Understanding Facebook CPM: Strategies to Drastically Lower Your Ad Costs
Has your Facebook CPM began to creep up in recent months?
Then you'll be relieved to know that CPM isn't a fixed cost. It's something that can be managed with the right strategies and tools. But before you can hone in on your CPM, you must understand the broader context of Facebook advertising.
In this guide, we'll explain why Facebook CPMs are important, what influences their rate, and how to optimise them. You'll have ads firing on all cylinders in no time!
What is CPM in Facebook Ads?
Ok, let's start with basics: what is CPM?
CPM stands for Cost Per Mille (or Cost Per Thousand). This is the price you pay when your Facebook advertisement has received 1,000 impressions, or been seen 1,000 times.
So, why 'Mille' when it's by the thousand?
It's just a fancy way of saying 1000 - the more you know!
Why Facebook CPM Matters
Facebook CPM is a metric that's a digital advertiser's north star. It's like a compass for your performance - navigate it properly and you'll be rewarded with great success. Ignore or misuse it and you'll be stuck in no-man's land.
Ok, putting fancy analogies aside, it's the key metric for measuring the efficiency of your Facebook ad spend. The lower you can get your CPM, the more cost-efficient your advertising will be.
When you decrease your CPM, your ad is reaching the same amount of people (or more!) for a fraction of the cost. You can then advertise longer, achieve broader visibility, and potentially see a higher ROI.
Here's a deeper dive into what a lower CPM means for your business:
- Cost efficiency: If you have two ad campaigns, but one has a lower CPM, it means you’re getting more impressions for the same budget. This is why optimising your campaigns for CPM can have huge returns, long term.
- Longer advertising timelines: A lower CPM means your budget will go much farther over time. When your ads (which are proven to work) can continue running, you'll gain more ad leads and sales.
- Better engagement: CPM doesn't directly measure engagement, but a lower CPM strongly indicates your targeted audience like your ads. When people engage, they're more likely to purchase your products or services, giving more ROI.
- Budget reallocation: The money saved from consistently achieving low CPMs can be reinvested into other areas. For example, you can use the extra funds to hire additional staff to handle your increased business.
- You're strategically on the right track: As said, a low CPM indicates your ads are being well-received. This, in turn, means that the components of your ad campaigns are on-point, i.e. ad format, creative and targeting. You can now perform A/B testing to fine-tune your ads and to achieve an even lower CPM.
If you're new to Facebook advertising, check out our guide on creating a Facebook ad account to get started. From there, you can start posting ads and skyrocket your conversions!
How to Calculate CPM?
Facebook calculates CPM by dividing your total ad spend (on that ad) by the total number of impressions it received.
So let’s say you spent $100 on an ad set and it was seen 10,000 times. Then your CPM would be calculated thusly:
Facebook CPM formula
(Total ad set spend/number of impressions) * 1,000 = CPM
($100/10,000) * 1,000 = $10
Your CPM would be $10.
How to Find Your CPM on Facebook?
If you've run past ads or currently running campaigns, you can find your CPM in your Facebook’s Ads Manager.
To do this:
- Go to your ‘Meta Business Suite’.
- Click on 'Ads Manager' on the left sidebar to go to your ‘Campaigns’ page.
- Look to your right until you see the ‘Columns’ column.
- Click on it and select 'Performance and clicks'.
From here, you can view and compare your CPMs of past Ads/Ad Sets to see which ones stand out. If you're running A/B tests, you can compare the CPM of each test to discover which format, creative or targeting is most effective.
What is a Good CPM on Facebook Ads?
Facebook CPM varies in price. And you've probably noticed this in your own campaigns - some simply get higher CPMs than others.
To better judge your campaigns, start comparing them with industry benchmarks. As different industries have their own CPM averages, benchmarks give a good indication of what yours should cost. These averages, however, seldom remain static; they are always changing depending on the current market trends.
Global CPM Benchmarks for March 2023
In March 2023, the worldwide average CPM for Facebook ads showed notable differences across industries:
High-range CPM sectors:
- Technology: $9.98.
- IT: $8.96.
