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How to Determine What’s A Good Budget for Your Facebook Ad Campaign

Trouble locking down a budget for your next Facebook ad campaign?

You’re not alone.

Most advertisers (almost all of them) don’t know what a “good” Facebook ad campaign budget is – it’s either they’re spending way too little or way too much – everything in between can be summed up as “trial and error.”

Whether you’re in the “spend-too-much-and-see-what-happens” or “spend-too-little-and-hope-for-the-best,” this article is for YOU.

The thing is, with Facebook ads, you have to find that perfect sweet spot.

You do not want to spend too little and miss out on conversions; at the same time, you do not want to spend too much and watch as your money goes to waste.

And it’s not just about conversions. It’s also about how much your competitors (or niche in general) spend on the ads.

Types of Facebook Ads Budget

When determining your Facebook ad budget, you have two choices to make:

  1. Daily budget Vs. lifetime budget: How each ad set spends the allotted money – per day or in its lifetime
  2. Ad set budget vs. campaign budgets: How you’re going to divide your marketing dollar between all your ad sets (campaigns)

These two choices will play a significant role in how your Facebook ad campaign turns out.

Neither choice is necessarily right or wrong; it’s all about preference and what you think works the best for you and your business.

The budget choice you make will depend on the type of Facebook ads campaign you’re running. Not to mention, making the right choice will also help you maximize your hard-earned advertising dollars.

Daily vs. Lifetime Budget for Facebook Ads Campaigns

Daily budgets are the easiest to set up and manage.

They’re suited for companies and brands that need to see instant results and don’t have a big advertising budget to play with.

Choosing a daily budget means Facebook will only spend up to the amount you specify per ad set per day.

That means that you could be spending $10 per day on one ad set and $20 per day on another. It also means that your ads may stop showing to people mid-way during the day.

A campaign can have multiple ad sets running with their own daily budgets – it’s like each ad set has its own mini-battle to win (to get the most amount of impressions and clicks).

The Benefits of Daily Budgeting

  • Control Over Your Ads Budget: You get to control how much you want to spend per day — thousands of dollars a month, or just $10.
  • Manage Your Money Better: If you use the right tracking tools (we’ll talk about this in a moment), you can determine exactly where your money is going, which ad sets are giving you the most value for money, and which ones are a complete waste.
  • Measure Your Ads Performance: Daily budgets allow you to see how exactly your ads are performing from day to day, giving you the power to determine if it’s working or not without having to wait for a week or two before making any decisions.
  • Easy to Set up for An Evergreen Campaign: Evergreen campaigns (campaigns that run continuously and indefinitely) like remarketing and product launch campaigns work best with daily budgets.
  • Works Great with a Fluctuating Budget: If you’re a company with a fluctuating budget, daily budgets could make an excellent choice for you. You can set it and forget about it until your budget increases or decreases.

The Drawbacks of Daily Budgeting

  1. You may not have enough time to scale your ads: You can only spend so much before Facebook stops showing your ads to people. If you’re spending $10 a day, it could take months before you get the results you want.

Remember that Facebook will only spend up to the specified daily budget in the ad set, no matter the ad performance.

  1. There’s no ad Scheduling: Your Facebook ads will run all hours, all day. If you need your campaign to be only active at certain times of the day or week, daily budgets won’t cut it.
  2. You’ve got to be careful with how you manage your money: If you’re not careful, the temptation of seeing immediate results could lead you to spend more money than you should in a day, leading to a poor-performing ad campaign.

Here’s an example of a daily ad set budget: 

How to Determine What’s A Good Budget for Your Facebook Ad Campaign 1

The daily ad set budget is $32, set for 30 days ($960 in total). 

Facebook targeting operates a lot like display ads (not search ads). Meaning they’re not focused on getting you clicks but as many impressions as they can.

They’ll place your ad in front of a target audience and do nothing to respond to their fluctuating demands. 

With daily budgets, Facebook will try to get you as many impressions as it can to make up your daily ad spend. 

