How to estimate Facebook advertising budget |

How to estimate Facebook advertising budget

By Shaad Hamid / November 20, 2012

I usually get asked this question quite a lot: “I want to advertise on Facebook, how much of a budget would you recommend?” and thought I’d share with you my methodology of how I estimate and recommend budgets to potential clients who have never advertised on Facebook before.

1. Figure out target audience volume

The best thing about Facebook is that it provides you with audience volumes. Therefore, before you calculate estimated budgets, you’ll need to obtain information on the different target audiences such as locations, age, gender, and other interests. Ideally the target audience profiles should be something like this:

Married women who live in the UK and are 40 years or older, who like, ‘The Daily Telegraph’, ‘Homes Under the Hammer’, ‘Location, Location, Location’, ‘Grand Designs’, ‘John Lewis’, and ‘Ocado’.

Once you’ve got information on all your different personas, include them in Facebook’s ad creation tool. You should see suggested volumes like so:

2. Now divide this number by 4

I think Facebook’s targeted audience volumes are the number of FB profiles that match an advertiser’s geographic/demographic and interest targeting (duh!). But these probably don’t account for fake FB accounts, or that among those who do have FB accounts some have duplicate accounts (e.g. corporate account/personal account), some don’t log-in as frequently as others, etc. So from the numbers I am seeing, Facebook doesn’t actually “reach” the total “targeted audience”.

I have noticed that on average, out of the total number of people targeted, Facebook “reaches” only a quarter of that number (this is across all accounts I work on, so may change based on different campaigns or targeting).  So to make things a little bit more realistic, I’d suggest dividing the targeted audience by four.
324,100 / 4 = 81,025

3. Make an assumption for the ad frequency (the number of times a user would see an ad).

I usually go by a frequency of 4 or 5 per person. But this number will change depending on the volume of the audience. If the audience volume is fairly high (say over a 100,000), I would go with a frequency of 1.5 or 2 per user. If the audience is small (say less than 10,000) then I’d probably assume a frequency of 15-20 per user.

In the example above I would assume a frequency of 1.5 per user, so I could assume the total number of impressions for a given day (assuming every user within my ‘estimated reach’ saw my ad) is 81,025 x 1.5 = 121,537 impressions.

Also I’d just like to quickly point out that I would usually target at a much more granular level than this; therefore, smaller target volumes would show a higher frequency than when you target at a broader audience like in the example cited here.

4. Make an assumption for your CTR

CTR is dependent on factors such as how well your ad creative is written and your bid amount. CTRs also vary depending on which vertical you operate in. I’ve noticed travel ads garner higher CTRs than the health sector, for example. Also, direct response ads will have higher CTRs than brand awareness ads. So you’ll need to make a judgement on what you think is a realistic CTR. With travel related ads I use a benchmark CTR of 0.04%; if it’s a competition or a giveaway, I’d assume a CTR of 0.10%; but for a less ‘social’ product or service I would assume a CTR of 0.015% (personally for me, this is the lowest acceptable CTR for Facebook ads). Based on this assumed CTR, you could obtain the estimated number of clicks per day. So for the above target audience, the estimated number of clicks (based on a CTR of 0.015%) is:

121,537 x 0.015%  = 18 clicks

5. Multiply by 30 or 31

This is your estimated number of clicks per day. In order to estimate the number of clicks for the month, I would multiply this number by 30 (or 31).

Estimated clicks per month

= 18×30
= 540

6. Multiply by suggested bids

Now you could multiply the estimated monthly clicks by Facebook’s suggested bid numbers. So in the above instance, the estimated budget would be:
Estimated monthly budget

= 540x£1.90
= £1,026

So there you go, here’s an estimated budget for a particular target audience for you. You could potentially include different ranges of spend based on the suggested budget. In the above example I took the higher end of Facebook’s bid suggestion. You could provide your client with maybe three different budgets based on the lower, middle and higher end of suggested bids.

Obviously the above methodology isn’t the only way to estimate Facebook budgets. I generally use this method for sales proposals and sometimes to make a case for budget increases. I would love to hear your thoughts and methodologies for estimating Facebook budgets, please feel free to add to the discussion within the comments below.

Image credit : mkhmarketing

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