The ROI of a Facebook Ad

If you are looking for a specific number, Facebook ads have an average ROI of 400%, at least they do with our clients; but that number is a complete situational statistic and if you are thinking about basing your marketing off of this, then for Pete’s sake, please read on:

There’s no better feeling in business than when you have leverage.It could be leverage on a system that makes things move smoothly. It could be leverage against your competition that gives you a seemingly unfair advantage. It could even be leverage on your customers that allows you to improve their lives in ways that are better and easier than ever.

Leverage is what catapults companies forward with great momentum.

In marketing, certain platforms give a brand more leverage than others, but this fluctuates frequently as new platforms pop up and others make changes.

A platform that you all know very well that has been consistently creating amazing leverage for brands over the past 10 years is Facebook. Its engaged community is larger than any other current platform, including television and radio. And while the sheer numbers of people that use the platform regularly worldwide are staggering [2 billion], the real value is in the reach of its advertising platform.

10 years ago, businesses were marketing based on more traditional metrics like gender and income profile. Today, Facebook allows brands to target people based on what their favorite foods are and if they eat out a lot, or if they have a pet bird and just moved into town. It’s insanely specific. Any business owner or marketer can post a photo with his or her phone on Facebook and make sure that the exact people that they want to see it, do.

This is amazing leverage.

But just because the targeting is awesome, and you post something on Facebook, doesn’t mean that it will bring you results. Remember, every business has access to this platform, so your unfair advantage isn’t so unfair without one key ingredient: creativity.

A few years ago, the early adopters of Facebook ads did have an unfair advantage because their competitors probably had not jumped on board yet. But now businesses all over the world are running Facebook ads to their potential customers. The ones that are generating huge amounts of revenue are not the ones simply posting a picture of their service or product in a Facebook ad. The ones that are crushing it are the ones that are exploring the depths of their creativity and testing various forms of it against multiple audiences to see what people respond to the best. The ones that are crushing it are investing in video storytelling and utilizing the amazing segmentation to funnel various demographics of consumers and leads back to their websites or through the doors of retail locations.

The performance of your Facebook ads can be in the gutter if your ads are boring and lack creativity to connect with your prospects and potential customers. On the flip side, it could be skyrocketing if you know your customer, are willing to test various creative, and look at the data deeply enough to make decisions on how to improve.

So, back to the question at hand: what is the ROI of a Facebook ad?

The answer isn’t as cookie-cutter as you would like because of the creativity variable; but that’s not the only reason. There is also a little factor known as the “comeback principle”. This is the theory (backed by data collected over the past few years) that people see an ad on Facebook or other platforms, then they go to the search engines and other platforms to research the brands in the ad. They want to read reviews, look at the competitors and shop lower prices. People are very comfortable shopping on the internet, in fact it’s ingrained in the younger population’s blood – they grew up like this.

Once they research the product or service and what other options are out there, they either come back to make a purchase, or they do not. That’s not to say that they never do. We’ve seen purchases made by people who initially came through a Facebook ad visit a website 100+ times before they make a single purchase; but we’ve also seen people comeback once and make a purchase.

The takeaway is that no one has any idea what is going on in an individual consumer’s life that will make him or her purchase right now, or in 6 months. Sure, we can get an idea from historical data, but we never truly know.

For this reason, the ROI of a Facebook ad will be relatively low if you are looking at immediate sales, but extremely high if you are looking at overall revenue growth.  

Here’s an example to paint a picture and round out this article:

We ran a Facebook ad campaign that promoted a new product for one of our clients. We spent about a thousand dollars in ad spend over a month, and got about $2,000 in immediate sales from those ads. If you looked at this you would probably say that’s not very good; but when you look at the overall sales for that product across all platforms during that month and the month after, we knocked it out of the park. Website revenue of $9,000 looks a lot better, right?

Now of course, there were other factors at work here. We also had email opt-ins for people to get the product at a discounted price, we ran a couple of email campaigns for the product, and we also ran Facebook retargeting (still Facebook ads) to keep people engaged and reminded. All of this helped to increase the ROI of the ads.

The takeaway here is that while Facebook is a powerful platform, it won’t do squat for your business if you don’t have the creativity and understanding of the data off of which to base your decisions.

It’s like owning a Ferrari but not knowing how to drive. It’s going to be really expensive and not very enjoyable when you crash it into a tree.

 

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