For anybody considering using Facebook advertising for business, this is pretty much the #1 question. It’s also nearly impossible to answer in its current form, at least in terms of a specific monetary value – but people still try!
This article (pictured above) by Jon Loomer, who’s one of the best in the business of Facebook advertising, doesn’t address the actual question small business owners want the answer to, which is: “How much should I spend on Facebook ads to actually get a return on my investment?”
If you ask this question, you’re shifting the focus to business, instead of social media. Sometimes I wonder if the people who ask “How much should I spend on Facebook ads?” are dreaming of ‘going viral’ or some other miracle when it comes to social media advertising. As it turns out, social media advertising can be calculated the same way as any other form of advertising — money in, revenue out.
You’d do better to replace that frequently asked question with this less commonly asked one: “How much can I afford to test the viability of Facebook ads for my business?”
This question, and the resulting answer you get from your test, is the key to success with Facebook ads. In this post, I’ll show you how to set up your test, analyze the results, and determine your Facebook ad spend.
But first, we need to break our new question into two parts…
- “How much can I afford?”
First thing’s first: You should never spend your grocery money on Facebook ads. Advertising will not save a failing business. It’s more useful for accelerating a business that’s already working.
In addition to not spending your last dollar on Facebook ads, you should never invest a significant amount of money into any advertising channel without testing it first. Especially with digital advertising.
If the $500 test fails (aka you don’t get a single lead, e-commerce transaction or other relevant business result), can you still afford your groceries? Yes? Good — go for it. If not, ask for referrals and do some cold calls before taking food off your table.
Now for the second part of our new and improved question.
- “What is the viability of Facebook ads?”
Facebook ads do not exist in a vacuum. They drive targeted traffic to a web page, to place a phone call, into your Facebook Messenger inbox or a Page Like. Ask yourself: Do you have a process that will turn that traffic into new business?
Let’s use the scenario of driving traffic to a landing page as an example. Anybody who fills out a form on this landing page will become a lead; somebody you can email or call to discuss business and close a deal.
Let’s pretend the average lifetime value of a customer (LTV) for your business is $2,000. You create Facebook ads, drive traffic to that landing page and measure conversions. Your budget is $1,000, your cost-per-click (CPC) is $0.50, so you drove 2,000 visits to your web page.
Two-hundred people (of the 2,000 visits) filled out your form, so your conversion rate from web visitor to lead is 10 percent. Of those 200 people, 10 of them become customers (5 percent, not bad). Using your LTV, you’ve just made $20,000 of a $1,000 investment in Facebook ads. That would be a staggering 1,900 percent ROI.
If you’re watching the metrics described above, the question: “How much should I spend on Facebook ads?” now seems less of a challenge because the answer is: You should spend every penny you can get your hands on, especially if you’re getting a 1,900 percent ROI.
The beauty of breaking things down into individual metrics like the ones described above is that you can improve on them one at a time!
- CPC too high? Refine your ad copy, use different images or experiment with different targeting to bring it down.
- Conversion rate low? Re-design your landing page or write more compelling copy.
- Leads not converting into sales? Adjust your targeting or add another qualification step in your marketing funnel.
While the examples above are more advanced digital marketing tactics, if you’re looking at them individually you have a great shot at optimizing each for better overall results.
Key takeaways regarding Facebook ads
Don’t spend your grocery money on Facebook ads.
Advertising is designed to pour gasoline on a fire that’s already burning, not start one from scratch.
Facebook ads don’t exist in a vacuum.
Make sure you have all the other components of your business in place (including a client intake system) before investing in advertising. Without landing pages, blog content, email autoresponders, etc., in place, your Facebook ads will drive traffic to a system that’s not optimized for business. Map out a digital marketing funnel before using Facebook ads.
Test your marketing funnel like a scientist.
Once you have your marketing funnel built, test each component and look for ways to optimize. But remember, you can’t fix what you don’t measure!
So, there you have it. The definitive answer to “How much should you spend on Facebook ads?” Well, I suppose that’s a misnomer, but the lesson here is: You can’t start seeing ROI on your Facebook advertising campaigns until you start asking the right questions.
Logan Mayville is a content strategist with bonus skills in copywriting, SEO, and digital marketing. He partners with clients who are looking to connect their content efforts to business objectives like lead generation and optimizing marketing funnels. Connect with him on Twitter or LinkedIn.