How Much Should You Budget for Facebook Ads?

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facebook ads budget How Much Should You Budget for Facebook Ads?

[AUDIO VERSION: I also recorded an audio version of this blog post. Click below to listen. Let me know if this is something you find helpful!]

My favorite new place for inspiration is the Power Hitters Club private Facebook group. It’s where advanced Facebook marketers share their stories, advice and questions on the latest tricks and strategies. Amazing for collaboration.

This week, member John McGarry posed a common question…

power hitters club ads budget How Much Should You Budget for Facebook Ads?

So, John has a potential client and he wants to advise on a monthly Facebook ads budget. What should he say?

What Are Your Goals?

The problem is that we too often ask, “What should the budget be?” prior to establishing goals. It’s the goals that should help determine the budget.

Let’s say, for example, that John’s potential client had the following goals:

  1. 50,000 New Facebook Fans
  2. 10,000 New Email Subscribers
  3. 100,000 Website Referrals
  4. 5,000 Trackable Product Sales
  5. 5,000 App Installs

Before you price out anything, ask that potential client for their goals. You could begin to assign dollar values for each of these things. But first, let’s ask a few more questions…

What Is Your Current Facebook Presence?

Building from nothing to 100,000 highly engaged fans who will buy from you is hard. Particularly if you’re looking to do that in a short period of time.

It will help you a lot if there is already an established Facebook presence. There are fans established ready to engage, click and buy.

Also important is the resources dedicated to this. Is anyone in charge of community management? How skilled are they at creating useful, helpful content that the target audience wants to engage with and share?

Without an established presence, proper expectations need to be set for your client. If you will not be building a community, you will only be reaching non-fans to sell, drive traffic and get installs. That is simply less effective than targeting fans who expect to see your content.

If you are also tasked with establishing this presence, the client needs to understand that this will take time. Building a community does not happen overnight. And costs will be higher as social proof is being built.

Read this post on building a Facebook page from scratch.

What Is Your Niche?

Companies in the entertainment industry have an advantage on a social network. You can expect costs per conversion (page like, link click, email address, install and sale) to be lower.

On the flip side, companies in non-social or “boring” industries will have a tougher time. Think law firms or insurance companies, for example.

The niche should be considered when setting your budget. If it’s a boring niche, adjust accordingly.

What Is Your Product?

If you’re selling a product, so many factors will contribute to your success selling it. We’re going to assume that you can easily target an audience likely to buy.

Is your product a high dollar item? Is it something people are unlikely to buy online? Are multiple steps needed to complete the purchase?

All of these things contribute to efficiency of sales with Facebook ads and should be considered when establishing a budget.

What Is Your Website?

Does your website currently get solid traffic? Is it well designed? Is content being published on a regular basis? Is it mobile friendly? How is the landing page set-up and copy?

These things matter a lot!

By having established traffic, you have a built in audience to target. If there is no traffic and very little content on a poorly designed website, you are sending people to a wasteland.

A well-designed and established website can make your job as an advertiser infinitely easier. On the flip side, a bad one can make it impossible.

Adjust your budget accordingly.

What Is Your Customer List?

The number one factor contributing to success or failure of Facebook advertising is the relevancy of the audience being targeted. Do they want to see what you are promoting?

A key to this is the customer list. If your client has a list of 100,000 paying customers, that gives you a solid foundation to start with of people likely to like your page, click your link, install your app or buy your product.

Without it, you will be reliant on a quality fan base and established website traffic…

If those things don’t exist, you will be using interest and behavioral targeting as your main methods of reaching potential customers. You’re behind the eight ball.

Adjust your budget accordingly.

What Is Your Time Window?

Let’s say that you’re signing a one-year engagement with a new client. They have moderate goals and minimal obstacles (good website, established fan base, solid customer list, etc.).

One year is plenty of time to test and adjust, refine and optimize to get to this client’s goals.

