Your guide to social media advertising costs

Your guide to social media advertising costs

  • July 24, 2020
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We’d love to be able to guarantee how much every social media ad will cost. Unfortunately, it’s not that simple. Because advertising is based on an auction system, ad costs will fluctuate daily (or more often) depending on a variety of factors, including ad algorithms on different social media platforms, what kind of customer you’re hoping to acquire and which action you’re hoping they take on your ads.

But never fear, there are many things we can demystify to help you better understand how much ads on social media really cost, such as:

  • Common terms – yes, all those puzzling paid social billing acronyms!
  • Recommended budgets
  • Average advertising cost by clicks and impressions

What do you pay for in social media advertising?

Social media advertising can have a range of different goals, and so there are a range of different billing options. But essentially, you are paying for actions that result from placements on peoples’ social media news feeds and pages via an auction system. 

The reason that the cost of paid ads on social media changes so much is that the best ranking ad in the auction wins the best placement, the second highest gets second best and so on. The most important thing to remember is that you don’t get billed for the ad placement. You get billed for the action or view that results from the placement.

You might also have heard of PPC. Search engine advertising is typically called PPC, or pay-per-click, since that’s what search engine advertising is all about – you pay when someone clicks on your ad and goes to your website.

Social media advertising has more options for actions than clicks. Some social media platforms offer more options than others for your digital marketing ad campaigns. Here’s a few of the most common:

Social Media Advertising Acronyms

AcronymWhat it stands forWhat it means
CPCCost-per-click The amount you pay for a social ad placement when the viewer clicks on the ad.
CPC… the other oneCost-per-conversionThe final amount you pay for a completed sale or customer acquisition.
PPCPay-per-clickAn advertising model in which advertisers pay publishers (like social or search) when the ad is clicked.
CPMCost-per-mille / thousand impressionsThe amount you pay for an ad once it reaches 1,000 impressions. (Mille is French for 1,000.)
CPLCost-per-leadThe amount you pay for each lead, or prospective customer (emails, sign-ups, lead forms).
CPL … the other oneCost-per-likeThe amount you pay for each like on an ad.
CPVCost-per-viewThe amount you pay for each view on an ad. Some platforms define ‘view’ differently and may include actions like clicking. 
CPACost-per-acquisitionThe total cost of acquiring a new customer via a specific channel or campaign.
CPA… the other oneCost-per-actionThe amount you pay when a user completes the action you specified when creating the ad, such as app installs, email signups, or store purchases.
CPECost-per-engagementThe amount you pay for each engagement on an ad.
CPFCost-per-followerThe amount you pay for each follower your Page gains in Page Follower ad campaigns.
(and a few other bonus acronyms you might see and need to know:)
CTACall-to-actionA statement that encourages the audience to take a certain action (e.g. “Sign Up Now”).
CTRClick-through-rateThe percentage of people who took the action of clicking on a link or ad when given the option.
CRConversion rateThe number of people who took the desired action (e.g. clicked on an ad), divided by the number of people who could have (e.g. saw the ad).
EREngagement rateThe number of people who interacted with an ad (e.g. engagements, clicks, completed video views), divided by the number of people who could have (e.g. impressions/reach/views).
CACCustomer acquisition costThe total sales and marketing cost required to earn a new customer over a specific time period.
LTV (or CLV)Lifetime value (of a customer)The predicted revenue that one customer will generate over the course of their relationship with a company. Read more
ROIReturn-on-investmentA measure of how much you earned considering the amount of money you spent.
ROAS or ROA$Return on Advertising SpendMeasures how much your business earns in revenue for every dollar spent on marketing or advertising. Our Agency Partners, BigCommerce suggests a common ROAS benchmark is a 4:1 ratio — $4 revenue to $1 in ad spend.
CTCClick-through conversionWhen a visitor is shown your ad, they click on it, and convert (mostly Google/YouTube terminology)
VTCView-through conversionA visitor is shown your ad, they do not click on it, but later return to your site and convert (mostly Google/YouTube terminology)

How much does it cost to advertise on social media per month?

Depending on your platform and objective, we recommend locking in a minimum monthly budget of $300 to $900 for social media advertising – about $10 to $30 per day – until you figure out your average CPL (cost-per-lead, in this case). 

But in reality, the answer to “how much do paid social media advertisements cost” is simple: it depends on you, your business, and your ads.

If you’re running Facebook ads and you’re only looking for clicks and impressions, think about running a couple of different types of ads aimed at audiences in different parts of the customer journey, from acquisition to retargeting. This would be the most efficient use of your ad budget. Of course, more ads could cost you more money – especially if they’re not effective ads – eating up your budget quickly and making social media seem like a poor investment.

But when your ads are creative and relevant, paid social media offers a pretty good return on investment (ROI). With great ads, you could spend as little as $50 a month and see slightly increased website visits, engagements, sign-ups or leads. This can be great for things like brand awareness, but if you’re looking for more from social media, like customer conversions, you’ll want to invest more.

We’ve found that generally, paid advertising is a long-term game and works best when paired with organic content, as well as good optimization of your budgets and audience targeting. 

Social media advertising cost comparisons

Now we’re going to break down minimums and averages of advertising costs. 

A couple of things to remember: when you’re setting up your ads on various social networks, often you’ll be asked whether you want to set a daily budget or a lifetime budget. Once you’ve spent all your money, your ads will then be automatically paused. 

These costs are only a benchmark, and that a lot of things can change your expected averages – like your industry, your ad formats, your organic content marketing, your target audience, the customer journey, and even the time of year and time of day. Also, some platforms require a minimum daily spend in your social media paid advertising cost.

To stay on top of this, keep an eye on your social media marketing campaign results once your ads are live. You should be able to get a decent idea of what you can expect within three months (and certainly by six months) of running your campaigns and be able to develop your own benchmarks regarding what your baseline acquisition cost for paid social is.

Social Media Advertising Costs

Average CPCAverage CPM
How much should you expect to pay on Facebook?$0.97 per click$7.19 per 1000 impressions
How much should you expect to pay on Instagram?$3.56 per click$7.91 per 1000 impressions
How much should you expect to pay on LinkedIn?$5.26 per click$6.59 per 1000 impressions
How much should you expect to pay on Twitter?$0.38 per click$6.46 per 1000 impressions
Source: 2020 Averages from WebFX

Cost-per-customer acquisition and lifetime customer cost

By now you should have a pretty good idea of the average cost of a social media ad. This is a great starting point to get control of your digital advertising spend. But as your social-know-how expands, you’ll be looking for more advanced measures of how much social media advertising costs your business versus how much profit it generates.

That’s where customer acquisition cost (CAC) comes in. 

(Cost of sales + cost of marketing)
CAC = New customers acquired

Customers generate profit; the more new customers, and the less you spend to acquire a customer, the better your profitability as a business. Your CAC is the total sales and marketing cost required to earn a new customer – all the efforts of your sales team with their outreach and nurturing, and all the efforts of your marketing team with inbound marketing luring new customers in. 

In order to calculate CAC accurately, and what you can do with the number once you have it (such as assess a customer’s lifetime value), take a look at this in-depth guide.

We hope you found this article useful. Bookmark it for later or share with your colleagues when you’re deciding on the budget for your social media advertising campaigns!