What is Facebook Ads and Its Benefits

Learn what Facebook Ads is and its benefits. We’ll cover Facebook ads targeting, costs, analytics, optimization, and a case study to top it all.

What is Facebook Ads?

Facebook ads is advertising on Facebook, and it’s broader audience network and its additional applications like Whatsapp and Instagram.

Facebook’s complete network includes 2.2 billion daily active users and 2.8 billion monthly active users. (Facebook, Audience Network, Instagram, Messenger). In theory, it is possible to reach 37% of the world population with Facebook every month. Its user base offers companies almost unlimited possibilities to target and to discover their core audiences.

Facebook marketing provides a comprehensive and easy way to reach different customers at varying stages of a sales funnel.

Facebook ads is a cost-effective and efficient tool for digital marketing, which increases a companies profitability and visibility online.

Advertising on Facebook has been on the rise, and companies that utilize it will gain positive and long-term results.

Facebook Ads Targeting

The most significant benefit of Facebook advertising is targeting. With Facebook, you can reach customers that are the most profitable for you.

The better understanding a company has about its target group, the better the data can be used to create more useful campaigns.

Due to the nature of targeting, you will find an audience you might have never discovered otherwise.

Targeting is done by choosing and combining interests, ages, locations, languages, or by creating custom audiences from various data sources.

With data-based custom audiences, you can create audiences that use data from your website and events from past advertising.

Examples of possible custom audiences:

  • Purchases, Add-to-Carts, and View Content
  • Leads
  • Data from previous Facebook posts
  • Website traffic
  • Video Views (For example, 95% who watched a video)

With these example custom events, we can create powerful retargeting advertising, which is an efficient way to increase the return on ad spend (ROAS).

At the beginning of the campaigns, interest-based targeting is more useful as a lack of data hasn’t enabled the use of custom audiences yet.

Look-A-Like Audiences:

 

Facebook Ads Look-A-Like Audience Creation

The core targeting method in Facebook ads is look-a-like audiences. The look-a-like audiences are a way of targeting, enabled by the use of Pixel on the website.

Look-a-like audiences match the audience from the data given in a single country. The size of a look-a-like audience is measured 1-10% of a countries population.

The use of a look-a-like audience enables Facebook to show ads to a similar but larger group that are likely to convert.

For example, you could produce a 1% look-a-like audience from purchase events from a country where the data has been collected.

The use of look-a-like audiences also enables the scalability of your campaigns with a higher chance of results.

It’s regularly good to remember that even if there would be enough data, there are no guarantees that the targeting will increase results or conversions. You can always improve targeting.

Example of testing targeting options:

  • Use the same ads in different ad groups to measure the effectiveness of targeting alone.
  • Utilize several targeting options between ad groups, and have at least three or more of ad groups to test.

Look-a-like audiences can be further optimized with other targeting options like ages, genders, local areas, and languages.

Look-a-like audiences can be combined to create Super look-a-like audiences for even better targeting. It involves merging the best performing audiences into one and allowing a more extensive scaling of the campaigns.

Facebook Ads Cost and Budgeting

Facebook advertising is paid with either pay-per-click or per 1000 impression (CPM – Cost per Mille).

Budgets are set daily, which means that Facebook will try to use the given daily budget. In some cases, Facebook will overspend the daily budget, but it will average it out during a month.

Campaign Budget Optimization (CBO Campaign) is an option, where Facebook will optimize, and divide the usage of a budget within a campaign to gain the best results for the campaign.

Campaign Budget Optimization divides budgets between different ad groups and ads to favor best-performing ones.

Five important measures that will determine the Facebook ads cost in its online auction:

1. Time

It matters to the price, whether which month, day and time it is.

2. Bidding strategy

  • In the Lowest Cost-strategy, Facebook will offer the lowest bid amount to gain campaign results.
  • In the Lowest Cost with Cap-strategy, we define the max bid that Facebook can use to gain campaign results. This strategy might hinder the visibility of the campaign if set too low.
  • Target Cost-strategy is available only for conversion-based campaigns. With Target Cost, you will tell Facebook how much do you want to spend per conversion. Using target cost enables testing profitability early on if we know exactly how much we can spend per conversion.

When testing out ads, try different bidding strategies and see their effects on the advertising results.

3. Placements

Placements influence the cost as well. For example, there can be differences when advertising between Instagram Story or Facebook Mobile feed.

