Are you spending a hefty amount on Facebook ads and yet getting the ROI you're hoping for? One of the standard metrics you should monitor while running your Facebook ads is Cost Per Impressions aka CPM.
Your CPM dictates the revenue you spend on your ads. It stands to reason that lower CPM equal less spend and as a result more ROI. Let's delve into some nitty-gritty details related to Facebook CPM; including smart ways to lower it quickly!
What is CPM
The term CPM stands for cost per thousand impressions. It is a metric used to estimate and track the costs of your advertising campaigns.
To simplify it even further, impressions are merely the total number of times people view your ad, such as from social media, search engines, web pages, etc. You pay as per the impressions you receive on your ads which are placed and shown to your target audience.
CPM is a standard metric used by online advertising companies to measure the cost-effectiveness and ROI of the advertising campaign. It is also used for comparing performances between different ad publishers and campaigns to understand which one works best for a company.
Nonetheless, never confuse impressions with your reach. The same user can view your ad multiple times, and it will be counted as impressions. However, your reach denotes the number of users who have viewed your ad only once.
For example, if you see your impressions rise to 3000 and reach only 2000, it is because the remaining 1000 people have viewed your ad more than once, which is not registered as a reach.
If you are wondering how CPM is calculated, here's a simple example for you:
If your CPM is $10, you are paying $10 to show your ad 1,000 times. Similarly, if you spent $50 and received 10,000 impressions, your CPM was $5.
Factors that determine CPM
Multiple factors determine your campaign's CPM. These factors include:
- Target audience: The target audience group for your campaign
- Schedules: Whenever your ads are scheduled can determine the costs. For example, ads run on holidays or special events may cost more than the low traffic times.
- Ad placement: It is the platforms where your ads will typically appear
- Frequency cap: It is the maximum number of times your ad campaign will be shown to an audience
- Creative type: The creative format of your ad depends on the placement and delivery of your ads. For example, canvas ads are only delivered on smartphones.
- Budget: It is the maximum amount of resources you are willing to spend on your ad campaigns
- Objective and optimization: Whether you would like to optimize your video views and mobile installs.
- Market demand: The market demand for your target audience related to your product or service you are hosting an ad for
- Market supply: The responsiveness and availability of your target audience on Facebook and Instagram
- Your other overlapping campaigns: If you run any other campaigns simultaneously for the same target audience, it may change the cost of that audience.
- Creative quality and relevance: The negative or positive feedback your ad campaigns have received in the past 90 days.
What does Facebook CPM mean?
Unlike the regular CPM definition, Facebook CPM is calculated by dividing the amount spent on your ad campaigns by the number of impressions (not reach) and multiplied by 1,000.
Why is it important?
Your Facebook CPM is important when analyzing ad performance. In the long run, if your CPM is not managed properly you will end up losing more money than necessary. Hence, advertisers should consistently keep a close eye on their Facebook CPM.
How does Facebook calculate CPM?
The formula for calculating your Facebook ad CPM is:
Amount Spent on ads (or ad set) divided by the number of impressions you receive, which is then multiplied by 1,000.
If you are spending $45 for a campaign and got 3,000 impressions so far, your current CPM is $15.
Similarly if you invest $75 on an ad campaign and gain 10,000 impressions, your CPM will be $7.5.
Why does Facebook CPM matter?
Your cost per impression plays a crucial role in the ad campaigns of your business. While you analyze your CPM, you can get an insight into the ROI and your overall ad spend. This will help you budget in a more efficient way to get the best results under a limited budget.
Remember. The lower your CPM, the lower is your ad expenditure which indicates investment in other core business activities.
What's a good Facebook CPM?
On average, the cost per thousand impressions is $11.20. It depends on the ad quality, competition and many other factors.
A good Facebook CPM for some of the popular sectors currently includes:
$1.38: General retail
$1.00: Health and beauty
$1.75: Editorial and Publishing
$0.78: Entertainment industries.
This estimate varies across other industries.