But let’s say that you have a client in a tough niche with aggressive goals. They do not have an established fan base, good website or anything else that makes your life as an advertiser easier. And they want to do everything in a month.

Good luck!

You should build testing and optimizing into your plan. You should also build in campaigns to accomplish specific goals. Your most aggressive time period should be the final quarter after you’ve already established a fertile foundation (fan base, traffic, customer list, community) for sales.

I would spread out your budget (and expectations) accordingly. The first month will be the toughest. The final should be when everything comes together.

Budget: Facebook Fans

As a rule of thumb, I say you should expect to spend anywhere from $.50 to $1 per Facebook fan. Now, this will depend on many factors, including niche, brand recognition, established presence and country. You could spend more or you could spend less.

Some will tell you that you can get fans for far less. Maybe insanely less. Remember that quality matters. It matters a lot!

John’s client can expect to spend between $25,000 and $50,000 to increase their fan base by 50,000. To set appropriate expectations, I’d start with a $50,000 budget.

Budget: Email Subscribers

Again, there is no set price here. Several factors will contribute to this cost. Are you building your list with an attractive giveaway? Does the landing page convert? Are you looking for subscribers or leads (leads may be much more)?

I set an expectation of $1 per email address. I’ve found that it can be as low as $.50 if targeted appropriately (fans convert!), but it can also be higher.

With an expectation of $1 per email address, John’s client should budget $10,000 for those 10,000 email addresses.

Budget: Website Referrals

Some content will be more attractive than others. It will be easier to get people to click on a popular, viral article with an engaging headline and photo than it will be to get people to click on a link to a boring informational article about the history of your company.

I consider anything close to $.10 a very good cost per website referral. You could go lower, but it’s more likely you’ll need to spend more. Depending on the referral, I wouldn’t spend more than $.50 per link click.

Many questions need to be answered prior to having a better feel for whether the cost will be closer to $.10 or $.50 (that’s a wide variance!), but let’s play it safe for now at $.35. It would cost $35,000 to drive 100,000 website referrals at that rate.

Budget: Product Sales

As you can imagine, results here will be across the board. Cost of product is going to be a huge factor, as is relevance to the user targeted. But let’s assume the product is $100.

While I and others have seen huge ROI on product sales, let’s play this conservatively and assume a cost of $30 per conversion. The client needs to determine based on margins their acceptable rate.

We can budget $150,000 to drive 5,000 sales at a $30 per conversation rate.

Budget: App Installs

Let’s also assume John’s potential client has a free app. It could be a mobile or desktop app — doesn’t really matter. The goal should be to pay $1 per app install, but again we should play this conservatively. Let’s budget for $2 per install.

To get 5,000 app installs, we can expect cost to be in the neighborhood of $10,000.

Final Budgeting

The sum of costs associated with all goals for John’s hypothetical potential client is $255,000. John should now break that up monthly depending on length of engagement, making sure to build slowly and account for bigger campaigns where additional spend will be necessary.

Your Turn

This is my recommendation for establishing a process for Facebook ads budgeting. How about you?

Let me know in the comments below!

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About Jon Loomer

Jon Loomer is a digital marketing consultant with a unique perspective on social media. He was introduced to Facebook in 2007 while with the NBA (back before Pages) and has been using Facebook for business ever since. Stay in touch by liking his Facebook Page (Jon Loomer Digital).

  • Marcelo

    This is something I’ve been trying to figure out lately. Not the budget part. That’s easy. Just know how much a customer is worth and that’s your limit per conversion. I mean the tracking. How to (early) detect deviations? If I expect to have a sale every $30. Should I stop the ad once I am at $31? $60? $90??

  • http://www.postplanner.com/ Scott Ayres

    That’s alot of dough…

  • https://www.elance.com/s/scott-benson/ Scott Benson

    $250k? I think I’ve been working with small businesses for too long…

    Ok Jon, you’re the fundraiser, right? How do I convince a client to sink a realistic amount of money towards their goals? I’m getting all my work through Elance right now. My hourly wage is good, but these folks want 10,000 fans for $50.