4. Relevancy Metrics

Through the use of relevancy metrics, Facebook rates the quality of the ads. 

  • Engagement Ranking
    • How well the ad is being clicked, liked, shared, etc. When users hide the ads or the ad isn’t liked enough, it will lower the engagement ranking of the given ad.
  • Quality Ranking
    • It measures how well the ads match their target audience.
  • Conversion Ranking
    • It measures how well the ad is converting to its goal. A high conversion ranking signifies that the ads are converting well in its target audience.

The lower the score on a scale of 1-10 will increase the cost of Facebook advertising.

5. Target Audiences

Targeting a highly competitive audience will be more expensive than targeting a less competitive one.

Other Costs of Facebook Ads:

Larger budgets and the scaling of campaigns will require more work than smaller campaigns. Always include the cost of work.

The creation of ads takes time, and its cost should be included as well.

For example, simple image ads could be cheaper to produce than video ads. When testing several ad formats, compare the production cost with their results to see if cheaper options could produce more with less.

The quality of advertising and its results are born through tracking its success. Never neglect your campaigns for too long.

FB and Instagram ads types:

Facebook and its network offer many ad formats for companies to achieve their various goals. Companies can create ads that reflect their brand the best.

Types of ads:

  • Image Ads
  • Carousel Ads
  • Collection Ads
  • Video Ads
  • Stories Ads
  • Shop Catalog Ads

Read through Facebook Ad Policies before starting to avoid suspension of ad accounts, and in the worst case, Facebook business manager account.

Facebook Ads Analytics: How to track and optimize?

The effectiveness and results of Facebook marketing can be tracked and optimized using various metrics provided by Facebook Ad Manager.

To analyze your ad performance properly, you will need a Facebook pixel installed on your website. Learn more about it here.

The metrics enable us to detect, which campaigns and ads are converting poorly. Increased data shows us what works and what doesn’t.

The goal is to keep our campaigns and ads performing well without letting the price of advertising escape too high.

Facebook Ads Pixel Analytics

What metrics should you measure in Facebook Ad Manager?

CPM

Track the trend of CPM. A high CPM cost might signify that the ads are not performing properly. 

CTR (Click-Through-Rate) and Clicks

Make sure your CTR is at least 2% and upwards. To receive a higher CTR, test out different titles, content, and copy. 

Conversion Rate

Track conversion rates if your campaign is conversion based. A good conversion rate has more to do with the offering itself. An expensive and complicated service will have a harder time achieving higher conversion rates comparing it to a cheaper, and simple product. 

Engagement Rate

Do your ads bring enough engagement in users? A high engagement rate lowers the cost of advertising and tells us what kind of ads our target audience wants to see.

Optimizing engagement rates will always create better ads.

Sometimes it’s advisable to test out campaigns with engagement results in mind and only then turn those campaigns into conversion-based.

Cost Per Results

CPR tracks cost per result, which is chosen while establishing the campaign. CPR could be custom conversions, clicks, forms, etc.

For example, a purchased product produces a profit of $30, and the cost per result is $35 means we are losing 5$ per purchase on advertising in the short-term.

It’s important to note that a single purchase conversion that produces a loss instantly could turn into a profitable customer in the long-term. It all depends on the lifetime value of the customer.

Tracking website data and traffic

Social Overview Google Analytics Facebook

Use Google Analytics to track the traffic from ads. It’s important to understand how the traffic is behaving on the website itself.

Any obstacles for converting to purchases or lead generation should be noticed with the use of analytics. Obstacles like page load speeds affect conversions.

Creating profitable advertising is hard when users can’t properly convert on the website.

Keep an eye out for high bounce rates that might indicate that content on the website doesn’t match the ad.

Track significant events on the website even if they aren’t as goals on Facebook ad campaigns. Tracking events early on during the campaigns will display if a campaign is producing different results as thought before. The data could be used for other campaigns in the future.

Long-term testing and tracking results, a company stays ahead on how well the Facebook ads have been.

Read more about the use of web analytics.

How To Test Facebook Ads Easily

  • Create a conversion-based campaign.
  • Produce three ad groups with different targeting options:
    • Interest #1
    • Interest #2
    • Look-a-like from purchase events
  • Test 3 similar ads in every ad group.
  • Go down the sales funnel (Start from content view and end up in purchase)
  • Keep creating better look-a-like audiences from parts of the sales funnel, when data becomes available.
  • Keep the ads fresh. Using the same ads eventually will turn negative results as they have been seen many times. Even the best performing ads will suffer.

