How Facebook Charge For Ads➞ Breaking down how the algorithm works & how Meta charges for ads

There are so many misconceptions and misunderstandings about how Facebook or Meta actually charges you for ads. For example, if you're running a lead generation campaign, you actually are not charged per lead. And it's important for you as a business owner to understand, one, what the service is that you're actually signing up for. So when you click that publish, what are you actually paying for Facebook or Meta to do? And 2, How are they going to charge your account? Understanding this foundation is what I believe the first step in creating a strategic approach to generating leads. And let me tell you, it does not have to be complicated. Even if you're not tech savvy, this does not have to be complicated. And that's exactly what we're going to be talking about in this video. We are going to be diving into the algorithm, understanding at a high level what the algorithm's role is and goals are. 2, we're gonna talk about how audience intention affects the way that you are charged. And 3, then we're gonna talk about the CPM, which is how Meta actually charges for serving your ads. If we haven't met before, my name is Shauna. I have been running paid social media advertising since 2015, focusing primarily on lead generation. And now I teach insurance agents, business professionals, and other entrepreneurs how to generate their own leads using social media. Media. So if you're interested in that type of thing, go ahead and hit that subscribe button. All right, so let's get into what we are going to be talking about today. So let's start off by talking about the algorithm. What is the Meta algorithm? So let's talk about what the algorithm is at a very high level. So I like to think of the algorithm as a little robot helper friend that is hanging out in the background, and his primary job is to pay attention to everything that you do whenever you're on the platform, and then to continue to give you content that is relevant to what you are interested in. Because the algorithm's number one goal is to keep you, the user, engaged on the platform. Think about it. If I am on Facebook and I'm scrolling through, he's able to serve me ads and make money from advertisers. But if I get off the platform, I no longer am a source of income for Facebook or Instagram. So the algorithm's number one job is to pay attention to what videos am I watching? Am I liking things? Am I commenting on things? What are my current interests? And that is why whenever you start to show interest in a specific topic, you're going to see more of it. Uh, Facebook and Instagram knows that I not only am interested in dogs, but I specifically like videos that have Australian Shepherds. It's because I have 2 absolutely crazy Australian Shepherds. So not only does Facebook know, oh, this person is interested in seeing dogs, but they also specifically understand that I respond more to posts and videos that show me Australian Shepherds. So his job is to create a set of rules that dictates what type of content is being served to me. So basically the algorithm is always paying attention to what you as a user is doing. Trying to make sure your newsfeed is relevant to you so that way you stay on the platform. And then when it comes time to actually serve you ads and try to get some actions from you, that it still fits in what your interests are so that way you continue to be engaged on the platform. Now obviously the algorithm is much more complicated than that, but at a very high level, what you need to know is the algorithm's job is paying attention to one, what you, the user, are doing on the platform and what your interests are. 2, paying attention to what the content is actually about, because he knows when he serves me a dog video, he knows if it has an Australian Shepherd in it and I'm more likely to respond well to it. And 3, working to make sure that what you are served on your newsfeed is relevant to you to keep you engaged on the platform. All right, so up next, let's talk about audience intention and what I actually mean by audience intention. I want you to take a moment and think about when you are on Facebook or Instagram and you see a post that is relevant to you. What actions are you typically going to take whenever you see a post? Are you going to stop and watch the video? Are you the type of person that will like the post? Maybe you leave comments on most posts that you see that are relevant to you. Will you follow a page, share the post, click on a link? Will you share information Will you give someone your email address if you're interested in the content that's being given to you? Will you interact with a brand off a platform or will you make a purchase? Now you might not know exactly what your tendencies are whenever you're on the platform, cuz you're not thinking it through, it's automatic. But I can guarantee you Facebook or the algorithm knows what you're most likely to do and what you're most likely to do on specific content. Facebook knows what action you as an individual are most likely to take. Now, on the backend of the ads manager, when you're setting up an ad to serve, you make a decision of what action you're wanting from someone. Do you want them to stop and watch a video, or do you want them to stop what they're doing and make a purchase? Facebook then has multiple different categories or optimizations that advertisers are able to choose. So if you want someone to like a post, then you're going to optimize your ad to try to go to the audience that is most likely to like a post. And Facebook knows what all of their individual users, what category they fall in. Now, if you're running specifically for lead generation, you are kind of in between consideration and conversion. Technically, whenever someone gives you their information and you've taken it, they have converted into a lead and it's technically considered a conversion. Now you can kind of see in my little triangle right here that more individuals that are on the platform would be good for an awareness ad. For example, if you want someone just to watch a video or to like a post, getting someone to emit that action whenever they're on the platform is much easier than serving them an ad, let's say for a Dyson vacuum and getting them to click on the link and then go over and spend thousands of dollars and make a purchase. So you can imagine if you're choosing the optimization of getting someone to just watch a video or brand awareness, and you're just kind of getting your name out there, it's going to be a little bit cheaper to get that action from individuals versus if you're making an optimization that is a little bit more intent, such as a purchase. Now, whenever you're running a lead generation ad, your ads kind of fall somewhere in between the consideration and conversion. Technically, whenever someone becomes a lead, it is considered a conversion. So your audience is kind of there in between the consideration, more so on the conversion end. All right. So how is all of this relevant to how Facebook actually charges for ads? Well, let's talk about that. So here we have Facebook's little hand, their little robot helper, the