Facebook Ads Cost by Industry
Kelly is a former Google Tech Entrepreneur and Apple Developer who has counseled businesses of all sizes and growth stages. You can find her expertise across Fit Small Business in marketing, business website, and business trend content.
This article is part of a larger series on Facebook.
Facebook Ads continues to grow as a popular digital advertising platform, and now has around 7 million advertisers worldwide. With a low average cost-per-click (CPC) of $1.86 and an average cost-per-thousand-views (CPM) of $11.19, it’s easy to see why businesses are looking to Facebook Ads. It not only offers sophisticated audience targeting options, but it also has a small $1 per day minimum ad spend, enabling businesses of all budget sizes to use it.
Facebook Advertising Cost Estimates
The average CPC for Facebook ads across all industries is $1.86, and the average CPM is $11.19. While average prices have decreased over the past year, keep in mind that costs vary greatly, and all advertisers must meet the minimum $1 per day ad spend. Some businesses and industries will have average costs below these, as well as above these average figures.
- Cost-per-click (CPC): $0.97
- Cost-per-thousand-views (CPM): $11.19
- Cost-per-acquisition/action (CPA): $28.11
For example, a company in the apparel industry that uses Facebook to advertise their product catalog sees an average CPC of 45 cents. However, a life insurance company that advertises on Facebook has an average CPC of $3.77. The reason for the difference is largely related to user interest; social media users tend to use the platform for leisure, making apparel ads more enticing for most users. Life insurance ads, on the other hand, are not likely to be appealing.
Facebook Advertising Average Key Metrics
There are factors that can matter a lot more than price, such as your click-through rate (CTR) and your conversion rate (CR). CTR is the ratio of how many times your ad was shown compared to how many clicks it received, illustrating the quality of your ad, whereas a conversion rate is the number of times a user who has clicked on your ad actually converts on your landing page, illustrating the quality of your landing page or offer.
- Average click-through rate (CTR): 0.89%
- Average conversion rate (CR): 7.75%
For example, a business with a high CPC may have a lower cost per acquisition if it has a high click-through and conversion rate. Whereas it may sound good to have a low CPC, it won’t necessarily equate to effective advertising if the ads have a very low conversion rate.
Facebook Advertising Cost by Industry in 2020
Facebook advertising costs vary by business and industry, although the overall average CPC across all industries is $1.86. The cheapest industry is food and drink, with a 42-cent CPC; the most expensive industry is internet and telecom, with a $3.07 CPC. While CPCs vary greatly, you can refer to industry benchmarks below to get an idea of your potential Facebook advertising cost-per-click.
Average Facebook CPC & Other Benchmarks by Industry in 2020
Industry | Average Click-through Rate (CTR) | Average Cost-per-Click (CPC) | Average Conversion Rate (CR) | Average Cost-per-Action (CPA) |
|---|---|---|---|---|
Beauty and Fitness | 1.02% | $1.85 | 11.65% | $38.33 |
Business and Industrial | 0.89% | $2.48 | 10.65% | $23.80 |
Finance | 0.58% | $3.89 | 8.98% | $41.28 |
Food and Drink | 1.20% | $0.42 | 3.98% | $12.91 |
Hobbies and Leisure | 0.93% | $0.68 | 2.91% | $21.99 |
Home and Garden | 0.71% | $2.78 | 7.02% | $44.23 |
Internet and Telecom | 0.68% | $3.07 | 10.03% | $29.95 |
Jobs and Education | 0.55% | $2.11 | 12.82% | $18.36 |
News | 1.05% | $1.11 | 2.15% | $56.89 |
People and Society | 0.85% | $2.01 | 5.62% | $33.21 |
Pets and Animals | 1.68% | $0.61 | 3.27% | $15.29 |
Real Estate | 0.98% | $1.81 | 10.67% | $16.52 |
Science | 0.45% | $1.33 | 11.04% | $12.67 |
Overall Average | 0.89% | $1.86 | 7.75% | $28.11 |
(Source: WordStream)
Industry Average Side-by-Side Comparison
Facebook Advertising Cost Change From 2019 to 2020
The landscape of Facebook Ads appears to remain unchanged from 2019 to 2020 if you only look at the average CPC. However, other key performance indicators, such as the average click-through rate and the average cost-per-action (or cost-per-acquisition) have both changed greatly in the last year. While the click-through rate decreased a small 4.3%, the average cost-per-action increased 76%, nearly doubling from 2019 to 2020.