While this might come off a little ominous, it’s not necessarily a bad thing. 

Lifetime Budgeting for Facebook Ads Campaigns

When setting up a lifetime budget, you give Facebook your ad budget in its entirety, specify the end date for the campaign, and let them spend it however they deem fit to get you the best possible results.

The Benefits of Lifetime Budgeting

More Performance-conscious: Unlike daily budgeting, a lifetime budgeting structure allows you to maximize your ad spend.

By letting Facebook take care of your budget, you’re placing a lot of faith in them and their tools to get you results. They’ll adjust their daily ad spend levels based on results and several other factors to bring you the maximum amount of clicks and conversions.

If they notice your ad performing better on, say, Wednesdays at noon, they’ll spend more money on that day. The same goes for if your ad performs the worst on Mondays or Fridays; they’ll withhold the money on that particular day to avoid wastage.

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Lifetime Budgets Also Allow you to Choose What Hours of the Days or Days of the Week to run your Ads: With lifetime budgets, you can choose what hours and which days of the week to run your ads so that you can maximize their impact.

How to Determine What’s A Good Budget for Your Facebook Ad Campaign 2

If you only want to display your ads at certain times of the day or certain days of the week, then this is the budget for you. 

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Asked if you should schedule your ads, I’d suggest you use it from the get-go and only when it’s necessary. Otherwise, you’re better off with the Facebook system monitoring your ads and scheduling them for you. 

The Drawbacks  of Lifetime Budgeting

Lifetime budgets do come with a few tradeoffs.

Your Daily Spend Fluctuates A lot: It will be tough to know the kind of coverage your ad will get during the day or on a given day since Facebook will constantly be adjusting your daily spending based on your ad’s performance.

If you’re in an important season and want to ensure your ads get the maximum coverage or you’re not sure of what to expect of your ad spend, then a daily budget is a more befitting option for you.

How to Determine What’s A Good Budget for Your Facebook Ad Campaign 3

Lifetime budgets require you to set your budget amount in its entirety along with the end date. You’re essentially instructing Facebook to spend the specified amount on your ads within that period.

You have to be sure you won’t be making any changes to your ads within that timeframe. But should you want to increase your budget or shorten your promotion, this might not work for you. 

Although Facebook still allows you to adjust your ad budget and timeframe, doing so will only impact how Facebook prioritizes your ad budget and spending. You’ll end up getting less bang for your buck, and you will be shortchanging yourself of potential leads and sales.

Daily Budget Vs. Lifetime Budget

As you can see, both types of budgets have their own sets of benefits and setbacks.

Daily BudgetsLifetime Budgets
Your ad campaign will be evergreenYou want to schedule your ads
You want to have the maximum coverage Your campaign has a set budget and an end date
When your budget changes frequentlyNot enough time to monitor or track your adsSo you entrust everything to the Facebook ad system to manage the ads for you. 

Ad Set Budget Vs. Campaign Budget

The odds are pretty good that you won’t be running a single set of ads, but multiple of them. But how do you determine how much money goes into each ad set? Should you just split your budget evenly between each of them?

Not quite. The key is to determine the average number of conversions per day for each one of your ad sets and then divide your campaign’s daily total by that same amount. 

Let’s say you have $400 to spend on Facebook ads in one day. If you have four ad sets, each one of them should get around $100.

Another good strategy is splitting your budget according to the number of conversions you expect for each campaign. The logic behind this is that some campaigns might perform better than others depending on your industry, audience, offer, etc.

So giving each ad set a fair share of your budget ensures that you’re getting the most out of all of them. More on that later. 

Ad Set Budgets

An ad set budget allows you to set a budget for individual ad sets instead of an entire campaign. That will enable you to create multiple ad sets within your campaign, each with a different ad budget. You can then track conversions or clicks per ad set.