algorithm's hand sitting there. And we say, hey, Here are our ads. I want you to go serve these ads, go give them to people, but not just any people. I want to dictate what their age is, maybe the location they live in, other demographics and specific interests that they're interested in. So we give them all of the different targeting parameters that we would like them to go out and show our ads to. And then on top of that, We say not just anyone. I want people that are most likely to take the action that I as the advertiser want. This brings me to talking about how Facebook actually charges you for ads. They are charging you for getting you impressions, or in other words, for getting eyeballs on your ads. They are charging you for putting your ad out there on their social media platform and for getting eyeballs to actually look at your ad. Now, the technical metric for this is called the CPM. And CPM means cost per mille. Mille literally means 1,000 in Latin. So Facebook is charging you based on getting you 1,000 impressions or eyeballs on your ads. Now I do want to take a moment to differentiate between the metric reach. Okay, so the metric reach means unique individuals that have seen your ad. So for example, you could look at an ad and see that you have 500 under the reach column. Okay, that means 500 individuals have seen your ad or had it served to them on their newsfeed. Impressions might be 750. So that means that 250 of those impressions, those eyeballs that got on your ads, are from individuals that have already been served your ad at least one time. Now why would Facebook do that? Well, if you have a user that is showing an interest in your ad, So for example, if I'm served a lipstick ad and I stop and I look at it and I click on it and I show, uh, that I have interest in it, but I don't take the action that they were looking for, which is purchase, then the algorithm might make the decision that they should re-serve the ad to me to try to get me to reengage and try to push me to take the action that the advertiser was looking for. So Facebook is going to take your ads and they're going to go out and show it to people and try to get you 1,000 impressions so they can charge you. Now they're going to take into consideration what your targeting parameters were. What's the age, the gender, the interest, all of that type of thing. And then on top of that, they're not just going to show it to any people that just meet those targeting demographics that you have chosen. They're going to show it to people that they believe are most likely to take the action that you are wanting. So if you are wanting individuals that are most likely to convert into a lead, they're going to go out there, try to get you a 1,000 impressions in that audience, hope that they get you what they're looking for. Like, they want you to actually get conversions and make you happy. Um, they might get it wrong the first 1,000 impressions and you might actually not get any conversions, but they're going to take into consideration the audience intent, the action that you're wanting, and then also the demographics that you are targeting. And then last but not least, they're also going to take into consideration what they believe is going to be relevant to the individuals that they're going to be serving the ads to. So you can imagine that based on all the targeting that you've chosen and also what intent that you want the audience to take, and also how many other advertisers are also trying to target that group of people, that is what's going to affect what your CPM is or how much they're charging you for those 1,000 impressions. Let's look at a couple of lead generation campaigns. Here I have a screenshot straight from the Ads Manager of 8 different lead generation campaigns from an account that I have generated quite a few leads for. Now, fun fact, you can see at the top we've got the different metrics, results, cost per lead, and so on. There are over 350 different metrics that you're able to view as an advertiser on the backend, uh, but you are actually able to customize the columns and I teach most agents and entrepreneurs and business owners that there are about 15 different metrics that are the most important for you to pay attention to. So the way that we have this broken down is we can see on the left-hand side, we can see the results. We can see how many leads each campaign generated. So this first one was over 8,000 leads and our cost per lead was broken down where that specific campaign, we were only spending about $1.17 per lead. Per lead. Now the real way that Facebook was charging us was for the impressions. Now you can also see here how I was talking about the difference between impressions and reach. So impression is the eyeballs and what they're actually going to be charging us on. Reach was the unique individuals that actually were served our ads. And then here in the middle you can see what the CPM was or what the cost per 1,000 impressions was. And you can see with this one account where we're targeting a very similar audience has fluctuated. We've got one CPM that's as low as $15.53 all the way up to $41.40. So the CPM can fluctuate, and that's not only based on audience targeting, what the intent is that you're looking for, it is also affected by how many other advertisers are going after the same group of people. That's going to make the CPM rise up. And last but not least, how relevant your ad is, how interesting it is to the individuals you're wanting to get in front of. Now I've heard some advertisers say that you can't change the CPM. Facebook sets it. It is what it is. Like if you're advertising like in Q4 and there's a whole bunch of advertisers going after the same group. It is what it is. It's just like seeing, uh, the price of apples, uh, might be a different price in the fall when they're in season and there's more of them versus whenever they aren't in season anymore and they're having to be imported. So kind of supply demand. And yes, that does definitely affect CPM, but you as the advertiser are actually able to influence it a little bit. And you do that by having the most interesting and relevant message slash ad that's going to be served to individuals. Because whenever Facebook, uh, Instagram, the algorithm sees that individuals are actually interested in the content that you have to offer, it keeps their individuals engaged and stay on the platform. They'll lower that CPM a little bit, and it's kind of like a secret little discount that you're able to get, but only when your ads are super relevant, super interesting, and really resonate with your target audience. I hope that you found that helpful. If you have any questions, please drop them in the comments below. I love answering questions. In fact, I love taking complicated strategies and breaking them down into easy-to-understand, easy-to-implement, actionable steps that entrepreneurs, insurance agents, and other business owners are able to implement into their overall digital marketing strategy. So if you're interested in learning more about growing your business when it comes to social media, and also digital marketing, then go ahead and subscribe, and I will see you next time.