- Consulting and Professional Services: $8.93
- SaaS (Software as a Service): $8.26
Mid-range CPM Sectors:
- Apparel and Footwear: $5.99
- Healthcare: At $5.78
- Health and Wellness: $5.73
- E-commerce: $5.33
- Education: $5.3
Low-range CPM sectors:
- Food: $2.6
- Manufacturing: $2.4
These numbers provide a reference point to provide you with a better gauge of your CPM.. If it's higher than average, you may need to tweak your targeting or ad copy. But if it's lower, you’re clearly doing something right and should scale your campaigns!
It's also worth noting that CPM averages often change weekly and monthly. In the Revealbot chart below, the average U.S Facebook CPM in 25 July - 01 Aug ‘22 was $11.17. By 31 July to 7 August ‘23, it had decreased to $8.78, a 21.39% drop. This sharp decline in the CPM average means it’s worthwhile to track.
You can even view CPM averages by their respective campaign goals. For example, if you're running a lead generation campaign, the average CPM from 17 April - 24 April was $23.72. Ofcourse, this is a general average and will depend on how you set up your campaign.
Facebook CPM by Country
CPM rates also depend on your country, mainly due to the following reasons:
Economic indicators: A country's GDP and purchasing power affect CPM rates. Advertising costs are generally higher in wealthier countries i.e Switzerland and Luxembourg, and lower in developing countries i.e India and Pakistan.
Competitive landscape and market saturation: Every country has a unique competitive landscape, and this affects Facebook CPM rates. If there are many Facebook advertisers in your target market, expect your CPMs to be higher. For example, if your country has a large aerospace industry, you will face more competition when trying to promote an aerospace product.
User Engagement and Ad Relevance: Countries engage and purchase differently, with some countries being more social media-savvy and others preferring traditional channels like television and radio. The UK and Ireland, for example, have higher CPM rates than other countries due to their high degree of user engagement and ad relevance.
To give you some perspective, here is a CPM snapshot of the top 15 countries:
What is Customer Feedback Score
Customer Feedback Score is a rating given by your existing customers to you based on their overall experience.
To ensure businesses are delivering the goods i.e quality products or services, Meta collects user feedback via automated surveys to recent customers. They also track how consumers interact with your Facebook business through online reviews and ratings. Based on both sets of criteria (good or bad), Meta assigns a score.
Why does Customer Feedback Score matter?
When your business receives a significant amount of positive consumer feedback i.e. high ratings, reviews etc, Facebook deems your ads as high quality, rewarding you with lower CPMs and exposure to better quality audiences. And vice versa.
In extreme cases, where feedback suggests a violation of Meta's advertising guidelines, Meta can stop that business from advertising altogether. This could range from business discriminating against its customers to engaging in fraudulent activities.
How to Find Your Customer Feedback Score?
Every businesses' customer feedback score is unique as customer experiences vary. Some businesses, for example, have outstanding customer service, but deliver subpar products. Oppositely, you have businesses that provide high-quality goods but never pick up the phone or return customer emails.
The first step to improving your business' overall customer feedback score is to find out what it is. To do so, follow these steps:
- Go to Business Support Home.
- Scroll down and click on 'View my accounts'
- Select your business account, and business page.
- You'll then see your customer feedback score, along with your customer's reviews of your business.
Customer feedback scores range from 0-5. If your score falls below 2, you're more likely to get charged higher CPMs. And if you get a score of 1, don't be surprised to find your CPM increases dramatically. Remember that Facebook will penalise or even terminate your ad account that consistently remains under the penalty threshold.
How to Improve Your Customer Feedback Score
Ok, let's get to brass tacks - improving that sacred customer feedback score.
Well, since scores are based on customer feedback, you just need to make your customers happy. While you could just take a holistic approach and improve your business in general, it helps to look at your negative reviews and go from there:
- Scroll down to “Where your Feedback Comes From”, and you should see three tabs:
- Product Quality
- Shipping Speed
- Didn't Receive Item
Each provides a percentage score out of 100 - the higher the better. As such, you'll want to focus on areas that have the lowest score.
Along with your percentage, you'll also get a list of customer reviews. Read through your feedback list and identify complaint commonalities. For example, if half of your product quality complaints were regarding the same product, you can retrieve the product, investigate it and take action.