Here’s what an ad set budget looks like:

Ad Set Budgets for Facebook Ads Budgets

When to Use an Ad Set Budget

  • When you want to control the amount you spend on each ad set
  • When there’s a significant difference in the size of your target audience for each ad set
  • When you have mixed bid strategies and optimization goals for each ad set
  • When you want to control the daily budget for each ad set

Benefits of Ad Set Budgets

  • More control in delivery: Ad set budgets allow you to assign a different budget for each ad set so that ads with better performance can get the kind of coverage they need.
  • Better distribution: You can also improve distribution efficiency by reducing or increasing your budget for underperforming campaigns.
  • Easier to focus on high-value ads: This becomes particularly important when you have many ad sets. You can set a budget for each one and track the performance in greater detail than if they all had the same budgets and goals.

Drawbacks of Ad Set Budget

  • You have to change the budget on a per-ad-set basis and not on a campaign level.

Campaign Budget Optimization (CBO)

CBO allows you to set an overarching budget for your ad campaign. This ad budget will then distribute in real-time to individual ad sets depending on arising opportunities.

Campaign budgets simplify your campaign setup by reducing the number of budgets you have to set manually.

CBO can also help you get the most out of your Facebook ad budget by allowing you to allocate money to each ad set based on its performance.

Side note: CBO is best suited for campaigns with at least two ad sets.

Benefits:

  • Better overall ad performance increased automation and delivery of your campaigns
  • Increased efficiency of ad spend by optimizing the distribution of budget across ad sets
  • More straightforward campaign setup since you don’t have to set individual budgets for each ad set 
  • Allows you to allocate budget proportionally to high performing ad sets and scale down on poorly performing ones

Drawbacks:

  • Initial learning curve. You may need to spend some time setting up your campaigns and ad sets to see the average daily results
  • May decrease your ad delivery
  • May not precisely hit the target CPA (Cost Per Acquisition) set for each campaign

When to Use a Campaign Budget:

  • When you want all of your ads in an ad set to get the same exposure and cost-per-click (CPC) regardless of their performance or audience size
  • When there’s a relatively low difference in size between your target audiences
  • When you have consistent optimization goals for all of the ads in a set
  • When you want to control the lifetime budget for each ad set or campaign
  • When you want to track or measure your ad results at the campaign level
  • When you value all the ad sets the same

Here’s how a campaign budget works on Facebook:

Campaign Budget for Facebook Ads Budgets

How to Determine the Perfect Facebook Ad Campaign Budget

The perfect Facebook ad campaign budget achieves that sweet spot between cost-efficiency and meaningful results.

Keeping a firm budget is the first step, but you’ll need to be willing to play around with it a bit to get satisfactory results.

So, how do you refine your budget and get those numbers? 

Step 1: Consider Your Goals

You’ll need to start by determining what you’re trying to accomplish. Are you trying to test an idea, build brand awareness, or drive conversions?

That’ll help you decide how much of your daily budget should go towards ad impressions and how much towards clicks.

Your campaign goals can be broadly split into three categories:

  • Awareness:  If you’re doing awareness-based marketing, your main priorities are impressions and reach.
  • Consideration: If you want to drive consideration through Facebook ads, then your cost per view (CPV) will be your primary metric. You want to make your target audience consider you as a solution to their problem.
  • Conversion: If you want conversions, your focus shifts to clicks and cost per click (CPC). 

Each of these goal categories comes with a specific set of marketing objectives to choose from. When setting up your ad campaign, you’ll be required to select one of these marketing objectives, so Facebook can help you optimize your ad campaign for that particular goal

Campaign types to optimize your Facebook Ads Budget

For instance, if your goal is to increase lead generation, Facebook will help you create a lead ad that collects information on potential customers or clients so that you can follow up on them later. 

In general, you have eleven key marketing objectives to choose from:

Brand awarenessTrafficProduct catalog sales
Local awarenessEngagement
ReachApp installs
ConversionsVideo views
Store VisitsLead generation

Step 2: Try Understanding How Much it Might Cost

Each campaign goal has a recommended daily budget, but if your ad sets are performing well and you’re getting conversions for less than that, then it’s okay to expand that. 