    • Matthew Wilberger

      Scott – You gotta look into acquiring potential client leads through
      channels other than Elance. Just copy the way Jon L. markets his
      services :)

      • https://www.elance.com/s/scott-benson/ Scott Benson

        Haha, right? I’ll write up all the retargeting articles for the new Twitter ads :)

    • Kenneth

      Hi Scott, if they’re willing to pay just $50 for 10,000 fans – I would give them exactly that and sign them up to some click-farm in India. The quality of their fans base will be accordingly. Seriously, I would just drop a client like that. They’ve got to be joking.

      • gopinathpara

        Kenneth, I’m from India. As you mentioned ,can you give me 10000 Quality likes from Indian Prospects for $50 ? You definitely can’t . The CPC is Rs.6-10 In India ,They are Not cheap Figures for us! its the currency conversion which is making difference . So please stop using India’s name from the list of Fake likes countries.

    • http://coderapper.com gopinathpara

      Scott, I can suggest you to drop from such client,who will give you pressures later. you can find even better jobs on elance. So try them. And like @matthewwilberger:disqus said , Try other ways to get potential leads. Just to give you an idea My average CPC for a quality LEAD from USA is $0.65 .

      • https://www.elance.com/s/scott-benson/ Scott Benson

        I don’t work too hard to get clients like these, but I think the larger problem is that these are not a small minority.

        I think I have a presentation issue. Clients want great returns for next to no investment. You can tell them what their goals will cost them and they’ll run (to someone who will give them fake likes, etc.). You can tell them what their budget might actually get them (like about a 1/10th of what they wanted) and they’ll go to someone “more experienced.”

        Does anybody have phrasing they fall back on to convince someone to raise a budget and lower expectations at the same time? Negotiations aren’t my strong suit, haha.

  • http://webhostingbays.com/ Juan

    I just using Facebook ads this month. I really excited when know about “targeting” that are main part to make money. It really awesome

    • http://jonloomer.com/blog Jon Loomer

      Targeting is where it’s at! Success starts there.

  • http://www.norio.co.za/ Norio De Sousa

    Great article! Very useful in that it gives us an idea of what should be possible depending, of course, on niche, offer, etc. Thanks, Jon!

    • http://jonloomer.com/blog Jon Loomer

      Thanks Norio!

  • http://www.internetjetstream.com/ Mike Seddon

    Very comprehensive answer Jon. It’s funny but I get this question all the time about Adwords. Like you, I try to understand what they are hoping to achieve and work from there. Often, just asking the question yields a very interesting conversation!

    • http://jonloomer.com/blog Jon Loomer

      You get it, Mike!

  • John Westbrook

    Jon,

    All of this makes much sense. However, your cost per website referral, or cost per website click, is estimated very low. It would greatly depend on what type of product you’re selling. My experience is only with running ads for the automotive industry – for example, many of my ads are car sales oriented. I typically use Polk Data behind these ads. The lowest you’re going to be able to get the ads, on a local scale, using Polk is probably $.80 – $1.20. I was just wondering if you’ve had much experience doing ads with that type of targeting, and what your prices per website referral were.

    Love your site, by the way,
    Best,
    - John

    • http://jonloomer.com/blog Jon Loomer

      Always a variation, John, and it depends on what you are doing. In my examples above, I’m looking at driving traffic only. This isn’t for driving sales. There is a separate item for that. If you are only driving people to a product landing page, then yes — costs will be high per link click. But if you have a helpful blog post or article targeted at the right people, those costs should be much lower.

      • John Westbrook

        Ah got it. That makes sense to me. Thanks so much for your reply!

