When it comes to setting advertising budgets and determining if Facebook/Instagram ads are right for your business, there’s one question you’ll undoubtedly ask: How much do Facebook/Instagram ads cost? While this question is valid, you may be surprised to hear that there isn’t a straightforward answer. Confused? Let us explain.

The first thing you need to know about the cost of doing business on Facebook and Instagram is that Facebook and Instagram utilize an Ad Auction. But what is the Ads Auction and what is its purpose? Facebook uses the Ads Auction to deliver maximum value to both advertisers and users, “We use an ad auction to determine the best ad to show to a person at a given point in time. The winning ad maximizes value for both people and businesses.” These ad auctions happen billions of times every day across the Facebook family of brands! A key term that should be setting off a lightbulb over your head is the word “auction”. If you’ve ever been to an auction or seen one in a movie or show, you have likely seen bidders competing against each other in order to get the prize that they covet. That’s how things work in the Facebook Ads Auction, you are competing with others in order to get your ad seen. The factors that affect your competitiveness in the competition are clearly defined by Facebook. 

So who wins the auction? According to Facebook, there are three main considerations that affect the auction. The first is the bid. Bids, according to Facebook,”… are what the advertiser is willing to pay to achieve their desired outcome.” Need a refresher about bids? Learn more about bids here. A bid is something that advertisers have control over and can change. The next consideration in the auction is the Estimated Action Rate. An Estimated Action Rate is defined by Facebook as, “An estimate of whether a particular person engages with or converts from a particular ad (in other words, the probability that showing an ad to a person leads to that desired outcome of the advertiser).” Estimated Action Rates essentially use a user’s historic data, based on the actions they’ve taken on the Facebook family of brands, in order to determine how likely they are to complete the ad’s objective. So, if you don’t like shopping online and you’ve never purchased an item from a Facebook or Instagram ad, your Estimated Action Rate for completing a purchase via an ad is likely to be low. The last factor in the Ad Auction process is Ad Quality. Ad Quality is determined by many factors, including feedback from people viewing your ad, people hiding the ad, sensationalized/language or information in the ad, clickbait and too much text in an ad’s image (Tip: use Facebook’s text overlay tool before launching an ad to make sure that your ad won’t be dinged for too much text). 

As a reward for learning about the Ads Auction process without getting your initial question answered, we have something extra that might give you something closer to what you were originally looking for. Although the cost of your Facebook Ads will be affected by your budget and the variables that the Ads Auction considers, there are some regularly updated, average costs that can be useful when planning your paid social budgets. Keep in mind that this data is based on averages and it can vary widely based on many factors. Published June 2020, one analysis by WebFx showed that the average CPC (cost-per-click) was $0.97, the average CPM (cost-per-thousand-impressions) was $7.19, the average CPL (cost-per-like) was $1.07, and the average CPA (cost-per-download) was $5.47. 

Although we’ve given you some KPI based costs, it’s important to remember that your costs will vary widely based on a number of other factors, including your ad’s audience, your bid type, your objective, placement and even things like the industry you’re part of and seasonality.