You must note that running a Facebook ad campaign isn’t a spray and pray affair.

You want to make each ad count.

And yes, it all boils down to how much you may have to spend on a particular marketing objective.

Luckily for you, we have been in the business of Facebook marketing long enough to make near accurate guesses on the average Facebook ad cost for each campaign objective based on the data we’ve collected over the years. 

By looking at our client’s Facebook ad campaign data, we might be able to give you a rough idea of how much we think your Facebook ad campaign will cost you.

But before we get to that, let’s run you through some background information on  how the Facebook ad system works:

How Facebook Ads Work

Well, Facebook ads run on an auction system. That means that your ad will compete against other advertisers to appear on users’ newsfeeds.

The only way to win an auction is if your ad’s bid is high enough or, more often, has a better value for what Facebook defines as “ad quality.”

So, every time Facebook sees an opportunity to display an ad to a Facebook user, they’ll run an auction and then display the ad with the highest value (a combination of the bid amount, ad quality, and estimated action rates). 

Now let’s find out how much it’s going to cost you. We’ll provide the stats and let you do the math. 

In 2020, AdEspresso conducted a simple study to determine the cost of advertising on Facebook. Here’s what they found out: 

  • The average CPC (Cost Per Click) for the first three-quarters of 2020 was $0.39.
  • The average CPL (Cost Per like) for the first three-quarters of 2020 was $0.20.
  • The average CPI (Cost Per App Install) for the first three-quarters of 2020 was $3.40.

Now let’s account for the price of each marketing objective. One thing you’ll notice is that prices vary a whole lot. 

CPC by campaign objective for your Facebook ads budget

Source

You might have noticed that some marketing objectives are far pricier than others. For example, if you’re planning to create an ad set for increasing impressions, be prepared to spend more than if you were creating one for link clicks.

The point is to make sure you’re going after the right campaign objective. Otherwise,  you won’t just waste money, but a fair amount of it.

By now, you should have a picture of what your budget should be for your goal.

Step 3: Start Small and Track Your Metrics

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You won’t know how effective your Facebook ad campaign is if you don’t test it. It’s only through testing and monitoring that you which horses to ride and which ones to put out of their misery.

We recommend starting small and keeping a close watch on the key metrics to monitor results and ensure your campaign stays on the rails.

Don’t just go after the number of likes, link clicks, and impressions because those don’t necessarily translate to results. Instead, try to go after conversions here. 

Generally, we suggest you start with small ad spends, spread across 3 to 7 days. And by small, we mean $2 to $5 variations to develop base performance data that you’ll be using to evaluate your campaign and estimate expected results.

That said, here are four key performance metrics you might want to keep an eye on:

Cost Per Results (CPR): CPR is a performance metric that helps you define the value of your campaign. It’s essentially a rough estimate of how much money you have to pay for every pre-determine result the campaign is driving (based on your marketing objective). 

It’s a pretty helpful CPR because it indicates how efficient your ads are by giving you an estimate of the cost of achieving your desired result.

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But how do you get this metric? It’s simple, use the CPR formula:

CPR = Total budget/number of conversions for a given objective or total ad spend divided by the total number of reach, video views, impressions, or clicks. 

It’s calculated as the total amount spent on ads divided by the total number of results (clicks, reach, video views, and conversions).

Cost Per a Thousand Impressions (CPM):  CPM measures how much you’re paying for every 1,000 impressions. 

AdEspresso claims that most Facebook advertisers use CPM instead of CPC because it helps them track the overall efficacy of their campaigns. 

CPM helps track ad engagement because it lets you watch how your ads are performing in terms of impressions. 

How then do you compute that? Well, here’s the formula: 

CPM = total ad spend *1000 / total impressions.

Cost Per Click (CPC): CPC measures how much you’re paying for every ad click. 

It’s the amount you pay for every click on your ad, so it provides marketers with insight into how well their ads are performing based on clicks.

To compute this metric, use the formula: 

CPC = total ad spend / total clicks.

