How Does Facebook Advertising Work?
The first thing you need to differentiate is paid search and paid social. Paid search is something like Google AdWords where users will type a keyword on Google and when they get a page with search results, they would see a few ads on top of the regular search results. Paid search basically helps customers find your business, while paid social (such as Facebook ads) will help your business find prospective customers. The power of Facebook lies in its amazing ability to target a very specific audience that is the most likely interested in your services and products. Facebook has developed its targeting arsenal from all the years of users sharing their details, preferences, likes, interests and data, as well as getting data about users from 3rd party partners. This kind of targeting is not available anywhere else and that’s what makes Facebook stand out.
The Facebook Auction System
Facebook uses an auction system (like Bing and Google AdWords) to determine which ads will be shown and to which user. Facebook also uses something called a competitive value, which is basically how much each advertiser is willing to pay for a user to take a specific action like click on the ad or add a product to the cart. Facebook also takes into the account how much engagement the ad is getting, so the number of likes, shares, and comments on the ad is also part of the calculation that Facebook uses to determine how much you will pay.
Organic Reach On Facebook Is Declining
In the last couple of years, Facebook has started to lower the organic reach of posts on Facebook pages in order to force everyone to invest more money into ads if they want their posts to be seen by their fans and other people. The effect of it was very clear between late 2013 and early 2014 where Facebook pages saw a dramatic reduction in their organic reach (the reach of their posts to people who liked their page), just take a look at the picture below:
Basically, if you are relying on posting content and promotions on your Facebook pages to bring in more customers to your business, then you are in a bad place because almost no one will see your post in their newsfeed. That doesn’t mean that posting content on a Facebook page is a bad thing, on the contrary. But the graph clearly shows that if you want to make anything out of your social media efforts on Facebook, then you need to start advertising on its platform.
Easily Track Performance and ROI
When you spend money on advertising, the most important thing is to know what you are getting out of it. Even though general social media is a great and cheap business channel, it can be very difficult (if not impossible) to track return on investment for the time and resources you invested into maintaining them. On the other hand, with Facebook advertising, you can see exactly how much you’ve spent and what results it has provided.
Facebook ads manager lets you track a large number of performance metrics that will help you gauge performance and measure your return on investment. Here’s just a small fraction of data that is available to you for each of your campaigns:
- The number of clicks on your ads
- The number of times your ad was shown
- The number of likes, shares, and comments
- How much you are paying per click
- How much you paid for each conversion (e.g. lead or a sale)
This is amazing and you can easily see how much money you are making off your investment so you’re not simply throwing money at it and hoping that it produced some results for you. Compare that with something like flyers or radio ad where you have no clue did someone come to you because they’ve heard the ad on radio or did they bumped into you accidentally. If you know exactly how much you are profiting on each dollar spent, then you can sleep easily knowing that your money is well spent.