Facebook Ad Budget vs Conversion Cost – Knowledge Bomb #2

By Tim Burd - August 23, 2017 3782 Views
Facebook ad budget
By Tim Burd - August 23, 2017 3783 Views

The question comes up all the time when we’re talking to Facebook Advertisers: “What should my starting budget be, and how long should I wait until I optimize my campaign?” This blog will introduce you to why Facebook rewards higher budgets, one of the many methods we use when figuring our Facebook ad budget, and also show you how to structure your campaigns based on your conversion costs.

Facebook’s algorithms track a user’s online activity and in general know which users are more likely to convert. Higher converting users in most cases are more expensive to target with ads, whereas a user who doesn’t shop online frequently are typically cheaper to target. Facebook can accurately predict the likelihood of a conversion and when your bid is high enough, you actually get a chance in the auction that Facebook will show your ad. In the case that your max bid isn’t high enough to win the auction for that user, you will be entered into auctions that are cheaper because those users are less likely to convert. Bottom line, your bid and budget essentially control how many valuable users see your ads.

We personally believe in higher budgets to start for a number of reasons. But, there are definitely more mathematical ways to calculate the answer to this question. We like to base the budget on what a conversion costs, so ideally, if you have a purchase history you should have a pretty good idea of what this number is. Let’s say a conversion for you costs $20.00. To start, we would recommend testing a minimum of 5 ad sets (ideally 10-20 to start) and you will want to allocate at least 10x your conversion cost per ad set (ideally more like 20x) to determine your daily Facebook ad budget. Now the math will change here based on how you are bidding. If you would like more information on manual bidding and the bully method go here. Just for simple math here though we are going to assume a $20 bid price meaning each ad set will have a $200 daily budget.

For example:

  • 5 ad sets x $200 per day = $1,000.00 daily budget
  • 10 ad sets x $200.00 per day = $2,000.00 daily budget
  • 20 ad sets x $200.00 per day = $4,000.00 daily budget

This method of budgeting and bidding allows for the algorithms to optimize properly, and collect the amount of data needed to analyze your campaign daily and still test different placements and targeting. As for the number of ads per ad set, we recommend doing about 3-5 unique ads with 1 duplicate of each (using the same post ID), giving you a total of 6-10 ads for the ad set. If you’re working with a smaller budget, you can try starting out with less ad sets, or with a lower daily ad budget ($100 per day ad spend) instead. With lower budgets you will also want less ads per ad set.

As a general rule, you don’t really want to change bids and budgets too often as it can cause problems with Facebook’s Optimization. But, it is OK to change these if a campaign is performing really well or very poorly and you want to adjust settings. We would just suggest to avoid changing the settings repeatedly, you will want to wait a minimum of 3 days before making any changes initially. If you follow these simple rules, after just a few days, you will have the data necessary to see what ads are working and you can make adjustments based on the performance. At this point it is safe to adjust your bid or budget about twice daily. You can do it much more but it is not recommended.

Well, there you have it folks, in a nut shell that is basically how we determine how many ad sets to do and how to set the facebook ad budget for our campaigns (at least most of the time). Of course, there are other strategies that work great also, we just get this question quite a bit and wanted to let people know what’s working for us! Stay tuned for more of the “Knowledge Bomb” series coming soon!

 

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