Facebook Ads Cost Change Comparison
2019 | 2020 | Percent Change | |
|---|---|---|---|
Avg. Cost-per-Click | $1.86 | $1.86 | +0% |
Avg. Cost-per-Action | $11.19 | $19.68 | +76% |
Avg. Click-through Rate | 0.93% | 0.89% | -4.3% |
Avg. Conversion Rate | 7.56% | 7.75% | +2.5% |
Factors That Influence Facebook Advertising Cost
Facebook uses an algorithm to determine if and when an ad will display, and what price will be charged for the ad. Many factors are considered as part of that algorithm, though Facebook ultimately chooses to display ads that it believes will promote user engagement. Factors include your audience targeting, bid amount, competition, ad objective, ad type, ad placement, ad schedule, and ad quality.
Looking to learn more about using Facebook to grow your business? Get all the information you need on Facebook for Business.
Audience
Facebook ads are displayed to users based on comprehensive audience targeting parameters. This differs from a search ad platform like Google, which relies on keyword targeting instead. There are hundreds of audience targeting options on Facebook, allowing advertisers to pinpoint exactly who their ads will display to. This includes demographic information, user interests, life events, and user behavior.
Bid
Facebook bidding is the process by which an advertiser sets how much they are willing to spend for a user to click or like an ad, or take a specified action. Unlike other pay-per-click platforms, such as Google Ads, Facebook Ads is not based on a keyword bid. Instead, audiences are created by the advertiser during the ad setup process. They then set a bid for their chosen pricing structure and audience (CPC, CPM, cost-per-view (CPV), cost-per-lead (CPL), or CPA) to determine ad cost and reach.
Facebook Ad Objectives
Facebook ad objectives are the overarching marketing goals advertisers have to choose from when creating their ad. Ad objectives include awareness, which focuses on promoting a brand; consideration, which encourages user engagement; and conversion, which entices users to buy a product or service. Generally, the higher the revenue an advertiser is likely to get from an ad objective, the higher the ad cost will be.
Competition
Remember that Facebook Ads works like an auction, wherein a number of businesses are competing for the same advertising space. As with any auction, the amount of competition will directly affect the price. The more advertisers competing for the same audience and ad placement, the higher the advertiser’s costs will be.
Facebook Ad Placements
There are a number of Facebook ad placement options, both within Facebook and on partner sites like Instagram. The most common ad placements are on a user’s Facebook feed, in the Facebook right column, on a user’s Instagram feed, and within Instagram stories. See all available Facebook ad placements.
Ad Quality
Ads that are well-targeted with messaging and media that speak to their audience and provide them value will rank higher than ads that don’t. For example, ads with blurry images see very little user interaction even if the ad otherwise conforms to Facebook ad specs. Increase ad quality by using compelling copy and high-quality images, along with relevant landing pages and audiences that are likely to interact with your ad.
How the Facebook Ad Auction Affects Ad Cost
Facebook uses an auction-style pricing process, similar to Google Ads, to help determine how much an advertiser pays for their ads. To determine which competing advertiser gets their ad displayed, Facebook also considers overall ad quality. Facebook looks for ads that they deem the most relevant to users, and, therefore, most likely to enjoy high engagement. Generally, ads with the highest ad quality and bid will be placed.
Here are some of the factors Facebook looks at to determine ad rank and cost:
- Bid: Which advertiser is willing to pay the most?
- Ad relevance: Which ad best serves its targeted audience?
- Projected ad success: Which ad is most likely going to get the most conversions or engagement?
To get your ad to display, start with a competitive bid—based on the figures listed at the start of this article—and a highly targeted audience with ads tailored to that audience. Once your ad is live and Facebook sees that users are engaging with your ad, Facebook will consider the ad’s high quality and may reduce price while increasing reach. Learn how to create a Facebook ad in our article on Facebook advertising.