A good way of determining whether you have a good CPM is to compare an ad or ad sets with other ad or ad sets.
How to track a Facebook CPM?
You can track your Facebook CPM typically from the Facebook Ads Manager. Here is the step by step process.
Step 1: Open Facebook Ads Manager
Step 2: Click on the Ads tab on the right side
Step 3: Pick the duration you want to view the impression count from
Step 4: Click on Performance and Clicks from the Columns dropdown.
Step 5: Scroll and find the column CPM(Cost per 1000 impressions).
Common Reasons that Cause a High Facebook CPM
Some of the typical reasons that may hike your Facebook CPM rates are:
When your audience views the same ad too many times, Facebook tends to limit your ads' deliverability to different extents, resulting in ad fatigue. In such cases, you can probably find your CPM rates soaring high.
Low relevance score
The Facebook algorithm focuses on displaying ads that have the highest relevance to the targeted audience.
Hence, if your relevance scores are less, which are again dependent on your quality ranking, engagement rate ranking and conversion rate ranking, your ads will not be displayed to your targeted audience, resulting in a higher CPM.
Restrictive placements & campaign
Sure, choosing the right ad placement is essential. However, if you are limited to specific ad placements and are not open to others and automatic placements, you may end up spending higher than it's expected.
It's Facebook being a weirdo
At times, when the Facebook algorithm goes haywire with the wild swings, you may experience a higher CPM than usual. You can use automated rules or facebook automation software to pause your ads, ad sets and campaigns automatically that see a high CPM.
How to Lower your Facebook CPM
To keep your ad reach and click-through rate optimum while lowering your Facebook CPM, here are some top ways you can consider for your ad campaigns today. Let's check them out.
Target the right relevant and broader audience
You can create a fantastic ad, but if it doesn't reach the right targeted audience, what is the need to create one in the first place?
You need to ensure that you optimize your target audience base. Find the audience that is likely to engage with your ad rather than just looking at them. The higher your audience engagement, the higher are your relevance scores(we will discuss this in the next point) and lower CPM.
Start by defining your target audience based on their lifestyle, interests, and behavior, using different tools from Facebook like the Facebook Audience Insights, etc.
Narrow down your audience base and exclude the ones who do not have any relevance to your brand.
You can achieve a higher CTR and conversion even while paying less CPM with a better-targeted ad campaign.
Improve relevance score
Since facebook focuses primarily on user experience and prioritizes "relevant" ads way above the regular ones, you may need to optimize your ads to lower down your CPM rate.
The more relevant your ads are to your targeted audience, the lesser you will pay for them. The Facebook algorithm shows the most relevant ads to the right audience, taking care of your CTR and other metrics.
To analyze your relevance score, you need to have a complete picture of three essential metrics from your ad campaigns:
This is based on user feedback, page reviews and post ad experience, which is your landing page. If you use clickbait, misleading ad content or are not transparent enough with your ads, you are definitely going to get ranked pretty low here. Even worse, if people report or hide your ad, your CPM can go higher in no time.
To regulate your quality ranking:
- Avoid low-quality attributes from your creative for your ads.
- Do not use any sensationalized language or click baits on your ads.
- Be crystal clear and honest about the product or service you promote and optimize your landing page to maximize user experience.
Engagement Rate Ranking:
Facebook Engagement refers to the clicks, reactions, and comments on your ad campaigns. Apart from viewing your ads to the target audience, you should also encourage them to engage with them.
Conversion Rate Ranking:
The conversion rate measures the number of conversions your ad campaign drives. You need to have high conversion rates to get higher relevance scores on your ad and a lower CPM. Targeting your audience, improving your cta, landing page, optimizing your marketing funnel, etc., are some excellent ways to drive more conversion to your ad campaigns.
Create a lookalike audience
A simple yet effective approach to lower down your CPM is to implement custom and lookalike audiences. Upload a list of customer emails and allow the platform to create lookalike audiences with it. This will help target a broader audience base, which is likely to add to your conversion rates even when the CPM is relatively low.
