Many factors go into the CPM (cost per thousand impressions) that we’re paying.
The average in the United States is about a $6 CPM, but sometimes you’ll see it spike to $100 for no apparent reason.
Let’s talk about the 4 main reasons.
#1 is our choice of business objective.
It’s not that Facebook sees we chose “conversions” as our objective and then decided to jack up the price (like wedding photographers or anything wedding).
Rather, it’s the other way around, whereby seeking conversions, they also will bid higher on our behalf for people more likely to convert, who happen to cost more– since it’s the same base of people buying things in general.
#2: Relevance Score does play a major role, too, so we can compare ads that are apples-to-apples. A high-engagement ad that has low negative feedback is going to do better than one with high negative feedback and low engagement, even if both on the conversion objective and targeting the same audience. That’s the power of creativity.
The third major factor, which we have no direct control over is timing. The price of Facebook ads has been close to doubling each year. But the algorithm has been able to double performance each year, meaning that the cost per conversion remains about the same, even though the base cost of traffic is doubling.
#4: Audience size– when you choose a tiny audience, you’ll tend to pay more for it, partially because you’re giving them also less room to learn, but also because Facebook wants to discourage you from flooding the auction.
For every active ad, you have yet another burden on their system to rank real-time in the auction and another ad for them to have to review manually and via machine learning.
There are so many people making millions of ads each day, but Facebook generally doesn’t want to hire more people.
The problem of deepfakes, privacy abuse, Cambridge Analytica situations, and an increasingly hostile press, means Facebook doesn’t want you creating thousands of ads via various ad multiplication tools.
When I was at Yahoo! (yes, that was THE search engine nearly 20 years ago, when I was there), we had minimum CPC bids in the hopes advertisers would submit “quality” ads– instead of bidding on anything since it was only a penny.
The available ad inventory is now flat in the United States. So simple supply and demand will tell you that ad prices are going up dramatically.
But rather than complaint, get smarter about your ads– in set-up and optimization.
The same situation has played out in PPC for the last 15+ years, where the traffic isn’t as cheap as it used to be. Yet today, the ability to make money on search is as strong as ever.