If you're seeing low percentages across the board, start reviewing your entire product lineup and shipping process. Your products (even on the cheaper end) should meet customer expectations and be packaged securely. Additionally, your shipping process should be as efficient and smooth as possible - no late deliveries or missing packages!
Of course, you can't please everyone and your customer feedback score won't always be 100%. However, with a little diligence and effort, you can get it high enough to keep you safe from penalty thresholds.
Key Drivers that Impact CPM
Every advertiser wants to maximise ad performance and cut down on campaign costs. Thankfully, there are several ways to reduce your CPM. But before we dive into solutions, lets under the key factors that impact them:
- Your industry: As mentioned, every industry has their own unique CPM average. This is because every industry is unique e.g the tech sector is known for its rapid technological advancements, and high-value products.
- Ad Relevance Score: Facebook's relevance score is based on how well an ad resonates with the audience. If you’re receiving many interactions, Facebook will reward you with a higher relevance score and a lower CPM. Additional higher relevance score will also result in more favourable ad delivery.
- Precision in Audience Targeting: Broader audiences let you reach more people, but lead-quality is often low. If your niche is relatively small, it's best to use more precise targeting and opt for a narrow audience.
- Ad Placement Choices: The platform where your ad appears, be it the Facebook News Feed, Instagram Stories, or the Audience Network, can influence the CPM. Are your customers more active on Instagram? Or are they more likely to convert through a video ad on the Audience Network?
- Bidding Strategies: Opting for manual bidding allows you to set a specific amount you're willing to pay for 1,000 impressions, directly affecting your CPM. However, you don't want to overbid and waste budget, or underbid and miss out on potential conversions.
- Supply and demand: CPM is also impacted by supply and demand. If your niche has more advertisers bidding aggressively for a spot in the news feed, expect higher CPMs.
6 Ways to Lower Your CPM
Now we understand why CPM matters for your business, let's explain how to lower those costs:
- Up Your Ad’s Relevance Score
As mentioned, Facebook heavily rewards ads with high relevance scores.
Facebook uses its Ad relevance diagnostics to identify how relevant your ads are to its targeted audience. Ad relevance diagnostics can be broken down into three components:
- Quality Ranking
- Engagement Rate Ranking
- Conversion Rate Ranking
Once your ad gets over 500 impressions, each of these metrics gets one of five possible ratings:
- Above Average
- Below Average (Bottom 35% of ads)
- Below Average (Bottom 20% of ads)
- Below Average (Bottom 10% of ads)
It's your overall total that determines your relevance score. If you're getting 'average' to 'above average' ratings in all three categories, you can expect a high relevance score.
This system gives you some guidance on how to optimise your ads, eliminating some of the guesswork. Below we'll explain how to improve all three metrics for a higher relevance score and lower CPMs.
Quality ranking measures how well your ads are perceived quality compared to ads targeting the same target market. Signals, such as user feedback, quality of ad components i.e copy, visuals etc, and other ad elements that may mislead, over sensationalise, or come off as disingenuous.
To improve your quality ranking, ensure to do the following:
- Don't mislead customers: Refrain from using misleading tactics like clickbait, fake news and inaccurate products. For example, mobile gaming apps are notorious for using different game previews that don't accurately reflect what the game is about.
- Optimise your landing page experience: Your landing page should be quick to load, easy to navigate and a natural followup from the ad.
- Address consumer complaints: Don't just 'take onboard' feedback. Show customers that you're actively responding to their complaints and quickly acting on them.
- Create great creativity: Use captivating high-quality images, videos or copy. Creative is essentially the door to your business, so make it as inviting as possible. To get inspiration for your ads, analysing competitor ads from the Facebook Ad library lets you see what works best in your industry.
Facebook engagement is all about ad content interaction. The likes, comments and shares that you achieve shows how well users react with your offerings. An ad with a lot of high-quality interaction is also more likely to also have a higher click-through rate.
To up your engagement rate, try the following:
- Create a hook: This could be an intriguing question, a powerful statement to evoke an emotion or a statement of fact that demonstrates your advanced topic knowledge. This can be in the ad copy, description and headline.
