What is the Facebook Ad Estimator?

Creating and managing your advertising strategies for Facebook can be challenging with the overwhelming need to align your business goals with your costs, strategy and results. Despite the performance data provided by Facebook, you may have difficulties translating the information into the insight necessary for you to reach your goals due to the internal calculations. This is the reason the Facebook ad budget calculator was created.

If your strategy involves creating advertising funnels with a high-performance level, the calculator is especially useful. No matter which type of strategy you prefer, you can calculate Facebook ad budget for all of your campaigns, forecast hypotheses, review your costs for each result and find opportunities for funnel optimization.

What does the Facebook Ad Calculator Calculate?

• Cost per click, cost per content, cost per page, cost per purchase, cost per cart
• Revenue per page, revenue per purchase, revenue per click, revenue per cart
• Break-even points
• Return on investment and ad spend
• Ad funnel conversion ratios and performance issues

What Does the Facebook Ad Budget Calculator Forecast?

• Total campaign cost, revenue per purchase and cost per click
• Spending required to earn a specific amount
• Number of link clicks, content views, page views and adds to cart
• Number of additional sales upon the improvement of your conversion funnel
• Return on investment and ad spend
• How your campaign profitability is impacted by external costs
• Number of additional sales with increased ad spend
• Cost per purchase, add to cart, content view and page view

The forecasting section is an excellent option to determine the potential of your campaign. You can use hypothetical numbers to forecast your expected results if you change your current strategy. You can also figure out how much spending is necessary to reach your goal and which improvements will result in the largest revenue increase. Testing a few different scenarios is easy.

A good example is if you are considering hiring a freelancer to improve your ads. Additional costs for your campaign can be added in the section titled Other Campaign Costs. Your forecasted results can be moderated to reflect an improved performance. The comparison offers you insight regarding how your costs may be offset through improved performance.

You can make changes to how much you spend per month and decrease or increase your revenue per purchase. This enables you to find opportunities for improving the structure of your business. Keep in mind if your campaign results are modified to the Facebook averages, you will be looking at estimates. Using as much real data as possible will make your forecasts more realistic.

Calculating Facebook Costs

When you open the Google sheet template, you can input the advertising results for your business to view a detailed cost breakdown. You can view the cost for every event in addition to how much revenue was generated per action. You can then determine when you start to make money. On the right side, you will see break-even calculations to help you understand your performance and costs. For example:

(Image Credit: Newsfeed.org)

You will then have a better idea regarding the actions you need to take for improved results. Improving your conversion ratio might be more important than decreasing your cost per click because cheaper clicks generally mean your audience is less qualified. The detailed breakdown is designed to help you track your big picture.

Funnel Optimization

The Facebook advertising calculator also has a section for funnel results. If you build ads similar to a funnel, this section is important. Your Facebook campaign must be reviewed as a connected events series. A link is clicked by potential customers to see your page, look at your content, add to their carts and hopefully make a purchase. Purchases are only made by small percentages of potential customers.

A lot of potential customers do not complete this journey. You can regularly analyze and optimize your funnel to increase sales by helping customers reach the end of your funnel. You can use the forecasting section to determine where your energy and time need to be focused. A good example is if your sales are low but you have a lot of consumers adding products to their carts.

This is an indication you need to improve your checkout process. If your payment process is not secure or your shipping policies are not well defined, your customers can become scared and leave your site. If you have a lot of abandoned carts, consider creating a campaign for retargeting.

Establishing a Facebook Budget

Your bid determines the amount you are willing to pay for a specific outcome. Your bidding strategy determines how your budget is spent by Facebook. The two types of budgets are a daily budget and a lifetime budget.

Daily Budget

Your daily budget is the maximum you are willing to spend per day on a specific campaign. If you are using a varied AOV to advertise your products, your campaigns should be set up with different budgets. You can then use SKU categories with similar AOVs or individual SKUs to separate your campaigns.

Lifetime Budget

Your lifetime budget enables you to determine the maximum you will spend throughout the life of your campaign. The amount you select will be spread evenly by Facebook for the time period selected. There is one variable you should consider. If the Facebook algorithm determines the opportunity is better for a specific day, more of your budget can be spent. Your lifetime budget will not be exceeded because less will be spent on other days.

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Bidding Strategies

Controlling the cost per optimization is achieved with your bidding strategy. This is similar to controlling how much you spend with your budget. There are four different types of bidding strategies. These are:

• Lowest cost
• Cost cap
• Bid cap
• Target cost

Lowest Cost Strategy

The only type of automatic bid is the lowest cost strategy. This means you do not have control regarding the way your budget is spent by Facebook. You simply tell Facebook to acquire the lowest result possible using the creative ad audience of your choice. In many instances, businesses with a brand new pixel or absolutely no historical data are interested in learning quickly without the need to maintain profitability. For this scenario, this is your best option.

(Image Credit: Medium)

Cost Cap Strategy

The cost cap strategy maximizes your cost-efficiency by attempting to get the best results below or at the CPA you desire. Regardless of your target cap cost, your budget will not be spent by Facebook unless customers are located at your targeted CPA. The cost cap strategy is often recommended over any of the others.

Bid Cap Strategy

If you intend to control your spending based on your performance goals, the bid cap strategy is a good option due to the intelligent algorithm used by Facebook. If the algorithm does not believe the customer you want to target can be acquired, your money will not be spent. Your bid caps should be set for 30 percent more than your targeted CPA.

Target Cost Strategy

This strategy lets Facebook know you want your average cost within a range of 10 percent of the amount entered. The target cost strategy establishes both a floor and ceiling for the targeted CPA you want to achieve. If your goal is acquiring a customer for $20, the amount spent will be within a 10 percent range.

