Facebook Ad Budget: The Rule of One
The ideal Facebook ad budget should be based on three things: a percentage of your overall digital ad spend, your audience size, and the goal of your ad campaigns.
The most common question about Facebook ads that we hear at 9 Clouds is: “How much should I spend on Facebook?”
To help businesses find the ideal Facebook ad budget, we created the Facebook Rule of One based on our experience working with car dealers and automotive marketers.
Here’s the quick version.
How Much Should You Spend on Facebook Ads?
The Facebook Rule of One is based on three principles:
- 1/3rd of your entire digital ad budget should be spent on Facebook.
- $1 per day for every 1,000 people in your audience is an ideal starting budget.
- 1 ad campaign should showcase your products to in-market buyers.
Why Facebook Ads Matter
At 9 Clouds, we talk a lot about Facebook ads and how to create the ideal Facebook ad budget. We have an entire Facebook video course, several eBooks, and dozens of blog posts explaining how to best use these ads.
It’s for good reason. One out of every five minutes on a mobile phone is spent on Facebook and Instagram.
Since the average American spends five hours a day on their cell phone, that means they spend an entire hour a day on Facebook.
As the image below shows, time on Facebook vastly exceeds time spent on other popular sites and apps. The circles represent the amount of time spent on each network — so you can see that Facebook and Instagram have more attention than all those popular circles combined!
The Facebook Rule of One
The Facebook Rule of One was created based on our experience creating Facebook ad budgets and marketing for auto dealers on Facebook.
After creating campaigns for dozens of stores across the country and spending hundreds of thousands of dollars on ads, we discovered a few key elements for a successful Facebook ad budget.
Here are the three main tenets of our Facebook Rule of One.
1/3rd of Digital Ad Budget Spent on Facebook Ads
Most auto dealers spend large sums on digital ads, especially pay-per-click ads like Google AdWords.
However, we’ve found Facebook ads to cost about 1/4th to 1/3rd the amount of pay-per-click ads. Admittedly, Facebook ads are typically served to customers who will not buy as quickly, or “high-funnel leads.”
Fortunately, Facebook’s Offline Events feature allows us to measure the conversion from these leads. This data has shown that spending 1/3rd of an overall digital ad budget on Facebook ads generates more leads who convert into sales than spending it all on pay-per-click alone.
$1 per Day for Every 1,000 People in an Audience
When an audience is created on Facebook, it generates an estimate of the audience size.
If you market to everyone in a city, you will target hundreds of thousands of people. If you filter to only people in that city who are interested in buying a Toyota in the next three months, your audience will shrink to tens of thousands of people or less.
The more targeted an audience, the cheaper it is to reach them.
That’s because you have fewer wasted clicks. If you market to everyone in a city, people who aren’t actually interested in buying your product might click the ad. But the more specific you make your audience, the more likely you’ll target the customers you really want.
Within a relevant audience, you want to reach customers more than once. This is known as frequency (how many times a single person sees an ad).
Across our ad accounts, we’ve found that Facebook ad budgets that spend at least $1 per day for every 1,000 people usually reach around 80% of their audience.
For example, if you have an audience of 10,000 people and a Facebook ad budget of $10 per day, around 8,000 of those 10,000 people will see your ad at least once. This is a great starting point. As you increase your ad budget on Facebook, your frequency will increase.
The point of diminishing return is a frequency of three. What does that mean?
Showing someone an ad up to three times increases the likelihood that they’ll click on it at the same or lower cost. After a frequency of three, your clicks will increase, but they will become more expensive.
Across platforms, aiming for a frequency of three is a great way to increase familiarity with your customers and make sure the right people see and engage with your ad.
Start with $1 per day for every 1,000 people in your audience. Then, you will be able to adjust your budget based on the results.
1 Campaign Showcasing Products to In-market Customers
Whether car buyers or clothes buyers, customers want to see all the colors, trims, sizes, designs, etc. that you have at your store. Product ads, especially collection and retargeting ads, ensure that interested customers are shown ads that lead to sales.
At a minimum, we recommend running one campaign that shows off your products. In fact, if you have to choose only one campaign, I would start here.
Showing your products to people who have visited your site (retargeting) will reach the most interested customers. Using a collection ad targeted to people whose behaviors match your customers will bring new people to your store.
In concert with top-of-the-funnel brand and image ads, product ads will help you fill your customer pipeline.
The final decision to purchase is about a specific question: Do you have the kind of product I want? Your product ad answers that question and will show the highest conversion in your Offline Events data.
Own Facebook Before the Competition Does
The average American spends five hours a day on their phone, and over 20% of that time — over an hour a day — is spent on Facebook and Instagram. This trend is only increasing.
Most businesses do not spend enough on Facebook. Where else do your customers give an hour of their attention each day? The lack of competition means that Facebook ads are currently underpriced for their value. Your Facebook ad budget should be higher than your competitors’.
Follow the Facebook Rule of One to budget correctly on Facebook. Then, make sure you are getting those leads off of Facebook and into your customer relationship management (CRM) system.
The cost of ads will inevitably increase as businesses realize the opportunity to reach the right customers at the right time on Facebook. Take advantage of the price arbitrage now to get as many leads and customers as possible at the current cost before it rises.
Get Started with Facebook Ads
Plan your Facebook ad strategy with our free Facebook video course. Learn to set up a business account, or jump ahead to learn advanced tactics to get the most from your Facebook ads.