How to estimate your Facebook Ad Costs
December 11, 2018
December 11, 2018
Hey everybody, this is Adam Arkfeld with ParaCore and in today’s video I’m gonna talk to you about estimating your audience size in Facebook, estimating your budget, and trying to determine how much you wanna spend, who much you can spend, and how you do some projections with the Facebook Audience Manager. A lot of times when we’re talking with a new client or a prospect that has never advertised in Facebook before we don’t have historical data to go on as far as trying to determine how big the audience is, how much we can spend, what their budget should be is a question that we hear a lot. So, in this video I’m gonna go over how we back into some projections even if we’ve never run a campaign for anybody to give them an idea of how much money they should spend, maybe how many conversions they can expect, and then what the total size of their market looks like, which is a little bit of a gray area, but we’ll get into that, okay?
So, because of the way that these screens are laid out, I’m gonna hide my screen for the duration of this video so that you can just see everything easily and alright. So the very first thing we’re gonna touch on is building an audience, okay? So this is the audience builder in Facebook and this is an audience that we use for outdoor/adventure marketing. It’s a very broad one to be quite honest, but just for discussion purposes. So what we have is, I’m not gonna go over too much detail in the Audience Builder itself. But what we have is when you put everything together it’s a potential reach of 3.4 million people. And that’s an important number.
A lot of times we might have a conversation with someone and they’re in a very specific geographic market and the audience might be 10,000 people or 30 or 40 and it’s just not a large audience. I mean, you’re gonna saturate that audience super fast and you’ll see that in just a minute. And then we have audiences that might be just way too big and 3.4 million is even really quite large. So typically we’re trying to bring that down closer to maybe a million, ya know 800,000 to a million, maybe between a million and two. Just kind of in that lower range of maybe around a million or ya know plus or minus. It’s not an exact science, depends on the budget but that’s just something to keep in mind.
But anyway, for discussion purposes and without getting into too much detail, this is a 3.4 million person audience, alright? So we basically build this out, you save it, and then you go to your Ads Manager. In your Ads Manager, so here we are we’re editing an ad set, we are going to put in a budget. And so the conversation is typically around like what should my budget be? And that’s just a very broad question. I mean, a lot of times I like to say, well how many leads do you wanna buy, or how much business can you handle? Because that kind of then determines what we’re gonna back into. But for discussion purposes and just to show how our estimations work, I’m gonna do a budget of $100 per day, which I put right here. And I also selected the audience that I just built. So you’ll see it right here, Travel and Tourism Page Admins.
On the right-hand side you see a potential reach of 3.4 million people. Facebook is telling you that this audience is fairly broad so while it’s green it’s not really, ya know, it’s probably too broad. But 3.4 million people and then here you have estimated daily results. So the reach being 3,300 to 11,000 people, just a huge range. And then this one’s optimized for landing page views and so that’s 42 to 260 landing page views. So, if someone, the idea is that when someone clicks the ad and then they actually view the landing page, it moves fast enough where they can view it, then that’s what a landing page view is as opposed to just clicking the ad and going back real fast or clicking something else on the end. These are actual landing page views.
Now, the reach and the estimated daily results are effected by your placements as well slightly. So you’ll see that if I hit Instagram here my reach went down on the lower end but then it went up on the higher end, which is ya know kind of strange. I don’t 100% understand why it gets more broad but that’s Facebook’s thing. And then the landing page views actually increase even though my budget didn’t increase. So that’s something to keep in mind. I did not increase my budget, I just added Instagram, and the minimum number of landing page views actually went from 42 to 59 even though the reach went down from 3,300 to 2,600. Play with these different options, you’ll see that the metrics change, right? So this went from 59 to 330 and then I removed this and it goes 49 to 300. So we typically don’t even run Audience Network. We run Instagram a lot. But just by playing with these your estimate of daily results will change slightly alright?
So what I’m gonna do is I’m gonna show you a calculator that we built that allows us to take the budget up here at the top, the budget that we put in, along with our potential reach and then our estimated daily results and back into what that looks like as far as market size go and what your budget should be. This is a tool that we’ve created that, in just a Google Drive document that allows you to estimate a number of those metrics. And so to kind of get the lay of the land, anything in blue here is something that I might change that’ll change other numbers. And so here on the Estimates side, this is primarily the stuff that Facebook is giving us except for the budget, which we’re putting in, low end, high end, low end, high end because there’s just huge ranges.
Over here we start calculating some numbers. So what’s my daily average landing page views? My monthly reach? The percentage of market that I’m reaching and then cost and then monthly conversions and then I can change the clickthrough rate and I can change the conversion rate and then it starts backing to some metrics and then we started building out an Opportunity section here which is how many days does it take to exhaust the market and I’ll get into all of that in a little bit more detail. But first of all what I wanna do is I wanna refine these numbers. I actually set these up before the video but as I was changing the numbers then they started to change. So let’s say we’re talking to a new client, they say hey, we wanna get an idea how many leads we’re gonna get for a budget of $100 a month with this audience page admins for tour and activity websites, travel and tourism websites.
So here I’m gonna just update these numbers. So the reach is 3,300,000. ‘Kay, so I changed that, and then the reach is 3,500 to 11,000, so I basically add that, and then 43 to 270, alright? So I’m just doing miner revisions to these because I changed the placements and I don’t know what they were before. And then my budget is $100, ‘kay? So all of these things I put in and I just pulled them over from the Ad Set Manager and these numbers that Facebook is projecting for us. Now, I’m gonna look over here on the right-hand side. So my average daily reach is essentially the two numbers divided by two. So it’s the average of 3,500 and 11,000 and then the same thing with landing page views. Average of these divided by two, ‘kay? Nothing major there, it’s in white so I don’t edit those, they’re formulas. Now the monthly reach is this number times 30.