If the amount is anything else, you will not be able to acquire a customer below or above your targeted cost. This strategy is recommended if your goal is achieving stable results while increasing your spend during scaling. Your targeted cost should be set for your targeted CPA until delivery is lost. At this point, you should decrease gradually.

Other Considerations

Bid Amount:

The advertiser is not automatically given the highest bid victory by Facebook. Facebook does this deliberately to ensure a high-quality experience is maintained for your feed.

Estimated Action Rates: 

Facebook uses estimated action rates to determine the likelihood of a consumer acting on your ad. This is an assumption encompassing the actions of the consumer you are targeting during the past, post-link clicks and historical ad performance. The ad objectives for your campaign including link clicks, conversions and video views are also considered. Here are a few action rates:

(Image Credit: The Social Savannah)

Ad Quality:

Facebook considers the experience and interests of the user when determining ad performance. The users see the most relevant ads according to their interests.

How Does Facebook Determine Ad Cost?

All ads in competition for space are considered by Facebook. The winning ad is charged the minimum amount necessary for winning the auction. Your charge is not always your maximum bid. There are other factors in addition to your bid amount Facebook uses to determine the cost and delivery of your ads. The image below shows an example of the average Facebook advertising cost per industry:

(Image Credit: Blue Corona)

Timing

Timing is supply and demand. Think about the peak advertising times for eCommerce including Cyber Monday and Black Friday. During peak times, a lot more advertisers place bids. Due to increased competition, you will pay more when you win.

Ad Quality

Facebook determines the performance of your ad according to your set objectives such as video views, the number of link clicks and any negative feedback reported by the users. The outcome determines the relevance score of your ad whether good or poor.

Bidding Amount

Facebook offers two different bidding options, manual and automatic. Selecting automatic means the amount of your bid is determined by Facebook. You set your bid with manual bidding including the maximum you will spend for your desired result. For instance:

Ad Delivery Optimization

Your ad is served to users by Facebook according to those most likely to take action. This is determined by your optimization. If your ad is not optimized for your desired results, your ad might not be shown by Facebook to the consumers most likely to perform your desired action.

Ad Placement

Your bidding cost will be impacted according to their placement within the ecosystem of the platform. If you choose automatic placements, your ads will appear on both the Audience Network and Instagram. Your average cost is lower and you reach a larger percentage of your audience.

Target Audience

In general terms, the more specific your niche for audience targeting, the greater the expense. Your cost is also dependent on the number of advertisers targeting the same audience.

Common Facebook Budgeting Mistakes

Prior to CBO or campaign budget optimization, optimizing and tracking your account spend was more difficult. This was because your ad set level determined how your budget was governed. CBO enables you to set your budget according to your campaign level. Facebook can then automatically determine the best active opportunities for maximizing your results.

Time and effort are eliminated because you do not need to make changes to your ad sets based on your performance. Your CBO campaign will operate in real-time to ensure you receive the best results and lowest cost per result for your budget. You can take advantage of the advanced learning available through Facebook for maximizing your return on investment with CBO.

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Excessive Ad Sets

One of the most common mistakes is placing too many ad sets. Consider the process to run a test or analyze data, More variables mean you need to spend more money and time reaching statistical significance. This means there will not be enough actionable data for optimization and scaling. A good example is a campaign budget of $250 per day for five ad sets encompassing six ads each.

You are essentially running 30 separate ads requiring testing for a winner to be determined. This is a total of 30 different variables. The minimum required is 1x AOV for evaluating your statistical performance and significance. If your product has an AOV of $200, the math is not difficult. When your total spend is divided by your $250 daily budget, 24 days are required to receive actionable information.

You can calculate how many days are required prior to determining actionable information. Start by calculating the variables by totaling all of the ads contained in your ad sets. A good example is if you have five ad sets with six ads in each one, you have 30 variables. Multiply the number of variables with the average value of your orders then divide the result with your daily budget.

Your total provides you with a timeline regarding how many days are necessary before you receive actionable information. The best solution is to accelerate your learning curve by decreasing how many ad sets you are running.

Your Caps are Too High

This mistake was even more common before CPOs. If you are setting your target cost, cost cap or bid cap too low, it will not spend. This does not mean low caps are the issue because the exact opposite is true. To ensure your budget is spent by Facebook, there is a temptation to change your audience or raise your caps. This is a mistake. All you will accomplish is getting customers above your targeted CPA.

The result is a limited ability to scale and a loss of profitability. If your budget is not being spent by the CBOs, your creative is not being delivered by Facebook because no users are purchasing at your targeted CPA with your current creative. Patience is necessary for both your cost caps and CBOs. If they do not spend, give it a few days before considering any changes. If this does not help, optimize and copy your ad creative before you increase your caps. Here is where you go to adjust your caps:

Too Many Changes

The final common mistake is making too many changes when your initial performance is poor. This is where the Facebook ad cost calculator comes in handy, but comparing ad sets too early is a bad idea. The most common reaction is killing the ad set with the highest CPA. Changes can be detected by the Facebook platform for both direction and trend lines.

This means your budget will be shifted automatically for better performance. Facebook also analyzes indicators regarding your future performance. Although there is no guarantee when analyzing future data, Facebook comes a lot closer than humans are capable of because magnitudes of data orders larger than what you can see with the human eye can be analyzed.

Making any decisions regarding your ads with data for just a few days is a mistake. Your best option is to wait until you have a minimum of 14 days worth of data available. Do not make any manual changes for your ad creative within your CBOs. Facebook will take care of shifting your budget for you. Use the Facebook ad estimator and place your trust in the capabilities of the platform.

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