Average Cost Per Link Click (ACPL):  ACPL measures how much you’re paying for every link click on your ad — that is, a link contained in the ad copy itself.

Remember, CPL should only be used when your objective is to drive link clicks. In other words, it’s not applicable if your campaign objective is to drive conversions or video views.

To compute this metric, use the formula: 

ACPL = total ad spend / total link clicks.

In the end, remember that there is no one-size-fits-all formula when it comes to Facebook advertising because every business has a different set of goals and resources.

Conversion Rate: This metric is the gold standard for measuring ad performance. 

It’s essentially defined as the number of conversions (link clicks, video views, reach, etc.) divided by the total number of people who saw your ad.

So, how do you go about computing this metric? Just use the formula: 

Conversion Rate = (total conversions/total impressions) * 100%.

For example, if your ad gets served to 100,000 people, and only 2000 end up converting on your ad, you have a conversion rate of 2.0%.

CR = (2000/100,000) *100 = 0.02 *100 = 2%

Step 4: Amp Up Your Ad Spending

To this point, all we’ve done is test our ads by spending $2 to $5 on Facebook ads for 3 to 7 days. The next step is to increase your ad spending.

Use Facebook’s ad manager to manage your ad budget and to monitor your daily spend on Facebook:

  • Just hover over to the ad set or campaign you’d like to edit. 
  • Click edit and proceed to make all the changes you want to make.
  • Be sure to click on “publish” before closing the page. 

Here’s an article you want to read to learn more about Facebook advertising for small businesses: 

How Much Should You Spend on Your Facebook Ad Campaign? Let’s Do Some Math

So, how do you calculate your Facebook ads campaign budget? 

Use the table below to estimate your ad cost:

Inputamounts
Your revenue goal$3,000
your product price/price per product or service$50
your cost per 1000 impressions (CPM)$10
your click through rate1.0%
your conversion rate/the percentage number of click-throughs to your website (calculate as (the total number of impressions/the total number of clicks)/*1005.0%
your cost per click $1.00
how many clicks do you need to make one sale or reach whatever goal you have12
the number of clicks you need to reach your revenue goal60
your cost per acquisition$20.0
your budget$1,200

Now replace everything on the right column with your own data collected during the test. 

We can start by breaking down your revenue goals.

In this case, our revenue goal is $3,000. 

Our product or service goes for $50. That means, for us to hit our revenue goal, we should be prepared to hit 60+ sales ($3000/$50). 

For us to make one sale, we need about 12 clicks.

Now, with a 1% click-through rate, that means for every 1000 impressions our ad brings, we’re likely to up with ten clicks.

In other words, ten clicks cost us $10. 

But we need 12 clicks to make one sale. 

So that becomes (12/10)*10 = $12.

From this, we conclude that one sale costs us $12, and since we need 60 sales to hit our revenue goals, our total ad budget should be around $12 *60 = $720. 

So, if the data is anything to go by, then our $1200 ad budget should be more than enough to make us hit our revenue goals. 

You can run the test ad, fill the table, and then break down the cost as we’ve done to estimate your ideal Facebook ad campaign budget.

Let’s break down the inputs: 

  1. Your revenue goal: Your revenue goal is the benchmark of your ad campaign. 

It’s how much money you’re trying to earn during that campaign period. How much do you wish to make by the end of that campaign period?  

  1. Your product price/price per product or service: How much is your product or service? 

Of course, keep in mind that this is the price you expect to charge per single unit of your product.

  1. CPM: This is the cost per 1,000 impressions

The higher your CPM (and subsequently CPC), the more expensive it will be to advertise your product or service. 

  1. CTR: Click Through Rate (CTR) is the percentage of people who saw your ad and ended up clicking it

A higher CTR means more potential buyers for your products or services. 

  1. Conversion Rate 

The conversion rate is the number of people who click on a link within your ad and end up buying a product you’re selling. 

If 1 out of every ten people click on the link, and 3 out of those ten people buy a product you’re selling, then you have a 3% conversion rate.

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