Facebook marketing can be tough. Sitting in front of a table of data that makes less sense than your 7th-grade algebra can leave you ending up with more questions than before.

I get it.

Grab a cup of coffee and let’s simplify it.

But first…

A lot of business owners (and marketers) give up entirely too soon. An ad budget with little to show in terms of revenue returns may be ditched without taking into account the value of the data it has procured.

Data in this day and age is worth more than gold.

The more you give to Facebook, the more it gives back.

Patience, execution, and confidence will allow you to take your marketing campaigns beyond what you thought previously doable.

To start…

There are three essential components to a campaign:

  • Ad Creative
  • Targeting & Audience
  • Landing Page 

Let’s dive into how the different metrics Facebook uses to rank your advertising campaigns.

Return On Ad Spend (ROAS)

The output that typically matters most. Facebook calculates how much your ad budget has been able to return in terms of revenue.

A ROAS target above 3 is typically what you should be looking for in order to gain a healthy profit after COGS, overhead, etc.

Ad Relevance Diagnostics (Quality Ranking)

Facebook helps you diagnose underperforming ads across three dimensions of relevance: quality, engagement, and conversion. Facebook offered us this detailed chart in order to help interpret the diagnostics (and I feel it does a great job).

Total Impressions

The number of times a post from your page is displayed and whether the post is clicked on or not.

People may see multiple impressions of the same post. For example, a potential customer may see your ad in their news feed and then a second time when a friend shares it.

This is very different from “Reach” which is a measure of how many unique potential customers saw your post.

The total impressions is a great metric to use when deciding on whether or not a particular ad set is underperforming.

If a very limited audience has seen your ad, you should continue to run it and collect data. If a very large audience has seen your ad (and it’s not performing), you should stop the ad set.

Facebook makes it easy for us to gauge correlation: at around 500 impressions, Facebook begins to show us our Ad Relevance Diagnostic and at around 8,000 impressions Facebook has a very, very good idea of how well our ad is doing.

This should be one of the first things and last things you look at when deciding how an adset is performing.

Click-Through Rate (CTR)

This extremely useful number tells us how many times your ad was shown versus how many times people engaged with it. Unless you are specifically running an engagement campaign, your CTR (Link Clicks) is where your attention should be focused and not CTR (All) or just CTR.

Your CTR is an extremely important metric to determine how well your copywriting and imagery are doing. The average CTR is 0.90%.

As a marketer, you should strive to be above 1% CTR.

One important point I’d like to make: a high CTR can tell you that your ad creatives (copywriting and imagery) are performing well against your target audience but it will not tell you if your landing page will convert.

Cost Per Click (CPC)

Your CPC is a function of your conversion rate; the higher the conversion rate, the lower your CPC. Moz, a leader in eCommerce data tracking, has stated that the average conversion rate was 1.56%.

Let’s take a look at the numbers: if your conversion rate is 1% and your profit is $200 per sale, your CPC must be maximum of $2 to breakeven.

What does CPC tell us is it is higher than your breakeven price point?

If your CTR is high & Ad Relevance is high, your ad creative needs improvement to reduce CPC.

If your CTR is high & Ad Relevance is low, your target audience needs improvement to reduce CPC.

If your CTR is low & Ad Relevance is high, your ad creative needs improvement to reduce CPC.

If your CTR is low & Ad Relevance is low, it tells us that either (or both) your ad creative and target audience needs improvement to reduce CPC.

Cost Per M(thousand) (CPM)

Your CPM measures how much you will need to pay to show your ad set 1,000 times and is the first KPI (key performance indicator) that is available to you. Your target is to keep this metric as low as possible.

Let’s look at the numbers: with a conversion rate of 1% and an assumed revenue per profit of $200, CPM breakeven per 1 sale = conversion rate * 1000 = 20. In laments terms, if you stand to make $200 from every sale and your website converts at 1%, an ad paying above $20 is simply not going to be profitable.

Engagements

Engagements are a cheap and efficient way to validate your ad copywriting and imagery. If people are commenting, liking, and sharing your ad, it’s a great sign that it will initially do well (as long as you are targeting the right audience).

Customer Feedback Score

This is a relatively new metric and is rapidly becoming the most important piece of data to monitor. Facebook has introduced surveys after your company has run ads and asks customers to give feedback on their experience.

Depending on how well your experience was with the customer, they have the option to rate you high or low, which has a direct impact on your ability to effectively advertise on Facebook. 

This goes beyond your ad creative and extends throughout the entire purchase funnel (including nuances such as your shipping times, refund policy, etc). Facebook is aiming to be one of the biggest eCommerce platforms of the new decade and they are starting now.

Performance Drop

This is not a metric but something I want to discuss briefly. If you have been running ads for a long period of time (a few months onwards to a year) and the performance is dropping, consider upgrading your ad copy and imagery first and then fresh targeting.

The process of decreasing performance (or ad decay) occurs when you’ve exhausted your audience, your ad copy and imagery have burned out, or there is something wrong with your Customer Feedback Score.

Daily Budget Spending

Last but not least, one of the most frequented questions when working with clients that I receive is how much money should they be spending on ads per month?

There is no gold standard when it comes to ad budget, but what I will say is this: if you have less than a few thousand per month to spend, treat the ad campaigns as data building campaigns and less as revenue-building campaigns.

For example, if you are a bootstrapped company looking to begin advertising on Facebook, your $500/mo budget may not immediately bring in much revenue but it will bring in data that will be scalable in the future.

Setting up your Facebook pixel properly and allowing Facebook to collect as much data as possible will absolutely set yourself up for success in the near future (when you decide to increase your monthly ad spend).

A well thought out ad campaign (even with a low budget) can absolutely lead you to higher revenue once Facebook has had enough time to figure out your most profitable audience.