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Are you a new business trying to venture into the realm of Facebook ads? Are you wondering how to set the appropriate budget for your first Facebook Ads campaign?

If so, this is the post for you! 

We understand that for newbies, the workings of Facebook ads can be somewhat intimidating and confusing. But fret not, we’ve broken down everything into simpler terms to make it easy for you. 

Whether you are creating a strategy for social media marketing for an established business or a start-up, we have got you covered.

What Variables Affect Your Facebook Ad Budget

There’s no straightforward answer to this question. Some people spend thousands of dollars every single day while others spend less than the amount they spend on a coffee. The exact answer depends on several variables, the most important of which are:

1. Your ad bid: Facebook offers two options for bidding—manual and automatic. The latter is meant to make the most out of your budget by keeping the costs per clicks/actions the lowest that they can possibly be. The former, on the other hand, works to help you achieve your desired cost per click/action.

The type of bid strategy that you choose, combined with your bid amount, has a direct effect on your costs. The bid amount depends on the competition as well. However, one thing to keep in mind here is that Facebook determines the ranking of an ad based on its quality score and not just the auctioned amount.

2. Ad objective: Facebook gives you the option of choosing between three ad objectives:

  • Conversions
  • Consideration
  • Awareness

The objectives are named very well according to their role. 

Awareness is aimed towards making people aware of your brand, product, or service.
Consideration is about creating the interest of people in your promoted stuff.
Conversions refer to a specific action performed by the targeted users such as signing up for an event, filling a survey form, installing an app, or making a purchase.

Once you’ve selected your ad objective, you’ll need to narrow it down further by choosing one of the more specific options that each of the above objectives offers. The ones that usually result in immediate value for your business, are the ones that will end up costing you more. However, getting a good ROI should be a priority.

3. Audience: The more specific your selected target audience is, the lower your costs will be. On the other hand, if you’re targeting customer attributes that are relatively vague and broad, then you’re more likely to incur higher costs. If you’re selling Christmas gifts in South Carolina, you don’t need to target Pennsylvania as well because your audience is in SC. 

4. Ad quality: Facebook rates your ads on the criteria of relevance and quality. The higher the quality and relevance, the lower your costs will be. Facebook calculates the relevancy score by keeping an eye on the number of users interacting with the post. More engagements or interactions mean that more people are interested in the advertised product. 

5. Your industry: The industry you’re operating in has a direct consequence on your Facebook ad prices. The cost will be higher if it’s a more high end, lucrative business industry. Competition in your industry also has a direct impact on the budget.

How to Set An Effective Budget

Creating a strategy before running an ad campaign can not only help to save a lot of money, it also makes things clear before you go live. Setting an effective budget for an ad campaign is a crucial step for the success of that campaign. A good advertisement blueprint contains a very near to accurate estimated spending chart.

However, where can you find the estimated budget to add in our strategy? Well, this can be done in several ways. You can either run a low budget ad campaign and see if the results are profitable. 

Alternatively, you can find your competitors and follow their ad campaigns for budget optimization. Advertisement intelligence tools like SocialPeta can easily do it for you. The SocialPeta tool contains intelligently extracted data from millions of ads giving you access to your competitors’ information in minutes

All you need is to create a SocialPeta account and enter the dashboard. Although SocialPeta is a very diverse tool with a lot of insights, for the sake of this article, we’ll only consider the function of cost intelligence.

The tool currently supports Facebook and all its associated ad publishing hubs like Facebook App, Instagram, Audience Network, and Messenger. Filters are available to narrow down and find the best estimate for a given category. You can perform the analysis for web ads, mobile app ads, or page promotions. Additionally, the filter for ad placement, target country, and call to action is available to find the analysis for each Placement, Country, and CTA button.

Let’s first have a look at the basics. 

Placement: We can use the term ‘ad slot’ for this as well. A placement refers to the position where the potential ad will be displayed to your designated audience. It can be in the feeds, stories, in-stream, search, messages, in-article, or external apps and websites. All these placements affect budgets differently. When choosing a placement, the interest and saturation of the audience should be kept in mind. For instance, if you have creative image-based content, you may consider going for the Instagram feed as a display point for your ads. Similarly, video ads work best for Facebook. 

Country: The selection of the target country is essential in estimating your budget. A product or an app that has less competition or saturation in the US may have higher competition in Pakistan or vice versa.

CTA: Call-to-action button or CTA is the button that links to the target page of a particular advertisement. This button can include the link to a specific landing page, app, form, or anything that you’re promoting with Facebook ads. Some names for the call-to-actionn button include Learn More, Sign Up, Register Now, Listen Now, Apply Now, etc. For a good budget estimate, one should take the CTA into account.

Now, going on to the other metrics that are available in the results: 

  • CPC is the cost per click, the amount of money required for one click. 
  • CTR is the click-through rate, the ratio of the number of people who clicked on your ad compared with the number of people who viewed the ad. 
  • CPM is the cost per mille; it is usually the cost per thousand impressions.

Refine Your Strategy

No matter if you’re going to launch a campaign for some big brand or a small business, you definitely need a strategy. Doing a competitive analysis can help you determine the right budget and design the highest performing ad creative. Having an ad intelligence tool such as SocialPeta can give you a more detailed analysis.

Small businesses don’t have thousands of dollars just lying around to spend on their Facebook ad campaigns. Having limited resources means that they need to make sure that the money spent on their Facebook marketing counts. Small businesses can’t afford do-overs—every penny matters.

Create an ad and submit it to Facebook’s ad auction, and set your maximum budget and bid. Choose the objectives you want to achieve (such as impressions, engagements, conversions, etc.) and spend your budget only on those desired objectives. 

The budget that you set can be changed anytime. It’s vital to allocate just the right budget for your ad campaigns. The best way to do this is to decide what your desired objective (be it a click or conversion) is worth to you. You shouldn’t be overspending on an action that won’t be contributing a high ROI.

If you’re unsure of the above information, the best way to find out is to run a test but only at a very minimal budget that won’t create a dent in your overall budget. Doing so will help you get useful insights that will guide you on setting the most productive budget for your future ad campaigns.

Waqas Nazeer

Waqas Nazeer is a Digital Marketing Consultant. He has worked with different companies around the globe and helped them in making their business prosper in the Digital world as well. He loves to write about the topics that add value to a business's online presence. All his pieces of writing are well researched and based on practical case studies.

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