How to set your Facebook ad budget

How to calculate Facebook ad budget

October 28, 2020
Jack Warren

Facebook ad budget explained

Next in our series on Facebook ads, we’re going to dive into the complicated world of Facebook advertising budget. Buckle up – Facebook makes this seem easy, but there’s a lot more to it than they’d have you believe…Setting your Facebook ad budget – the process

When you head into Facebook Ads, you’ll be met with a deceptively simple ad-creation process. It goes like this:

1 – Choose your creative

This bit is easy. Pick the creative content you want to use. By using Datasine, you can take the risk and guesswork out of choosing. Datasine’s intelligent AI will analyse your creative options against your set audience’s preference history to determine which ad they will find most engaging. Our creative data analysis is deep, informed by deep data science, and the best AI tech out there. 

Once you’ve chosen and uploaded your perfect creative, Facebook will ask you to pick a couple of other important options:

2 – Choose your audience

Facebook is great at audience targeting. If you’ve got a good marketing strategy, you’ll already know the kind of people you want to see your ad. Tell Facebook, and they’ll take care of getting your ad in front of the right eyeballs.

Now it’s time to do what you’ve come here to learn about:

3 – Set your budget.

There are two kinds of budget offered by Facebook:

  1. Total budget. This is the maximum that you’re willing to spend on the ad throughout its lifespan. If your total budget runs out, the ad will stop running. Think of it like a tank of petrol fuelling your ad. Your total budget will keep your ad going until the ‘tank’ is emptied, and when it’s gone it’s gone. You can top it up, but the ad won’t run when there’s nothing in the tank.
  2. Daily budget. With a daily budget, you refill the tank up to a certain point each day for a preset amount of time. For example, if you set a daily budget of £5 per day for seven days, you will potentially be charged a total of £35.

Facebook ads – how you pay, and who sees them

Pay-per-delivery

Facebook only charges your account when they deliver an ad to someone. Unlike Google Ads, they don’t charge per click – just by ‘delivery’. On the face of it this shouldn’t be a big deal – after all, if you’ve identified and set your audience correctly, Facebook should definitely be delivering your ads to the right people. So, pay-per-delivery isn’t too much of a big deal.

Well, we hate to douse your hopes – but it’s a bit more complicated than that…

Get a realistic idea of who will see your ad

We could digress a lot here about how you can use this to your advantage, by going into brand/customer relationship building on Facebook – but that’s a topic for another day (stay tuned!). Right now, we’re concerned with setting Facebook ad budget and, for this, it’s important to know that a lot of people will scroll right past your ad without registering it.

This leaves you with two options:

  • Spend as much as possible. This is what you might call the ‘carpet bombing’ option. It works on the assumption that greater spend = increased delivery, which = more potential clicks and conversions. It’s not a bad theory – and it can bring in some great results, especially if you’ve used Datasine to ensure that you’re sending out the best performing ad possible. However, it’s not a very strategic option, and it can result in a lot of wasted investment.
  • Calculate a careful Facebook ad budget template. This option is a bit more complicated, but it’s worth it if you want to get maximum ROI from your Facebook ads. We’ll go into how to build your Facebook ad budget below:

How to calculate your Facebook ad budget, and build a Facebook ad budget template

Calculating your Facebook ad budget is a strategic process, so it helps if you go back to your marketing strategy. Here are some steps to follow:

  • Consider your goals. What do you want to achieve with this campaign? Are you looking to increase sales, to generate leads, to engage audiences, or something else?It’s important to remind yourselves of goals and objectives because these have a huge impact on your potential Facebook ad budget. For example, a campaign which aims to drive sales will (if successful) have more tangible ROI than a campaign which aims to engage audiences. That’s not to say audience engagement doesn’t bring ROI. It absolutely does! The point of this exercise is not necessarily to pour money into the most immediate source of ROI. It’s to decide what your brand needs to invest in at this point. If the long-term benefits of lead generation and audience engagement are better for your brand than the short-term ROI of a sales drive, you need to adjust your Facebook ad budget accordingly. The bottom line is that understanding your campaign goals will help you to assign Facebook ad budget in the ways most likely to benefit your brand’s current goals.
  • Establish your ideal success rate. Facebook advertising may feel like a shot in the dark, but it’s worth setting some tangible success markers. How much do you want to gain from these ads?Let’s say that your campaign aims to boost sales. How many sales do you want to generate? How much would you like to make? And over what timescale?Remember – be realistic about this. Diving into past campaign data will tell you what’s achievable and realistic for your brand. It’s great to be ambitious, but don’t aim higher than you can genuinely achieve! Not only is it demoralising for your team when impossible targets aren’t met, it’s also not a scientific or strategic way to establish a budget.Once you’ve set some solid targets, you’ll have a much better foundation for your budget calculation.
    1. Consider audience variables. Chances are you already know who you’re targeting (if you don’t, you should definitely go back and figure this out!). Now, work out how many of these people need to convert in order to meet the targets you set in Step 2.Got that figure? Great. So far, so easy. Here comes the but…There are several things you can’t control about Facebook ads. We’ve already mentioned that most people will scroll by your ad. But even this variable assumes that all of your audience are going to get the ad delivered to them. Remember – not all of your target audience will visit Facebook while your ad is running.Sure, you can make your ad more noticeable and enticing with an optimised creative using Datasine. But you can’t control when (or even if) your audience will log into Facebook at any given time.So, you need to set your audience size with a considerable margin of error.Dig back into past campaign data, and work out your average conversion rate. This is the number of people who have converted from your Facebook ads in the past. The likelihood is that this will be pretty low. Don’t worry – that’s normal! Even a low conversion rate is worth it with the right audience.Then, do some audience research. Establish, if you can, how often your target audience visits Facebook. Don’t worry too much if you can’t gather exact figures – ballpark will do. By this point you should have a rough idea of the audience size you need in order to hit your conversion targets. But there’s another important factor impacting your budget and that’s a timescale.
  • Set a timescale. The longer your ad runs, the more you’ll pay. But, sometimes, it’s worth running an ad for longer in order to achieve your targets.It may be that your campaign is on a strict time schedule. In this case, it may be worth increasing your audience size (and therefore your budget) in order to get the ad in front of the right number of eyeballs in the time available.If your ad runs for longer, you can probably work with a smaller, more select audience. This does mean setting a budget to take the extended timescale into account, but it could pay off for you.For example, if your ad runs for a week, it’s less likely that the entirety of your audience will see that ad in the time set. A wider audience means more impressions – but a less intensively targeted audience will also have a lower conversion rate.If, however, your ad runs for a few months, it’s a decent bet that most of your audience will log into Facebook during that time and see it. This means you can whittle your audience down to those most likely to convert. You might get fewer overall impressions – but your conversion rate will be higher.Timescale and audience size go hand in hand when calculating your Facebook ad budget, so be sure to consider them both carefully.
  • Consider the average frequency of your ad. You pay every time your ad is delivered to an audience member. To establish how much you’ll need to put in the pot (and whether to opt for the Daily or Total budget), you need to know how often those deliveries will take place.Facebook doesn’t give you much control over how frequently your ads are delivered, but it will tell you the frequencies it uses in analytics. If you have past campaign data for a similar audience, bring it up and see how frequently ads were delivered per lead. This should give you a rough idea of how much you’re paying per audience member.
  • Estimate your CPM. CPM stands for ‘Cost per thousand’. If you know your audience size, estimated conversion rate, timescale, and average frequencies, you should be able to estimate the total number of impressions your ad will receive. CPM measures the total spend (estimated, in this case) on a campaign, divided by the number of impressions, and multiplied by 1000.So, if you spend £50 and get 10,000 impressions, your CPM would be £5. In order to set a Facebook ad budget in advance, you’ll need to calculate an estimated CPM. This is why we spent so much time figuring out audience sizes, timescales, ad frequencies, and so on. Go into Facebook’s ad manager, and enter the figures you’ve arrived at for these elements. Facebook should then estimate a total campaign cost for you. Use this to estimate your CPM.
  1. Calculate your cost per ad set. Once you’ve got an estimated CPM for the targets you’ve set yourself, simply multiply the number of target ad impressions by your CPM, and then divide by 1000.Voila! The result is an estimated cost per ad set for your campaign. Now, remember that this is an estimate. If you’ve used the right data to inform your estimates, this should be a pretty accurate figure. But still, it’s worth leaving a margin for error just in case. 

Of course, it helps hugely if you’re running the right ads in the first place! As we mentioned above, Datasine can help with this! Book a demo today, to see how our intelligent AI platform can take the guesswork out of advertising, and help you pick creatives which convert.

 

Related posts

Let's work together.

Find out more about how Datasine empowers marketers with intelligent, data-driven insights to improve the performance of your marketing campaigns.

Share This