One of the most common questions when launching a new Facebook campaign is: how much money should I allocate? The reason why the budget is significant is that it plays a significant role in your campaign’s results. In this tutorial, we will go through the type of budgets and the ways to calculate and set the right budget for your campaigns.
What is the budget and what is the type of budget Facebook offers
Budget is the amount of money you are willing to spend to show your ads to your target audience over the course of a day (daily budget) or the course of a predetermined period (lifetime budget). Depending on your goal you may consider using a daily or a lifetime budget. This (budget) is different than the amount that you spend on Facebook to show your Ads, which is called Ad spend. The budget can be set on either one of these levels:
1. The ad set level: This is the most common and by-default setting that has been around since the beginning of Facebook Ads. When setting the budget on the ad set level, Facebook will try to spend the whole budget even though the conversions vary across ad sets. What this means for you as an advertiser is that you need to take the time to analyse and see which one is the best/underperforming ad set and then manually increase or decrease that ad set’s budget.
2. The campaign level: This is a new option offered by Facebook. With Campaign Budget Optimisation you set one budget per campaign and then Facebook’s algorithm will make sure that the best-performing ad set will get the higher budget while decreasing the budget for the under-performing one. When setting up this type of budget, you need to have in mind the number of ad sets in your campaign.
How do I decide what my budget should be?
Before explaining how to set up your budget, you should have in mind that Facebook requires that advertisers meet a minimum budget to help deliver your ad consistently. Depending on what you choose to get charged for you get the following options:
- If you decide to get charged for impressions, then the minimum budget required is 1$/day.
- If you choose to get charged for clicks, video views, etc. then the minimum budget is set at 5$/day.
- If you choose to get charged for events such as offers, app installs etc. then the minimum required budget is 40$/day.
The main reason why there is such a disparity in minimum budgets across charging methods is that the most common (frequent) results (such as impressions and clicks) help Facebook gather data sooner and enable a stable ad delivery as opposed to events/conversions that rarely occur (app installs, purchases etc.).
So, the above means that:
For campaigns charged based on impressions, your minimum monthly budget should be 1$ * 30 (days) = 30$
For campaigns charged based on clicks, your minimum monthly budget should be 5$ * 30 (days) = 150$
For campaigns charged based on conversions, your minimum monthly budget should be 40$ * 30 (days) = 1200$
Setting up a Facebook campaign budget based on previous data
If you have been running ads for quite some time and you have been able to get some conversions (purchases, sign-ups etc.) you can use these costs to guide you. Previous data can help you set a more realistic expectation.
- Head over to your Ads Manager.
- At the campaign tab, customise your columns to include: costs per website content views, costs per website add to basket, and cost per website purchase along with their respective numbers (how many add-to-baskets etc.).
In the screenshot, you see that you were able to get 4,176 conversions (purchases) with an average of 0,65 euros per purchase. This helps you figure out how much a conversion is worth for you (average CPA) and how many conversions you had. In reality, this is a bit more complex since the product price may vary, but this can be used as a good baseline.
Going back to the example, if you want to set up the budget for the next month what you need to do is multiply your CPA by the number of conversions which results in 2,714. You need to factor in the profit made to fully evaluate if this CPA makes sense or you need to aim a bit lower, or you have room to go higher.
Setting up a Facebook campaign budget when you are starting out and you lack previous data
When you are starting out it is challenging to set up a budget without having any data to rely on. In this case, you should:
- Use those as mentioned above daily minimum budgets.
- Set your price for how much a click or a conversion (the desired action you want your visitor to perform on your website) is worth to you. By doing so, you can monitor and adjust your budget as you see fit. OR
- Set up a Facebook campaign for 2-3 days with a 10$/day and auto-bid (do have in mind Facebook’s minimum budget requirements). This will help you get the valuable data and insights you need to set the right budget for your campaigns confidently.
Making the most out of your budget
Once you have set up your budget, you need to ensure that you are using it wisely. Here are some things you could do:
- Use the right bidding strategy. Test and see which bidding strategy gives you the best results. You may want to start with the lowest cost bid (auto bid), and as you gain more data, you consider other bidding options to have more control over your budget.
- Ensure that your landing page is appropriately set up, you are using the right placement and targeting the right audience. You shouldn’t waste money on landing pages with low “after-click” experience.
- Make sure that you are using custom audiences with high ROI and have created LookAlikes based on them.