Work on the ad creatives & improve the ad's relevance scores
Remember when we said your engagement rate has a lot to do with your CPM? If you want more people to engage with your ads, you need to implement compelling ad creatives. With countless ads flooding the internet and the short attention span of audiences, you need your ads to be compelling enough to grasp their attention and click on them.
One of the best ways to work on your ad creatives is to choose video ads as an ad format. Visual cues work best when it comes to grabbing the attention of audiences. Facebook allot most of its ad space to video ads. Since video ads are slightly tougher to create, advertisers skip on them, resulting in higher CPM and lower engagement rates. Hence adding video ads to your campaign is the perfect opportunity to outshine within the crowd.
You can either hire a videographer or an in house designer to create your videos. If you don't have a budget for that, you can simply create your video ads using software like Canva, etc.
Do A Split Testing (A/B Testing)
Split testing is the ultimate way to test ads and understand what works best for your campaigns. Use the A/B testing feature from Facebook and get a detailed analysis of the best performing campaigns for your business.
You can view how well your audience is responding to your content and get the most positive response. This way, you can focus more on high-performing ads than low ones, resulting in a lower CPM cost.
Do more placements OR set to automatic placements
Your Facebook ad size and placement plays a crucial role in the success of the advertisement and CPM. There could be many advertisers bidding for that specific feed placement. If you choose other placement or automatic placements, you can get that on a lower CPM compared to others!
Change your campaign objective
If you already have multiple campaigns, it is probably time to step up your funnel and level up your objectives. For example, if your ad objective was to achieve more purchases, try link clicks.
The key is to be specific and choose the right objectives. Sometimes the Facebook algorithm may find it hard to find the right people to show your purchases objective since it doesn't occur many days of the week. In such cases, you may have to switch it up again.
Retarget website visitors
Retargeting, also known as re-marketing, is a critical stage in the marketing funnel that focuses on the audience who have visited your website before but didn't complete the purchase yet.
Showing your ads to retargeting audiences, also known as warm audiences, is an incredible way to improve your engagement and conversion rates while lowering down your Facebook CPM. This is because these people have already viewed your brand and are likely to convert with just a few subtle nudges.
To target your warm audiences, you need to install the Facebook pixel, track visitors' activity, and report it to Facebook. Using this data, you can easily create an audience list based on their actions and display your ads to them for quicker conversions.
Change your bid type
Now, changing your bidding type to optimized CPM or oCPM is also a good way to lower down your CPM rates. While you select the oCPM bidding type, Facebook will show your ads only to the people interested in your products and services. Thus, this way, your conversion will grow while slashing down the CPM.
Set a target ROI & regulate your ad budget control
If you do not set a fixed ROI, you may go spendthrift and spend wildly on your ad campaigns while getting your CPM higher in no time. Hence, you need to set a target ROI and allot a limited budget to the goal.
Start by selecting optimize for clicks, pay for clicks within your Facebook Ad Manager console, and monitor it for a few weeks. If you have CTR 1% or above, switch to optimize for clicks, pay for impressions.
Doing so can help reduce our CPC by 10-15% while lowering your CPM rates.
While running larger ad campaigns, the costs can go haywire. However, with such measures, you can get efficient ROI for longer periods with reduced expenses. Thus, extend the scheduled time of your ad campaigns, and you are good to go.
Always have the right CTA for your ad
Adding a strong call to action is an indispensable necessity for your ad campaigns to strive. Including a strong call to action or a specific direction to your audience significantly increases your conversion rates even at lower CPMs.
Since your Facebook CPM determines your expenditure on your Facebook ad campaigns, you need to keep it as low as possible while maximizing the results. Most of the factors that lead to higher CPM are around user experience. Hence, it is important to curate the most relevant and informative ads compelling enough for visitors to click on them and transform them into your conversion without burning a hole in your pocket! Furthermore, stay open to new ad placements and experiment with the other elements in your ad to lower down your CPM. By following these few tips, you can effectively lower down your CPM rates while achieving your objectives from your ad campaigns!