How to Estimate Return on Ad Spend (ROAS) in 5 Steps
Before you commit to setting up a Facebook Ads campaign and allocating a portion of your marketing budget to it, first get an idea of what your estimated return on ad spend might be. To do this, determine how much you want to spend per month on Facebook Ads. Then, determine your monthly clicks by dividing your budget by your industry’s CPC. Then, multiply your monthly clicks by the average conversion rate to find your number of new customers per month. And finally, multiply that by estimated customer value to get revenue.
Here’s how to estimate your Facebook Ads return on ad spend in five steps:
1. Determine Your Estimated Monthly Ad Spend
First, consider how much you would want to allocate toward Facebook ads per month. Facebook has a minimum daily ad spend of $1, so you will at least need to determine a budget of $31 per month. For reference, the average small business spends around $1,000 to $3,000 per month on Facebook Ads.
2. Calculate Your Estimated Monthly Clicks
Next, find your industry’s average cost-per-click (CPC). With your average CPC, calculate your estimated monthly clicks by dividing your monthly ad spend by your average CPC.
Equation: Monthly ad spend CPC = Estimated monthly clicks
For example, let’s say your business is in the fitness industry and your monthly ad spend is about $800. Per the table above, your industry’s CPC is $1.85. That would equate to 432 clicks per month.
Example: $800 / $1.85 = 432 clicks
3. Estimate Your Monthly Conversions
To estimate how many conversions your ad might yield each month, multiply your number of monthly clicks by your conversion rate.
Equation: Monthly clicks average conversion rate = Conversions
Continuing the example above, the industry average conversion rate for fitness is 11.65%. With 432 clicks per month, that would mean you’re acquiring 50 new customers per month.
Example: 432 x 11.65% (or 0.1165) = 50 new customers acquired per month
4. Estimate Your Potential Ad Revenue
To estimate the potential revenue expected to be generated by your ad, multiply the number of conversions per month (if your conversion point is a new customer) by your average customer’s lifetime value (CLV). In other words, how much a new customer is worth to your business in the long term.
Equation: Number of new customers x Customer lifetime value = Revenue generated
In the case of the fitness business above, the CLV is estimated at $100. Multiplied by 50 customers, this means that the fitness business is generating $6,000 in new revenue every month from ad spend.
Example: 50 x $100 = $5,000 projected revenue generated from your monthly ad spend
5. Determine Return on Ad Spend
Subtract your monthly ad spend from the revenue generated to find your estimated return on ad spend. Effective advertising should yield a profit. If you’re not at least breaking even, you may want to seek professional account management, such as Hibu, or allocate spend to other advertising channels.
Equation: Revenue generated monthly ad spend = Estimated return on ad spend
As the final piece of the fitness business’ ROAS calculation, we would need to subtract $800 in ad spend from the $5,000 in total revenue to determine total profit (or return on ad spend). That comes to $4,200.
Example: $5,000 – $800 = $4,200 return on ad spend per month
Frequently Asked Questions (FAQs)
What is the Facebook pixel?
The Facebook pixel is a snippet of code that can be easily added to your website to track visitor behavior. If you are looking to gain more insight into user behavior for future ad campaigns—and have access to your website’s code—then you would be a good fit for the Facebook pixel.
Which is cheaper: Google Ads or Facebook Ads?
CPCs tend to be lower for Facebook Ads than Google Ads, but what you need to keep in mind is that user intent is different on each platform, as are click-through and conversion rates. Facebook may be cheaper, but Google users are more likely to make a purchase or take an action after clicking on a search ad. Learn more about Facebook Ads vs Google Ads.
What are the best ways to target Facebook ads?
Facebook offers a number of great targeting parameters, from life events to interests and behaviors. Every advertiser will use these targeting options differently to create exact audiences that match their ideal customer.
Where can I find a Facebook Ad management service?
Choosing to use a Facebook Ad management service is often a smart move, especially if you’re a new advertiser struggling to understand the Facebook Ad platform. However, there are many management services available and it can be hard to pick the right one; to help, we recommend reading our article on the six best Facebook Ad management services.