  • http://www.CowabungaLife.com Bradley Morris

    Thanks for this John. As someone who is about to reLaunch my product, I don’t have that type of budget. I am wondering if you have a suggestion on doing the best with my money. I have a solid sales funnel, but not it’s time to get leads converted into sales (when I go live Sept 1st). My products are online meditation eCourses that range from $97-197 in price.

    If I had $5000 for marketing, where would you suggest investing that fuel?

  • Maria

    Great article. Thanks!

  • erik

    Website is key when posting. You could run the best, “kick-ass” ad and not have it convert due to a pore website. #truth

  • Selene

    Is it possible somehow to target an intersection of interests? I am just getting started and have no website traffic or e-mail lists to talk of. I’d like to target people who are interested both in romance movies/books and comics, but can’t find a way to do so, and either by itself gives a pretty broad audience…

  • http://www.Smead.com/ John F. Hunt

    As a former Marketing Consultant to businesses this question came up all of the time (regardless of what advertising vehicle) and the best way to deal with it when a client or potential client asks is to ask a few probing questions. Such as “You want to get fans – what is a fan worth to you? You want to get email addresses – what are they worth to you?” This conversation turns the tables on them and they then have to understand the value of a fan or email address. Why do they want to get a fan or email address in the first place? They likely won’t know the specific answer, other than more fans or emails will lead to more customers. It all has to do with ROI. Are you acting as a media “buyer” for them or as an “investment strategist?” There is a big difference. You are not an ad rep for Facebook, you need to work for the client and not Facebook – always trying to optimize the marketing channel on the client’s behalf. If you have to pay $100 per fan but it leads to $1000 per fan in sales and a 10% ad investment works, then you will buy as many fans for $100 that you can until you run out of product or you run out of interested fans. Sure it might cost $35,000 to drive 100,000 website fans – but can you guarantee that- even based on your past best practices?(no). Learn the process of iterative ad testing and optimization. Start with a client and say lets do a test budget of $100, optimize, tweak, etc. Get to the point where the desired conversion is worth the expense in the client’s mind and then scale out with larger investments. Don’t sell anything to a client other than the fact that you are working on their behalf.

  • brenton

    Love tge audii

  • Michael Caporale

    Are you factoring in labor costs in this formula?

  • Raj

    John this is really awesome. Almost all queries clarified at a single shot. Thanks a ton

  • Kalinda

    Hi Jon. Really great post! Always get something new from your posts. :D

    One question not related with this post. Recently I was trying to use export/import template to edit and create ads, but I was stuck. Have you ever edit or create ads with the export/import template?

  • http://marketingwitfred.com/ FREDDIE ROSS

    I agree, having a Facebook ad can play a big roll in how well you reach your audience.

  • Timothy Sarazen

    I would say I love the audio option, so I can listen while I continue to work… but is that your voice? You sound bored. I had to stop listening halfway through because it sounded like you were reading an obituary. This article had tons of awesome information, but the audio didn’t capture the magnificence of the message being communicated.

    If your followers enjoy the audio feature, consider outsourcing the recording? I’ll do it for free just cause I like you.

  • Walter Hayes

    I guess this depends a lot on the Country you are targeting. I’ve learned the hard way that mixing countries in the same Ad Set is not a good strategy…

  • Bob

    What ratio of “post types” do you recommend? Meaning, specific MKT objectives vs non company related posts i.e. building rapport/encouraging engagement on not for profit topics.
    Many thanks Jon;
    ~Bob S.

  • Who_Dunit?

    Can anyone comment on this subject?

    Much has been said about the timing of Facebook ads particularly time of day and day of week. Is it smart to try and time these cycles?

    For instance, is it wise to adjust your budget (daily) to spend more during peak times and cut back during other times?

    The idea is for your overall budget to stay the same but have your ad circulate more during the peak times. Any comments?

  • Desirock

    really nice post… but i think the budget goes too much…. but ten again we need to add our profit aswell….

  • Maz

    hom much should we budget for fan page 2000 users with quote niche ?

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