Facebook ads have become an essential marketing tool for small and large-scale businesses alike. Understanding how Facebook ads work allows for a company to yield the best results for their advertising investment. In order to figure out the best strategy for one’s business, one must understand the goals for the campaign as well as the target market and budget.

Goals

Recently, Facebook facilitated the process of choosing the best type of Facebook advertisement by asking what a company’s goals are before redirecting to the ad options.  Now, smaller companies or companies with less experience on Facebook can easily find an advertising opportunity that suits their needs.

Targeting Options

Facebook ads work by utilizing specific targeting options to make the advertisements more effective.  The more a company targets an audience with particular attributes, down to specifics such as which high school they attended or their relevant interests, the more pertinent the ad becomes to those who view it. Facebook Advertising’s edge over Google Adwords’ similar campaigns stems from this intensive targeting strategy. Best results derive from ads which are focused in on the target market, but kept broad enough to ensure that the target market contains a possible reach of at least a few thousand people.

Payment Options

Instead of charging a lump sum, Facebook ads work on a cost per click or cost per impression basis. A company makes a bid to have an ad shown, and then Facebook compares this bid with bids from competitors to decide which ad will come up in a target markets’ news feed. The maximum amount a company pays is based on the cap that the company places on spending for the day. The largest difference between the cost per click and the cost per impression payment option is that the cost per click is always equal to the exact bidding price. Conversely, the cost per impression option only has to be higher than competitors’ to be shown. For example, if company A bids $0.40 per impression and their competitor bids $0.30 per impression, company A would only be charged $0.31 per impression when that ad is shown during that period. If company A is running a cost per click ad and bids $0.40 per click, every time the ad is clicked it will cost exactly $0.40.

Per Click or Per Impression

The type of payment option that a company chooses is mainly decided by the purpose of the advertisement. A company focused on gaining interaction will want to focus on paying for the actual clicks on the advertisement. With  pay per click advertisements, Facebook targets the people most likely to click on those ads. Cost per click can also results in free impressions for those who see the ad but do not click on it. However, these ads have a higher price tag. If people do not click on them, Facebook takes them out of rotation. A company more interested in getting exposure should choose to pay per impression, as the company will be paying for exactly this. Cost per impression advertising is cheaper per action. Unfortunately, there is also the risk of a low interaction rate. The ads could potentially be wasted on people who are not interested, or who do not pay attention to Facebook ads. A social media marketing expert can help you decide which type of ad is better for your business.

The Two Major Types of Facebook ads

Nanigans recently completed a study on how well news feed Facebook ads versus sidebar ads work. According to the study, news feed ads have a return on investment 26 times higher than ads from the sidebar. Although sidebar ads are not usually as effective as news feed ads, they can still have an impact. Sidebar ads are less expensive than news feed ads. Therefore, many companies find sidebar ads to be a nice way to provide an extra source of exposure that can help generate more likes for their page. However, if a company is on a tight budget, it is more profitable to lean towards news feed ads. Photographs can also increase the return on investment of an advertisement. According to the same Nanigans study, news feed ads with photos yield a 37% higher click-through rate than ads which only contain a link. Following the same trend, photos also increase the click-through rate of side bar ads by 20%.

Facebook ads allow companies to directly connect with users relevant to their product or service in an environment where advertisements are integrated into the information they want to see. If you are interested in learning more about how Facebook ads work or about any other internet marketing tactics, please feel free to contact Vision Advertising. We are an internet marketing company, specializing in up-to-date social media marketing as well as many other internet and media based functions. We have helped run many successful Facebook ad campaigns for clients and would love to help you do the same.

Do you think the way that Facebook ads work is effective? Now that you know how Facebook ads work, are you going to test them out for yourself?