- Create shareable content: Content that is easily shared on Facebook can lead to more engagement. Trending topics and topics of interest that are relevant to your target audience are more likely to be spread around.
- Be Creative with your ad creative: Include GIFS, emojis, memes and other creative to get attention. If you can make a user smile, laugh or be intrigued, you're more likely to get your message across.
- A/B test often: Even if your CTR and engagement is great, you can always improve. Try testing different variables i.e visuals, CTA position etc, to see how it affects the engagement rate.
Conversion Rate Ranking
Your conversion is essentially any ad's end goal. A conversion can be either a sale, an app download, an opt-in for your email list or any other desired user action. While high engagement rates are great, it means nothing if users aren't taking that desired action.
To increase your conversion rates, apply these tips:
- Precise CTAs: Create a CTA that's clear, concise and relevant to your business proposition. You can also position it prominently so it stands out in the ad.
- Relevancy: Make sure that your advertising’s content is relevant to the user and their interests. A good way is to provide solutions to their pain points.
- Timing: If your business has seasonal trends or promotions, switch up your ad copy accordingly to stay relevant. For example, you don't want to be advertising Christmas products in the middle of spring.
- Experiment with CTAs: Even if your CTA is for customers to make a purchase, try pushing your objective higher up on the funnel and get them to sign up for a newsletter first. Making more connections with customers is always a good thing!
- Optimise Your Target Audience
If you've started with a broad audience, try narrowing it down to a more specific one later on. Look for patterns in your analytics to see which demographics are your top converters. If people aged 45-55 are most responsive to your service, test this by targeting ads specifically to that age group.
You can also create ad sets to target different audiences simultaneously. For example, one advert can target a specific age group while another can target website visitors. From there, you can perform A/B tests on your top performing ads.
Remember that when running multiple ads in an ad group, Facebook will automatically optimise the delivery of each ad. This means Facebook will allocate more of your budget to your top-performing ads, leaving your lower engagement ads out to dry. If you want to check the long-term performance of each one, you'll want to turn the 'Advantage campaign budget' feature off.
Finally, when you do discover high-converting audiences, you can create lookalike audiences for your new campaigns. This is a great way to fuel your growth!
- Use Retargeting to Convince Indecisive Leads
Retargeting, also known as remarketing, is a digital marketing strategy that involves displaying ads to people who've already engaged with your business. This can range from viewing or liking a social media post to visiting your website or downloading a PDF.
Retargeting helps to remind past leads and customers about your business and encourages them to return. Since they've shown interest in your brand before, it's a gentle way of nudging them towards a conversion. You can also target current customers, as they're likely to purchase from you again if they were satisfied prior.
When thinking about your retargeting strategy, remember that not all leads are equal. For example, website visitors who've abandoned their cart have a higher buyer intent than people who simply liked your post. Out of the two groups, it's more cost-effective to retarget the former instead of the latter.
On top of that, you'll want to adjust your ad creative and messaging accordingly. If you're targeting abandoned cart users, remind them of what they missed. For instance, your ad could say, "Forgot something? Complete your purchase and enjoy a special discount!" Not only are you reminding these potential customers, but you're giving a special offer as an incentive to complete their purchase.
- Show Your Ads in the Right Places
To understand your target audience, you’ll need to find out where they're spending their time on Facebook. This could be their main feed, Stories, Reels, or Marketplace, among others. It's important to display the right ads in the right places for maximum effectiveness.
According to Hootsuite, the following number of active users spend time in the following places on Facebook:
- Stories: 1.25 billion users
- Search results: 733.1 million users
- Facebook Marketplace: 495.7 million users
- Instant articles: 313.6 million users
Based on these figures, Stories are a great way to reach more users. However, where your target market is most active will determine where you post your ads.
- Understand Where Your Consumers Like to Interact
My friend runs a customised cake business. He has a website, Facebook page, and Instagram account, and most of his customers find his business on Google - which leads to the website.
Contrary to his expectations, very few of these customers actually place their orders on the website. Instead, after landing on the site, most navigate to the business's Facebook or Instagram profiles to finalise their orders.
