Running a successful Facebook ad campaign can be both tedious and time consuming – not to mention expensive if you don’t know what you’re doing.
But with nearly one third of all US display advertising impressions coming from Facebook, few businesses can afford to pass up the opportunity to tap its massive user base.
Whether running your own ad campaign or relying on a 3rd party service, knowing the basics of Facebook advertising can both dramatically increase your return on spend, as well as protect you from getting burned.
To begin, it’s useful to have a basic understanding of how the Facebook ad platform works.
How Advertising on Facebook Works
Buying ads on Facebook takes place primarily on a cost-per-click (CPC) basis. That means you specify how much you’re willing to pay for a click against a specific target (user age, country, region, gender, interests, college or professional network, ect), and Facebook compares your bid with others and ultimately shows the ad of the highest bidder.
So like in any auction, the highest bid wins – except, this auction has one added degree of complexity…
While you’re bidding for clicks, Facebook is backing things out to a cost-per-impression. To do this, they determine your “click-through rate,” or percentage of users that will click your ad, and multiply that by your CPC bid to determine their effective cost-per-impression.
For instance, if you have an ad that you’re bidding $1.00 per click on, and it gets a 0.1% click-through rate (CTR), that averages out to $0.01 per impression. Another bidder may have an ad with a $0.60 bid but a 2% CTR, averaging out to $0.012 per impression – as such their ad will be shown before yours.
Effective bidding then means finding and adjusting your CPC bid such that your CPC*CTR is competitive enough to get you the volume of clicks you desire.
Ok, now that we’ve covered the basics, let’s review how to effectively managing bids, maximizing CTRs, and of course, optimizing for actual RETURN.
How to Maximize ROI on Facebook Ads
Since Facebook is a real-time market, the CPC you need can vary significantly as other bidders place, adjust, and remove ads. An ad that was generating great volume just a few hours ago can fall stagnant as the market heats up.
But CPC is just piece of the puzzle, the other challenge is keeping your CTR up. As your ad collects more and more impressions it gradually grows stale, and its CTR drops. Thus gaining and maintaining a high CTR means constantly deploying, split-testing, and refreshing the creative (images, titles, bodies) in your ads to keep them fresh and relevant.
You’ll find that there’s no one “best” ad – an effective ad for females in California who like gardening will hardly work for males in New York that are interested in sports cars. As such, a well-run campaign (creatively at least) tests multiple ad elements against each targeting segment, pairing each ad with its most appropriate audience – amounting to a creatively optimized campaign.
The question then becomes, what are you optimizing to? Everyone advertising on Facebook has a clear campaign objective – some hope to sell virtual sheep in a social game, others hope to sell designer sunglasses – the sad reality is, very few advertisers track conversion from click to purchase. That is to say, advertisers and services will optimize campaigns for cheapest CPC, then look in aggregate at purchase rates across the campaign – but not actually track which ads are driving the purchases!
This seems crazy when you consider that while one ad may cost 10% or 20% more per click, the users driven from that ad will convert up to 100% or even 200% better! The fact is, the cheapest clicks almost never drive the best users. By optimizing for the lowest cost-per-click, advertisers are actually weeding out some of the users most likely to purchase!
The most efficient way to run a campaign will always be tracking actual purchases, tying those actions back to the ads that created them and bidding from there. Anything less opens room for massive inefficiencies.
Ultimately, advertisers are viewing their campaigns in terms of actual return on spend – internally at least. Judging and adjusting individual ads by that same criteria can mean the difference needed to make your campaign a success. As the Facebook ads marketplace gets increasingly competitive, advertisers will need to get more and more efficient around how they measure and run campaigns.
At Nanigans, we’ve built a platform designed to optimize for actual ROI – automating the creation, deployment, and bidding across many ads and multiple demographics. By adjusting the cost-per-click based on your actual customer spend, our system ensures the campaign yields the highest return possible.
