So why are Facebook ads so popular? There are a number of reasons, but let's unpack them one-by-one. Over the years, Facebook has been very aggressive in cutting the organic reach that brands, products, and services have on the platform. What do I mean by that? If you are a company or even a local business, and you have a Facebook page, and you just generate posts, and don't pay for them to be sponsored, we call that organic content. So if you're creating organic content in your local business, your reach organically will be fairly low, that means that Facebook really doesn't send your post out to the majority of the people that follow your page. It really is, every year, year after year forcing you more and more to actually pay for content to be send out to your followers. In fact, many popular advertisers have decided that if a piece of content is not sponsored, it is not worth their time. So they're not even generating organic content because they know that the organic reach or their reach that doesn't have to be paid for is so little, that it really doesn't add any value for them as a business. So as far as I see it, if you really want to push the needle with Facebook, you have to create posts and sponsor those posts. So there are different types of Facebook ads, they act and perform differently, but each type of Facebook ad should be considered seriously before you actually begin your campaign. We have news feed ads in the center. These ads are the largest ads on the platform, and as a result they garner the most attention. Whether on mobile or desktop, news feed ads are the ones that hit you over the face. However, there are legacy ad formats such as the right-hand ad. One of the first types of Facebook ads, these ads are a lot cheaper but garner a lot less attention. Finally, Facebook offers unique bespoke experiences such as the logout experience, which gives a full canvas to a particular brand as someone logs out of the platform. The number one thing to know about marketplace ads is that they are less impactful. It's because they hide out on the right bar of the Facebook desktop site. They are way cheaper and often the people that buy these ads buy them in bulk or in programmatic ways. Now as we mentioned, the news feed is the most premium space of Facebook advertising. It's the stuff that appears in the middle of the experience for the consumer, whether they're on mobile or desktop. Now as a result, you're going to pay more for these types of ads. In general to get about 1,000 people to see a news feed ad, it costs about five dollars. If you compare that to the marketplace version, it's about a tenth of the cost. So we really know that it's a premium but we're going to get a lot of attention, and as a result the click-through rates for these ads are through the roof compared to other types of Facebook ads. If we consider the cost per 1,000 for other social networks, we see that Facebook is smack in the middle. Its average cost per 1,000 is about five dollars. You can see the Snapchat and Pinterest are forced to sell their advertisements for less in part to compete with Facebook and it's large market penetration. More people use Facebook, so it's a more desirable platform for advertisers. As a result, smaller advertisers have to often charge less to compete. You can see that Twitter is generally at hand more expensive and LinkedIn is very expensive. I encourage you to think why LinkedIn is so expensive, it's because these leads are usually B2B leads or business to business leads, that often have a larger monetary price tag or a monetary revenue gain associated with them. If someone buys a server or at least even considers buying a server as a result of looking at a LinkedIn app, there's a lot more money in the game than someone seeing an ad for a mattress on Facebook. On the Facebook ads platform, you don't just have to pay per 1,000 folks that you'd like to see an ad, instead there are objective set up for specific goals such as clicks. You can see that Facebook is somewhat affordable in this price range depending on your industry. If you're selling a pair of shoes, your cost-per-click to your website might only be $0.50, and that could be tenable, given the margin that you have on the sale of that tennis shoe. It's no surprise to me that the B2B focus on Facebook is one of the most expensive cost-per-clicks, because again it goes back to the relative revenue margin that can be had as a result of someone clicking on the website. It all comes down to how much money you'll receive from your average transaction, and what percentage of Facebook users will actually go and convert as a result of clicking on your website. If you're going to be paying per-click, you've got to calculate those three things. One, how many people will click. Two, what percentage of people will actually convert that click. Three, how much money will I make on average as a result of that conversion. You really have to factor these things in before you actually go to deciding what your maximum cost-per-click should be for Facebook. When I think of the cost per action model on Facebook, I think of two things. I think it's the safest way to do advertising on the platform, and it's also the most expensive way. Let's unpack why. So reviewing a little bit of terminology here, cost per action is paying for an advertisement only when a consumer does the specific thing that you're interested in. There are all different types of actions: there are micro actions and there are macro actions. A micro action might be someone just opting into a coupon to a bagel place. A macro action may be someone going all the way through your online shopping portal, and buying a pair of shoes as a result of seeing an ad. Either way, Facebook gives you the ability to pay only when these things happen, but as a result, these things are much more expensive. Why are they more expensive? Because Facebook is taking on the risk. Facebook is saying, "I may serve the ad to 10,000 people but if no one actually clicks and buys this thing, then I'm out all of that relative ad revenue that I could have made if I just sold the ad in a CPM model or just on a view-only basis." So Facebook charges more for this, but it really eliminates the risk that small companies have. As long as I'm okay with that CPA cost, I can be okay with my advertising campaign in general. If you know what the margin is on the product you're selling, you can set your CPA up to be a fraction of that margin so that you know you're only spending money on advertisements when they make you money. There are all different types of actions on Facebook, and it's not just buying something, it could be installing a mobile app, or actually having someone redeem a specific offer, or sign up for an e-mail newsletter. These actions are easy to integrate with the Facebook ads manager. So take a look at these average cost per actions, there's a bit of a sticker shock there, I'll admit. Again this really is the way in which you can pass off risk to Facebook, but as a result you're going to pay more. You can see that again these industries tend to map with the relative transaction cost of each industry. Consumers don't spend as much on a parallel as they do on automobiles, and as a result, the cost per action for an automobile is much higher. This is a good segue to talk about Facebook ads more generally. The best Facebook ads have clear calls to action. What are you supposed to do as a result of seeing this Bombas ad? Well, there really are two things; one is to take a quiz and two is to gain 20 percent off as a result of taking that quiz. If the audience follows this action, it will continue them down the purchase funnel as Bombas intended. So it's either a sale, a coupon, or some type of special offer that makes the ad timely and unique. In my experience, sales, coupons, and special offers are the real drivers to getting people to click.