The takeaway is this: it's not just how and where consumers find your business, how they prefer to interact with it is also important.
So how does this apply to your CPM?
Understanding your consumer preferences can help you to design better ad campaigns and target them accordingly. If your orders derive mainly from Facebook Messenger, then your CTA should be focused on the Messenger interface.
- Monitor your Frequency to Avoid Facebook Ad Fatigue
Ad fatigue occurs when your ads have been seen by the same audience multiple times. As a result, viewers become familiar and even bored with your ads, resulting in lower engagement and conversions.
The good news is, Facebook provides a frequency cap tool that lets you adjust how often the same user sees your ad. You can set your frequency cap to show ads less frequently to a larger audience, or show ads more frequently to a smaller audience.
Additionally, you can increase ad frequency to those who have already seen your ads in the past. This can help remind users about your product and motivate them to actually take action.
When setting a frequency for an ad campaign, you'll receive a predicted frequency average from Meta. This shows how often users will see your ads on average throughout your campaign's duration. However, it's worth noting that campaign average frequency is typically lower than the cap you put in place.
How to set a Frequency Cap for your Facebook ad campaigns
Users can set their frequency caps during the ad set creation stage. However, it can only be done for Awareness campaigns.
- Go to Ads Manager and select 'Create'
- Choose 'Awareness' as your campaign objective.
- In the 'Awareness' section, click 'Show more options'
- You can now set your frequency cap.
How to Find Your Ad Campaign's Frequency
Your ad campaign frequency can be found in your Ads Manager. And by default, your frequency metric should be shown alongside your "Performance" set of metrics i.e. Cost Per Result, Reach etc.
If you don't see this frequency metric, do the following:
- Go to Ads Manager.
- Select “Column” towards the right hand side of your screen.
- Click “customise columns” from the dropdown menu.
- Select “Frequency” and it will show up as one of the metrics.
The number shown under the Frequency column represents the average number of times a person saw your ad. Use this number along with your own judgement to help determine the best frequency for your ad campaigns.
A general rule of thumb is to have a frequency between 1.8-4 for optimum campaign performance. If frequency exceeds 4 and you're not getting the desired conversions, it probably means your target audience isn't resonating with your ad.
6. Partner Up with Influencers
Did you know that 49% of consumers look to influencers for purchase recommendations? This information was discovered in 2021, but the same trend still holds true today!
Partnering up with influencers can drastically increase your brand’s visibility and engagement. But just as importantly, it adds social proof and trust to your campaigns, thus driving sales.
Social proof basically means that people are more likely to purchase a service or product if others have done the same. This concept is especially important in the e-commerce industry, since customers can't examine products beforehand. They need reassurance from other customers or influencers before they purchase.
While you'll naturally get social proof as more and more consumers purchase your products, influencers can help you get the ball rolling.
When you get social proof, your target audience will already know who you are and respond to your ads. This allows you to reach more consumers and reduce your Facebook Ad CPM.
With the right influencer, you up your online advertising game instantly.
How MagicBrief's Advertising Library Can Help Decrease Your CPM
MagicBrief is a great tool to help you find and store the best adverts in your industry. Our advertising library allows you to group your ads into collections, making it easier to keep track of the best performing ones.
Once you understand why your competitor's ads are successful, you can create variations that will give your digital advertising campaigns an edge. You'll also have access to the best ad creatives and strategies - all in one place.
Register today and use the MagicBrief Chrome extension tool, free of charge!
Save TikTok, Instagram and Facebook ads with a few clicks. MagicBrief gives you the tools to quickly optimise your CPM and boost conversions.
Facebook CPMs often make or break ad campaigns. If ads costs are too high for too long, you'll quickly drain your budget and stop posting ads. This leads to decreased brand visibility and could cost you precious customers.
But with the strategies outlined above, you can drastically reduce your CPM and get more conversions. It does involve trial and error, but with diligence and attention to detail, you'll be able to master Facebook CPMs in no time!
We hope this Facebook CPM Mastery guide has been helpful and given you the tools necessary for success. Put what you’ve learned to use, and we guarantee that your campaigns will start performing better right away!
Good luck, and happy advertising!