In this guide, we’re going to address all your burning questions, including:

• How much does it cost to advertise on Facebook?
• How the Facebook ads bidding auction works?
• How to set up your Facebook ads budgets
• What’s the difference between Daily vs. Lifetime budgets
• What’s the difference between Lowest Cost Bid vs. Target Cost Bid?
• How to optimize your Facebook ads budgets

We’ll start with a quick overview of Facebook advertising costs and will then proceed to learn how exactly to set up your Facebook ads budget.

How Much Does It Cost to Advertise on Facebook?

Many Facebook advertisers struggle with measuring the campaign ROI, that’s because they’re unsure what’s the cost-per-result they should be paying.

Here’s the real answer to the question “What’s the average advertising cost on Facebook?” : It depends on a dozen of factors.

For example, Facebook ad costs may vary depending on the countries you’re targeting:

Moreover, the Facebook advertising costs will also be affected by your offer, ad design, and placement.

As a general rule, the cost-per-click on Facebook stays around $1. However, if you’re selling in a competitive market or to high-value customers, you might also have to pay $5 per click. As we said before – it really depends.

Here you’ll find the complete overview of the latest Facebook ad cost benchmarks.

How the Facebook Ads Bidding Works?

When setting up your Facebook ad campaign, you’ll be presented with lots of different options and tools.

While it might seem a little daunting at first, don’t worry – it’s actually logical and straightforward.

Facebook’s ad delivery is driven by two primary goals:

• Creating value for advertisers by helping them reach and get results from people in their target audiences
• Providing positive, relevant experiences for people using Facebook, Instagram or Audience Network

To deliver on these goals, Facebook has set up an ad bidding auction.

The Facebook bidding auction

Every time you publish a new Facebook ads campaign, you’re joining a massive, worldwide auction. While Facebook will try to satisfy every advertiser, even with 2.2 Billion monthly users, the space for advertisements is limited.

Three factors contribute to your ad delivery:

• Your Facebook campaign’s bid –  The more you’re willing to pay, the more Facebook will deliver your ads. If you’re going to use automatic bids, there’s a good chance you’ll be just fine.
• Your Relevance score – Your ads’ relevance score will directly affect the cost of your ad results and how Facebook prioritizes their delivery in the bidding auction.
• Your estimated action rates –  Facebook determines your “estimated action rates” (which are precisely what they sound like) by many different factors.

When an auction occurs, Facebook will standardize all three factors above to account for different optimization goals, then combine them into a total value.

The ad with the highest total value wins and gets shown to the target audience.

How Does Facebook Charge You?

What if you place the highest bid and win the Facebook ad auction. How will you be charged?

For example, let’s say you made a bid of $30 for 1,000 ad impressions (That’s Cost Per Mille bidding, and we’ll explore it in-depth soon). Are you going to be charged $30 for every 1k impressions, even if you could surpass your competition at a slightly lower budget?

The good thing about Facebook advertising is that there’s no danger of overbidding. This means two things:

• You’ll often be charged for less than your initial bid
• Even if you bid a lot more than needed for winning the auction, Facebook will only charge you for the amount it takes to beat the competition.

However, always try to bid the maximum amount that you think the results might be worth. This way, you’ll end up with a positive Facebook campaign ROI.

Facebook Ads Bidding Options

Facebook has many different bidding options that are each helpful for achieving some particular goals.
Up next, you can find a quick overview of all the different bidding options.

Lowest Cost Bid vs. Target Cost Bid (Former: Manual vs. Automatic Bidding)

Recently Facebook made some big changes to the bidding strategies it offers introducing Lowest Cost (with or without a cap) and Target Cost.

Here’s how Facebook explains it:

Usually, in the “Optimization & Delivery” section (during the Ad creation process), you had a choice to select between Automatic Bidding or Manual Bidding.

Now, what you see on your screen looks like this:

Don’t’ get scared. Even if the change seems really big, actually it’s more a question of changing words.

To make it simple, we can say that:

• Lowest Cost bidding is the new name of Automatic Bidding
• Target Cost bidding is similar to the old Manual Average Bid and
• Set a bid cap is the former Manual Maximum Bid option.

You can use Target Cost Bid for:

App Installs, Lead Generation, Conversions, Catalog Sales, Store Visits

You can use Lowest cost Bid for:

Brand Awareness, Reach, Traffic, Post Engagement, Page Likes, Event Responses, App Installs, Video View, Lead Generation, Messages, Conversions, Catalog Sales, Store Visits.

Flagging the Bid Cap option let you set an upper limit on how much Facebook can bid for any individual result.

If your goal is to get the most people at the lowest cost, you should use the Lowest Cost Bidding.  If you choose to try the Target cost bidding strategy, then be bold! Always bid the maximum amount that you think the results might be worth. If your Target Cost Bid or your Bid Cap is too low, you may not spend your full budget and limit (or even stop) the delivery of your Ad.

To Cap or not to Cap? And what is Pacing?

Setting a bid cap can save your ad set from overspending for an event but, at the same time, if you set your cap too low Facebook may struggle to spend your budget, and this will negatively impact the distribution of your ad.
If your primary goal is to get as many results for your full budget as possible, you should not use a bid cap. If your primary goal is keeping your cost per result below a certain amount, go for the bid cap strategy.

To start setting your bid cap use an average cost per result from prior campaigns and a daily budget that is at least five times higher than your bid cap. This is because Facebook needs at least 50 events (the learning phase) within a week to properly optimize.

If you don’t set a Bid Cap, Facebook will use the Pacing method to optimize your bid for the best results.

Pacing gives Facebook the flexibility to get you the best available results for your goals.

If you choose the lowest cost bid strategy Facebook will raise or lower your bid on an auction-by-auction basis; it’s called “discount pacing.”
If you pick the target cost bid strategy, Facebook’s pacing will consist in deciding which auctions to enter and which to skip; this is the “probabilistic pacing.”

Since you’re trying to get the lowest cost per optimization event possible, Discount pacing lowers your bid when appropriate to help you get the least expensive results available. This is balanced against ensuring Facebook spends your full budget by the end of your ad set’s lifetime.
Here’s a simplified chart showing how this works with a $10 bid cap:

Since the target cost bid strategy is about stability rather than lower costs, Probabilistic pacing enters your ad set into only a selection of auctions based on the likely cost of their optimization event. Here’s a simplified chart showing how this works with a $10 cost target:

• In practice, budget pacing and bid pacing are one process. Facebook adjusts your bid or which auctions it enters based on how much budget and time are left for your ad set.
• Similarly, Facebook may increase how much budget it spends if there’s an opportunity to get many optimization events with costs aligned with your bid strategy.
• Facebook may also decrease how much budget it spends if there are few available optimization events with costs aligned with your bid strategy. 

Facebook Ads Bidding Optimization Hacks

Now that you’re familiar with all the different Facebook bidding methods, let’s take a look at the top three optimization hacks.

Additional reading:

The Complete Resource to Understanding Facebook Ads Cost – 2018 Benchmarks!

Facebook Ads Bidding 101: Everything You Need to Know (…Supported by Data) 2017 EDITION

The Beginner’s Guide to Facebook Advertising: Campaigns and Bidding