Facebook Advertising Best Practices 2018 — The Metrics That Matter
Time to interpret this madness...
If we had to say one most important Facebook ads tip it would be this: Know Thy Numbers. And that’s it! One tip to rule them all.
If you don’t know your metrics, you won’t be able to create a powerful advertising campaign. Your numbers are your best friend, because they tell you everything you need to know about the health of your campaign.
Facebook advertising is really just a numbers game. You play with different levers until all of the different pieces align, and then you scale up.
The problem is, Facebook bombards you with so many different metrics all at once. It can be incredibly difficult to decipher which ones really matter to your campaign and which don’t.
If you’re like me when I first started with Facebook ads, you’re probably feel a little lost, and you probably thought that it shouldn’t be this difficult to interpret!
Instead of waiting for Facebook to redesign its UI, let’s break down which metrics matter so you can navigate the data madness.
*Disclaimer: I’ll be using our company’s software, Uppercase Analytics, to illustrate some of our points. It’s a free software platform that is currently in beta testing. You can sign up to use it for free here. You are not required to purchase it to get value out of this series! I will also show you how to perform different functions in Business Manager or by hand when possible. I’m just going to be sharing my methodologies and workflow.
Ok, let’s get started! The first thing you need to consider is the goal of your ad. Are you selling something, generating leads or app downloads? Depending on your objective, your metrics will change slightly. I’m going to assume you’re trying to make sales for this post, and I’ll explain the differences for the other two metrics at the end.
Facebook Advertising Metrics That Matter
Purchase — First and foremost, if your goal is to sell product on Facebook, your purchases (and cost per purchase) are the only thing that matter. Facebook uses your Facebook Pixel (more on proper installation of your Pixel in the near future) to determine how many people purchase the product on your website. You should always be tracking how many purchases happened as a direct result of your ads.
Cost per Purchase — Cost per purchase is the total amount you spent in advertising divided by the number of purchases, telling you the cost for one additional purchase. This number is very important because it tells you your margins for each sale. If the cost per sale is higher than the average purchase amount for your businesses, you’re losing money on your ads! However if this number is less, you’re making money. Then, you need to analyze how much less.
For example, if you have a product that sells for $100 on an ecommerce website, and your results are $20 cost per purchase, you are making $80 on each ad! At this point, you consider your cost of goods sold, and determine how low you need to get your cost per conversion to make your goal profit.
ROAS — ROAS is short for Return On Ad Spend, and it’s a multiplier that tells you how much you’re profiting off of your ads. To find this number, You divide your average purchase price by the cost per purchase. This number should be above 1 — this means you’re spending less on ads than the revenue you’re bringing in! If it’s below 1, it means you may be losing money on your ads.
In the example above, to find ROAS you would divide $100/$20 and your ROAS=5.0. This means you’re making 5x what you spent on your ads back in revenue. Most companies aim to have a ROAS of at least 3.0, although it may take some testing, optimizing and adjusting to get there.
The three metrics above are by far the most important, and the ones listed next are in the second tier.
That means that if the three metrics above are hitting your goals, nothing else really matters! You may be able to optimize a bit more, but at the end of the day, you’re hitting your goals. Congratulations!
If you aren’t hitting your purchase goals, you can look to the next stats to help figure out why. The screenshot below shows these two metrics first and foremost!
Reach — Reach is the number of people who have had the opportunity to see your ad (it’s shown up in their feed, but whether or not they actually looked at it is up to them!). Reach matters because it allows you to make informed decisions about when your ad has been exposed to enough people to decide if it’s performing or not. It’s best to use an a/b test significance checker to determine this definitively (a free feature on Uppercase Analytics), but Facebook doesn’t offer this. Instead, a good rule of thumb is that you need to reach at least 5,000 people before making decisions on your ads. This gives Facebook’s algorithm some time to adjust. This works in 80% of the situations.
Frequency — Frequency measures the amount of times people in your target audience have seen your ad. This metric matters because if it gets too high, your ads may start performing more poorly because your audience is tired of seeing your ad. Once your frequency on an ad reaches 4, you should start thinking about changing your ad creative and/or targeting, and once it crosses 6 it’s definitely time to change it up. Our software alerts you when your ads cross these thresholds so you don’t need to check!
Link Clicks — This metric measures the the number of people who clicked on your ad. Compare it to your Click Through Rate, which is the number of people who clicked out of the total number of people who saw your ad. On average, you should shoot for a CTR of at least 1%, but if it’s in the 3–5% range, you know your audience is loving your ads!
Your Link Clicks are important because it gives you an idea of the amount of traffic you’re sending to your website. Compare this number to your number of purchases (or number or leads or app downloads) to see what your conversion rate is.
When setting this up in Business Manager, be careful because there are many different types of clicks you can measure. Clicks (all) measures any sort of click on your ad, not just clicks to your website, so it becomes an inflated number.
Cost per link click — Even if your campaign’s end goal is purchases, your cost per link click still matters because the more people you send to your website, the more chances you have to make a sale. The average cost per link click on Facebook is just over $1.00 now, but this varies by industry. If your cost per link click is over $5.00, there is definitely room for improvement. In the next few weeks, we’ll publish posts on exactly how to test strategies to lower your cost per click.
Building a foundation in Facebook advertising, or any other type of social advertising, begins with understanding these metrics. I suggest spending a day really thinking through these different metrics until you feel very comfortable with the stats they represent. It will make understanding your Facebook ads much easier!
Next, we’ll talk through how to figure a budget for your Facebook ads. How much will you need to spend to hit your campaign goals? Stay tuned!