I do realize that there’s some sort of number 30.44 or something that’s like the real number of days but I find that annoying. So I just do 30. I realize not every month has 30 days. And then the percentage of market is how much of our market are we gonna reach in a given month? So I take the reach and I divide it by the audience size. And so if our audience size is 3.3 million, our reach is 217,000, they’re all getting one impression, then the percentage of market is 6.59%. So it’s just a good number to know because if you’re reaching 90% of your market in one month maybe not the worst thing, you just know that they’re gonna have, frequency is just gonna be a lot higher. If you’re at a very low percentage then that actually gives you quite a bit of opportunity in the future.
This cost is simply $100 times 30 so this is your ad spend budget. So when people, ya know, when you start talking about alright, well what’s my ad spend budget? Then this is the number that you’re starting to calculate and trying to figure out. So if I were to change, now I can’t just change this to 200 and everything work because these numbers all change based on more budget but what you do is you know you would change it back here to $200 and then go back in here, update this number, and then update the reach numbers because the reach numbers are gonna change based on your budget. So don’t just change this number and then expecting the sheet to kind of calculate correctly. You wanna change this number, update the reach in the landing page views and then everything else will calculate correctly. And so then the next thing I like to do is I start to then back into some conversions and get a feel for what the performance is potentially gonna look like. So I’m doing a clickthrough of 1.5%, it’s in blue, so I can change this to whatever I want. So let’s do 1-1/4%.
Over the course of a month, that means that we’re looking at 2,719 clicks and that’s a formula of the clickthrough rate over the reach. So I’m basically just doing a formula there and then I’m auto-calculating the cost per click which is essentially just the number of clicks over the budget, and then I’m putting in a conversion rate. So a conversion rate is ideally based on some sort of historical data. We have conversion rates as low as one or 2% sometimes, depending on the type of traffic in the campaign. And then we get as high as maybe 25% on the high end if it’s a really, really high intent campaign where someone’s like in Google and they know what they’re looking for and we have the perfect solution. So the range can be quite dramatic. If I’m simply ya know just roughing it and I don’t know, I might use 8% or I might run some projections between six and 10% and then if it’s above, that’s a bonus and if it’s a below we’re not too far off the mark. But usually if you’re getting below 4%, I mean that’s kind of like could potentially be a danger zone or you’re just running like a very broad campaign.
So, anyway, so we have 8%. So then we try and calculate the number of conversions that might equal and so that’s 2,719 clicks times 8% which is 218 conversions. And your cost per conversion in this case would be $14. Alright, so then, so that’s a good number that you can start talking to your customers about. Now, one thing to keep in mind, especially when you’re running on Facebook is your conversion rate might not be that high and I mentioned that we do have campaigns that run at one and 2% conversion rates because Facebook, the users have no intent to purchase here. It’s like a billboard, you’re just putting it in front of them. In AdWords, they have a much higher intent. So your clickthrough rate, if you wanna be conservative, you might put this at let’s say .8, .8% and then you might put this at 2%. I think I destroyed my percentage here. There we go. Well I don’t know how to do that. Alright, we’re gonna put this at 1%. Wha, wha, wha. Got it, okay 1%. And then your conversion rate, let’s say you’re not real confident. It’s gonna be 1.5%. So, like those numbers on the surface don’t look that great but your cost per conversion being at $92, depending on the service that you’re offering or what you’re trying to accomplish, 92 might not be bad. I mean, for ParaCore if we’re getting a cost per conversion of $92, that’s not the worst thing in the world if they’re a qualified lead. That’s actually quite good if they’re a qualified lead. But if you’re selling a product for $100, probably not a good cost per conversion.
So, be very, very, very conservative on these numbers, especially if you don’t have historical data to work through and then you can get a pretty good feel for what your cost per conversion is gonna look like. And then over here we start to look at opportunity. Days to exhaust market 455. Cost for full market 45,000. So I like to kinda say, well if they wanted to get through the entire market in one month, their ad budget might be $45,000 per month. Now, so they might get through that in one month and the next month, if an audience of the exact same size is going to then have another $45,000 budget and it would be like their second impression. I mean that’s just like kind of theoretically. So that’s how we calculate opportunity cost in Facebook in the audience size.
So putting together just a budget estimation tool like this is really helpful. You can just copy this exact thing. I think I showed you all the formulas in here as I was walking through it. But really what you’re doing is you’re creating the audience first in this first section. So build the audience, get the potential reach, then go to the Ad Set Manager and start selecting placements and budgets and then plug them into a tool that’s gonna allow you to create some projections and as you do this more your projections are gonna become more accurate, you’re gonna be able to project for prospects just a lot better. I mean the first couple might be a little bit off base or just if you’re taking on a client and you’re not doing these projections, do these projections internally, see how they stack up or maybe even do these projections on like a separate ad account and see how they’re stacking up against your performance. If you’re already running an account to say hey if I do something like this then here are the results I’m actually seeing, where’s the discrepancy with Facebook. Because you’re really basing everything off of Facebook’s low and high in reach and low and high in landing page views. And if they’re giving your bogus estimates on these then all these other things are gonna be off and so you might wanna reconcile those in the future.
Alright, that’s it for today. Thanks for watching the video. My name’s Adam, owner of ParaCore. We do pay-per-click marketing. If you liked the video please like, subscribe, comment. Let me know if you have any questions and I appreciate you watching. Thanks, and we’ll see you in the next video.
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