Simple Facebook Ads Test

Keep achieving better and better targeting for the ads with increased data.

Data helps us increase the profitability and efficiency of the advertising, although advertising without it is still possible. Given time, results will get better.

Understand how values of different events develop and measure them early on and optimize everything according to the strategy.

The long-term impact of advertising should also be included in the calculation of results. For example, when a company has calculated its CLV (Customer Lifetime Value) correctly, it can produce an accurate return-on-ad-spend.

How Facebook Ads Affect Additional Marketing Channels in Use?

Facebook advertising has a positive impact on brand recognition and especially increases web presence through increased results from search engine optimization and search engine marketing.

An example, for SEO and SEM, a potential client has seen your ad through Instagram and later decides to search it on Google. Likely with queries, you’re already ranking or advertising on.

Sometimes you need more results and visibility than cost-effective search engine marketing could provide. Facebook marketing will provide more visibility if your product category isn’t as searched as you’ve hoped.

Cold traffic has to be warmed through increasing marketing attribution across the funnel. The more your brand is seen, the more likely customers are to convert in time.

With Facebook ads, we can create complete digital marketing experiences that bring cold traffic into customers through retargeting at the right.

Facebook marketing, in general, is a great tool to be used for increasing online activity in any business.

Read more about growth marketing.

Virality and The Network Effect:

Network Effect and Virality

Due to its nature as a social network, sponsored links (As they’re seen in ads) have a rare but real chance of going viral. When creating compelling advertising, virality and sharability should be taken into consideration.

When an ad obtains shares that are not paid, it will lower the overall cost of clicks and other results.

Something to note:

The expected results of a post that has gone viral will have divergent data compared to the paid campaign itself.

Data must be separated to measure precisely how virality has influenced the results. Don’t optimize ad campaigns with data from viral posts unless they are proven valuable. Don’t optimize ad campaigns with data from viral posts unless they are proven valuable.

Facebook Ads Campaign Objectives:

Campaign objectives are distributed into three categories, awareness, consideration, and conversion.

Campaign objectives guide Facebook to optimize its targeting to those who are likely to finish an objective (conversion, click, or engagement)

In many bad campaigns, the campaign objective has not set the way it was intended. For example, an online store wanted increased sales but received mostly traffic, because the objective was set to – traffic.

Awareness:

  • Increase brand recognition
  • Reach – Users who have seen the ad, not the same as an impression, which includes multiple impressions from one user.

Consideration:

  • Traffic (Clicks)
  • App Downloads
  • Video Views
  • Lead Generation
  • Post Engagement
  • Page Likes
  • Event Responses
  • Messages

Conversions:

  • Conversions (Through Pixel)
  • Catalog Sales
  • Store Traffic (Facebook Store)

Facebook Ads Case Study: Online Store Conversions Optimization

Before we came in, our client had only done Facebook marketing on a small scale.

As we started auditing the results of past Facebook ads, we saw that unhappy results were based on the campaign objectives.

The budget was split (80/20) between page like and traffic campaigns. Analyzing the data, we saw that it didn’t bring the results the client wanted.

The client desired to have increased sales with the ads. The results weren’t measured properly, and the campaign was left to its demise.

The only measured metrics were clicks and likes, and it pointed to reduced sales results within the campaign.

The FB-page likes didn’t convert to sales, and only 10% of them visited the website.

After the audit, we created new campaigns to reflect the client’s needs.

In our case, there was plenty of data collected prior, and we were able to produce look-a-like audiences from purchase, and other sales funnel events from day one.

We selected the most engaging ads from previous campaigns to the new tests, and we created a conversion-based campaign with a purchase conversion selected.

To have more variability, we additionally created more look-a-like audiences from the sales funnel (add to cart, view content) and tested them against the purchase one.

When we reached profitability in the campaign setup, we started slowly scaling up the spend.

In the first month, we gained 1400% more results with a 9.41 ROAS. During the second month, we improved the results by 78.5%, and ROAS increased to 15.03.

In four months, we produced a new profitable sales channel for the online store in which our client can actively advertise its products.

Engaio Digital agency helps companies and websites to gain more with Facebook ads:

  • We develop a strategy to start the process of advertising.
  • We improve and develop existing Facebook marketing.
  • We help with scaling and increasing profitability. 
  • We help the company to learn more about Facebook advertising.