390: How Much Should You Spend on Facebook Per Auction?

Every week, I’m asked one or more of the following questions:

“How much do we need to spend on Facebook to get bidders?”
“What should our Facebook budget be for this auction?”
“How many people would [dollar figure] get us on Facebook?”

Facebook rookies seem to believe that there’s a set, static amount—or some price grid—that Facebook charges for results; and they seem to think I know where to find that grid. It makes sense: other media are sold that way. Sadly, though, neither of those assumptions are correct. That said, we can learn to make educated guesses. I’ll tell you what I recommend per campaign, but first I want to show you how I arrive at that suggestion.

Algorithm secrecy

Algorithm secrecy

First, you need to know that how far your money will go on Facebook does and will change. Its ad inventory is dwindling, as more advertisers transition their dollars from less efficient media. Facebook is constantly tweaking its tools and options either to better target your known prospects or to protect advertisers from taking advantage of their options for nefarious goals. Victim litigation and the fight against fake news have actually caused Facebook to scale back some very convenient options—including some that were available even several months ago. So, we advertisers have to keep experimenting. Then, we must continuously measure and compare our results to plan our next campaigns.

Geographic density

Geographic density

Like Google AdWords, part of Facebook’s ad pricing is determined by an auction system. Facebook offers a finite number of ad spots in a consumer’s Newsfeed. So, advertisers must outbid others who want that same space. Advertising costs vary, depending on the physical area you want to target. Typically, rural areas require far less money to saturate than suburban or urban areas—not just because there are fewer people in those areas but also because many products and services aren’t marketed to the demographic realities of those who live there.

Facebook budget penetration

No matter what geographic area you choose, Facebook will always serve your ads first to those most likely to engage with your content. The more you spend, the deeper into the prospect pool you go within the geography you target. The size of your geographic net you cast is thus affected by the distance a prospect would reasonably be willing to travel to purchase an asset or have it shipped. Also, whether or not you offer online, phone, or proxy bidding influences the geographic settings of your Facebook ads.

Prospect accuracy

Prospect accuracy

Connected with physical proximity is interest proximity. Your ideal buyer might not be determined by geographic nearness but by how close you can be with demographic profiling of your perfect buyer. This is especially true with collectibles, niche commercial/industrial items, specialty farming equipment, and some trophy real estate properties. This reality makes harvesting your buyer data so critical.

Facebook budget prospect density

That data is now even more valuable because of Facebook’s Lookalike Audience tool, which can take your bidder and email subscriber lists and turn them into the kind of targeting data formerly available only to Fortune 100 companies. This allows you to cover large geographic areas without having to pay for saturation. You can cherry pick your most likely bidders—not just in America but around the world.

Holiday proximity

Holiday proximity

Because of the competition with other advertisers, holiday seasons raise the bidding price for your ads. You’ll notice a rise from the Monday before Thanksgiving until the day before Christmas. Depending on your target audience’s demographics and geographic location, you might also see cost increases the two weeks before both Valentine’s Day and Mother’s Day. If you have large cultural events in a specific metro area at a specific time each year (like the Boston Marathon or Indianapolis 500 of Bike Week), you might see a small impact as well. I’ve not analyzed Facebook ad costs during the Olympics, but it wouldn’t surprise me if advertising rose 5% or even 10% during those weeks.

Content relevancy

Content relevancy

Maybe the biggest factor in the cost of your ads is the content of your ads. Facebook, like its advertisers, wants paid promotion to seamlessly blend with the user-generated posts in the Newsfeed. Neither the platform nor its users want interruptions; instead, they connect with products, services, and stories that are truly interesting or valuable. They don’t want ads that make audiences flip to a different app or site. So, Facebook rewards ads with high interaction rates with lower cost per click (or other desired action).

Thus, the more your text ties into consumer desires, the cheaper your ads. The same holds true for photo quality, video brevity, and the perceived value of the asset (or service) at hand. Beauty is in the eye of the beholder, but the beholder that determines your ad costs is not you. It’s the viewer. The less you think and act like a traditional auctioneer, the more potential bidders you’ll reach for the same money.

Facebook efficacy

Facebook efficacy

Finally, all of the above assumes that Facebook is the most effective and/or efficient way to reach your target audience. That’s not always the case. There are still some audiences whose demographic factors are not available selections to advertisers on Facebook. This makes these folks less likely, or at least less efficient, to reach there.

So, here’s my standard answer when auctioneers ask me how much they need to spend: “I would spend 25% to 75% of your auction’s advertising budget on Facebook, depending on what your Google Analytics reports show you.” If you’re tracking every medium you use—both online and offline—in terms of the traffic they drive to your auctions’ pages on your website, your Google Analytics will answer that question better than I can.

To shorten this post, know that you can use this method to determine what your overall auction budget should be. You can take that information and drop it into this formula to determine how much of the overall budget to spend on Facebook. If you don’t yet have that data, I would incrementally start shifting more of your budget to Facebook until you reach a point where you don’t get more bidders or higher relative sale prices from more Facebook spending.

Stock images purchased from iStockPhoto.com

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