allows you to access unlimited historical data, while audiences based on pixel data are limited to a 180-day time frame. However, you would like to update this data on a regular basis - monthly or quarterly - in order to keep it relevant.

Furthermore, you can even use an email list of leads or people who subscribed to your newsletter to create a broader source audience if you wish.

#5 Fans of your page

This audience can be very attractive since it is the easiest one to create. It is based on your Facebook page likes and is the simplest way to utilize your page’s success and find people that are similar to your Facebook fans.

Moreover, this audience does not require you to create a custom audience to lookalike from. All you need to do is to choose your page’s name as the source for your lookalike audience, and it is as easy as that.

Source audience - fans of your page

#6 High-intent website visitors

Advertisers often overlook this type of source audience but it can be one that has the most “warm” visitors. This lookalike audience is based on pixel data collected about your website visitors within a selected period of time. The most common period used is 30 days. However, you can use a shorter or a longer period, depending on your traffic and your needs.

When creating this audience, there are two main parameters you should consider. The first is time spent on your page and the second is the specific page viewed.

The time spent parameter is rarely used but can be most effective in assessing visitor intent. When paired with specifying the visited URL, it becomes even more efficient. For example, using a product page’s URL would help you target audiences that are further down the funnel.

This is a great way to create a source audience that has high potential because it is sizable but specific.

#7 eRFM audiences

At Madgicx, we use AI algorithms to create lookalike audiences based on an eRFM model. It is a very popular model in the business intelligence world, and I'll explain it.

eRFM stands for engagement, Recency, Frequency, and Monetary value:

  • Engagement: The level of intent your website visitors have shown. The software breaks down the visitors’ behavior into two levels: high and mid intent. High intent means the visitor took an action that indicates an intent to purchase. Mid intent refers to regular visitors who did not show any intent to purchase.
  • Recency: You can select recency of 30, 60, or 180 days to track your visitors’ actions.
  • Frequency: The software is able to segment your visitors into three groups, based on the number of visits to your website: infrequent, occasional, and frequent.
  • Monetary value:  This metric is classified into three categories: Low, Medium, and High average order value (AOV). The software breaks this down by calculating the prices of the products purchased on your website.

These audiences help you target your most valuable website visitors with the highest intent to make a purchase. Therefore, it is no surprise that lookalikes based on these audiences outperform any other lookalike audience.

Madgicx's eRFM audiences

What is the best percentage for a lookalike audience?

In order to answer this question, you first need to know the target location. Only this way, you can understand the reach of your audience. For example, if you select 1% in the US, the reach will be 2.4 million people. However, if you select 1% in Israel, the reach will be 64.2k, which is evidently much smaller.

Now, it is important to understand that a higher lookalike percentage will create a larger audience, but it will be less similar to your source audience. This means that you need to consider your reach vs. the quality of your audience (its similarity to the source) when deciding on your lookalike percentage.

Lastly, just like in any aspect of your Facebook advertising efforts, you need to experiment to find the right answer for your business. You should test different lookalike percentages in different locations to discover what works best for you.

Pro Tip: If you’re using the same source audience to create more than one lookalike audience in the same location, you might want to use audience exclusion. For example, if you create 3 different lookalike audiences in the US from the same source, you might want to use 1%, 1% to 2%, and 2% to 3%. This way, each audience will exclude the people in the lower-percentage audience.

Can you narrow down your lookalike audience with additional targeting features?

Yes, you can!

This could be useful once you start scaling your budget and showing more ads to the same audience. In this case, it might develop audience fatigue, which you would like to avoid. To do so, it might be necessary to move up to larger percentages or switch to a different source audience.

It is assumed that a lookalike should not need any age, gender, or interest restrictions because Facebook already takes these things into account. However, it might be worth testing some layering, such as combining your top interests with a high-percentage lookalike.

Super lookalike audience

Another way to increase your reach and keep the quality of your target audience is to combine a few high-quality and low-percentage lookalikes into a single “super lookalike audience”.

If you follow my recommendation and create all the different custom audiences mentioned above, you’ll have enough data to identify your top-performing custom audiences. These audiences will be great seed audiences for effective lookalike audiences.

After identifying your top-performers according to your business KPIs, you can create low-percentage (up to 3%) lookalike audiences from each of them. Next, you can launch all these new lookalikes into a single ad set. You can combine between 3-15 lookalike audiences into this “super lookalike audience”.

Then, run with this super lookalike for a while to see which of these lookalikes performs best. Afterward, you can scale the best lookalikes to add another layer of optimization.

Conclusion

If you want your Facebook ads to reach people who are most likely to become your customers, Facebook lookalike audiences are your best tool for that.

As you’ve seen, these audiences leverage Facebook’s algorithm to identify commonalities among your existing customers and target audiences. Then, these commonalities are used to create prospecting audiences that share these characteristics. Hence, lookalike audiences are the best way to utilize Facebook’s database to find people who are most likely to convert.

To create a lookalike audience, you need to define the source audience. It can be based on your pixel data, a customer list, or your page’s fans.

You should test all the different audiences I recommended in this article and find out what works best for you. Later, you can leverage the scaling methods I suggested in order to avoid audience fatigue and scale your successful campaigns.

And now, go lookalike as much as you like!

Think you’ve tested enough audiences?

With Madgicx, you can target all the audiences you should test in minutes - not days - and reach your target ROAS infinitely faster.

Date
Oct 20, 2021
Dec 13, 2020
Yuval Yaary

Yuval is the head of Content Marketing at Madgicx. He is in charge of the Madgicx blog, the company's SEO strategy, and all its written marketing materials.

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