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An Overview of Facebook Advertising

Peter Campbell
By Peter Campbell - December 08, 2016

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“Do Facebook ads really work?” “How much should I be spending on Facebook ads?”

Our clients frequently ask us these and other questions related to social advertising. Many business people are uncomfortable with non-traditional advertising channels such as social media, and these are very legitimate concerns. However, the answers are not always as straight-forward as we’d like them to be. So let’s just start with the basics…  

Is Facebook The Right Platform For You?

You need to go where you audience is. Marketers have been saying this for years, and it’s as true today as it always has been. Before you ask questions like “how much,” we need to begin on a much more fundamental level: Should you be investing your time and money in Facebook at all?

Again, you need to go where your audience is. If you determine that most of your audience will be reluctant to engage with you on a certain platform, then you should focus your efforts elsewhere. But let’s assume that you’ve been able to establish that Facebook has a lot of untapped potential for your business—then what?

Do Facebook Ads Work?

The short answer is yes, they work incredibly well… but only if you use them correctly.

Here’s a little-known, extremely important, and utterly disappointing fact for you: when you post on Facebook, only about 6% of your audience will see that post organically. That means in order to reach the other 94% of your audience, you’ll probably need to open your wallet.

When this alteration in Facebook’s algorithm was first introduced, businesses were not happy. They had already spent endless time and money building a following on this platform, and it was now being held ransom? People were furious, and understandably so. Did you know that Facebook’s organic reach and stock prices are inversely correlated? Yup! This may have been a greedy move on the part of Mark Zuckerberg, but here’s what he’s attempting to do…

Facebook’s goal is to integrate advertising content into your newsfeed as seamlessly as the content that was posted by your friends. They want it to be timely, hyper-relevant, and emotionally edifying for their users, and to accomplish this, they have no plans of increasing the amount of sponsored ads shown to their users. They only want to change the relevance.  

You see, Facebook’s algorithms have been forced to become orders of magnitude more complex since the platform was first launched in 2005. Today, there are more people and businesses using Facebook than ever before. When you open your personal Facebook account and your Newsfeed pops up, the content that you’re seeing has been determined by more than 100,000 algorithmic weights. These parameters have sifted through as many as 15,000 potential stories to present you with the best 300 pieces content. As a business, it’s your goal to be selected as one of those 300. This information was all presented as part of bigger social media crash-course at Hubspot’s Inbound Marketing Conference 2016. You can see more of that lecture here:

So let’s circle back to the original question: Do Facebook ads work?

Yes—in fact, Facebook is one of the best advertising channels that we have at our disposal. Why? Because its complex analytical tools allow you to find exactly who you’re looking for. Facebook’s ad targeting is incredibly specific, and this is good news for advertisers! Used correctly, Facebook’s advertising tools have nearly limitless potential. However, of the 40 million plus businesses that use Facebook, only about 5% are using these tools, which is more good news for you. This makes it relatively easy for you to stand out. So start taking advantage soon before everybody else catches on!

How Much Should You Spend On Facebook Advertising?

This is the wrong question. Before you even think about your budget, you first need to establish a set of goals. Goals should be the primary factor in determining your budget. Not the other way around.

The goals you set should follow the SMART framework:

  • Specific
  • Measurable
  • Achievable
  • Relevant
  • Timely

Once you have established exactly what you are hoping accomplish, and when you are hoping to accomplish it by, only then you can begin to think about your budget. As you do so, you should always keep ROI in mind. Spending money on advertisements without a firm understanding of why these ads are important and how they are going to drive profit is a total waste.

Your budgeting strategy is likely to change with your goals. Here are a few different kinds of goals that businesses typically set for themselves…

  1. Getting more Facebook ‘likes’

Remember this: quality is much more important that quantity!

If you do business out of Nashville, Tennessee, getting 5,000 likes from India is going to be a lot less valuable to you then 5 new Nashvillians who are genuinely interested in what you do.

How much does it cost to reach these sorts of people? As a rule of thumb, plan on about $0.75 per ‘like,’ but don’t be surprised if that price is closer to $1.00. Every company is different. Not everybody’s metrics will be the same.  

  1. Website referrals from Facebook

If you want people to visit your website, there’s a lot that needs to happen before you start using Facebook advertising. You’ll need to make sure that you have solid mechanisms in place to turn referrals into leads when they arrive at your website.

You shouldn’t be spending more than $0.50 per referral—that’s your ceiling! And if you’re serious about tracking and improving your marketing efforts, then, for Pete’s sake, use Facebook’s pixel feature! It’s the only reliable way to quantify how successful your Facebook ads have been.

  1. Product sales from Facebook

ROI is the only metric that counts here. What is the price of your product? What sort of margin do you need to make Facebook ads worthwhile for you? These are questions you need to answer before you begin running ads.

Don’t expect to get it right the first time. Convincing people to make a purchase takes some effort. You might consider A/B testing different advertisements before fully implementing the budget you decide on to make sure you’re getting the most bang for your buck. As a rule of thumb, if your cost per sale has surpassed $35, you need to rework the ads you’re running.

  1. Email subscribers from Facebook

Most of what will determine the success or failure of your efforts to acquire new contacts won’t have much to do with Facebook. You need to set up beautiful landing pages with seamless transitions and compelling CTAs. The only thing that Facebook is going to do is get potential contacts in the door. Then you’ll have to impress them.

So let’s assume that your landing page is great. Let’s assume that everything else about you is great, and just focus on Facebook. How much should you be spending to acquire 1 email address? Plan for $0.50 to $1.00.

Have Other Questions?

Then don’t hesitate to get in touch with us! At Horton Group, this is what we do. Let’s talk.

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