Cutting CPM by 20% will increase your revenue by 20%
With the 2020 election looming, Facebook advertisers and e-commerce stores are going to continually see their ad costs go up as the date gets closer (if they haven’t already).
In June 2020, Trump spent nearly 6.6 million, and Biden 11 million, on Facebook ads directly. Indirectly, people will also try and cash in on hot news items for cheap clicks. From the 2016 election, there’s a famous story about Macedonian teens who used the election to share and advertise wildly popular fake news about Hillary Clinton in order to gain ad sense. This election cycle likely won’t prove any different.
What is CPM?
CPM is essentially how much your ad costs and stands for “cost per 1000 impressions.”
Unlike Google, which charges you per click, Facebook charges you for placement real estate. There’s a certain price associated with each placement (Instagram, affiliate sites, newsfeed, etcetera), which Facebook measures per 1000 placement of each Facebook user.
If your CPM is $6, that means it’ll cost you $6 to gain 1,000 impressions or show your ad 1,000 times. This is not to be confused with reach, which is individual, unique impressions. You could have 500 in reach and 1,000 impressions, which would mean each person saw your ad on average two times (giving you a frequency of 2).
How Do You Find Out Your Facebook CPM?
To find your CPM, go to your Facebook business manager, then your ads manager, and change your columns to “Performance and Clicks.”
You can also click on “Customize Columns” and create your own pre-set custom columns, since “Performance and Clicks” doesn’t have a lot of eCommerce related columns.
What’s a Good CPM?
The unfortunate and hard to swallow answer is “that depends.”
I’ll give you an example of why that depends, and why lowering your Facebook CPM may not always be a good thing (there’s a balancing act going on here).
When you create an ad campaign, Facebook will ask you to pick an objective (purchases, link clicks, reach, etcetera).
Let’s say that because you want to lower your CPM, you choose a reach objective, meaning Facebook will give you the maximum amount of ad reach. Using this method, your CPM will likely fall in the $.50 — $2.00 mark.
However, who are the type of people who are cheaper? Remember, Facebook knows a lot about the type of user you are and the types of users who are cheap are the ones who are not willing to buy.
That means that by artificially lowering your CPM, you also might be avoiding the people who are ideal purchasers.
That means when lowering your CPM, you want to keep in mind that you want to have a lower CPM for those who are in fact going to buy.
However, to answer the original question, a good CPM is between $5 — $15 depending on geographic region, audience, product price, and other demographics.
6 Ways to Lower CPM While Still Achieving Sales
1. Improve your relevance score
Facebook breaks your ad relevance score into three parts: “quality ranking,” “engagement rate ranking,” “conversion rate ranking.”
To find these, go to your campaign, click on the “ad set” or audience that you want to look at, then click on the “ads” level.
There, you’ll see your relevance ratings on any of the default columns.
Improving any of these will improve your CPM.
Your quality ranking refers to the user experience after the user clicks your ad. If you’re click-baiting, being misleading, or anything that creates a negative user experience, your ranking will suffer. This is pretty easy to control, as you should be an upfront and honest advertiser.
Your engagement rate ranking refers to how many comments, clicks, shares, and engagements your ad receives. I’ll talk below about how to improve your engagement rate ranking.
Your conversion rate ranking refers to how well you are accomplishing the objective you selected at the onset of your campaign. If you’re not getting enough conversions, there are three things you can do. One, increase your ad spend to get out of learning limited (Facebook wants approximately 50 conversions a week). Two, you can drop down your campaign objective to increase the number of objectives (generally you want to go Purchase → Add to Carts → Content Views). Three, you can improve the landing page experience and increase your conversion rate on the website side.
2. Broaden or tighten up your audience
The ideal audience size is generally between 1–10 million. When you notice that your CPM on a given audience or campaign is higher than normal, you’ll want to try to both increase or decrease your audience, which may result in a much lower CPM.
When I run any given lookalike audience, I will choose a 1% option and a 4% option and pick the lookalike with the superior CPM.
When I run an interest audience and the CPM is high, I’ll comb through the selected interests and try to remove any that are too general or too large and see if that will lower the CPM.
On the flip side, the more exact your audience (less than 100,000), the less real estate there often is, resulting in higher ad costs.
3. Create a high-impact data set for your lookalikes
The better your lookalikes, and the more people purchase from you, the more your audience will resonate with your ads, lowering your CPM. That’s because Facebook will reward you for creating an audience that is in line with your ad and product.
Odeh Ahwal of EcomDimes: “my number one simple, yet effective approach for optimizing my CPM for my Facebook ads is the implementation of custom and lookalike audiences!”
For more on lookalike audiences, read this article:
4. Create the right type of ad
In December 2019, Ad Espresso did a $1,000 Facebook ad test to see which ad type had the best CPA, but included the CPM in that test.
As you can see, the image type had the best results across nearly every metric, including CPM.
However, there is a caveat here. Their chosen objective was leads, and it’s common knowledge that when going after leads, photos still perform the best, and Facebook knows this. For that reason, your ad type when your objective is leads will be much cheaper.
From my experience, the ad type that generally performs the best in eCommerce, when the objective is purchases, is a video ad.
That’s not to say that a video ad will be the type for you. The best advice I can give is to try all three ad types and see which has the lowest CPM and the best CPA (cost per acquisition). I’ve had carousel ads and image ads perform the best on multiple businesses and you should never go into a campaign assuming anything.
5. Add engaging copy to your post
As I stated above, how often people react, comment, share, or click your ad can lower your CPM because Facebook wants people to have a pleasurable experience on Facebook, so engagements are one way to measure the pleasure people get out of your ad.
There are a few ways you can create an engagement-friendly ad.
Create engaging copy or highly engaging photos and videos
Instead of just showing a 360 or flat-lay view of your products, try to add something that will be inherently engaging.
For example, adding a quote or statement to the copy that everyone will want to agree with will improve your engagement or have people commenting. If you create a video (people love pets!), try adding some humour or levity to it.
Simply adding a testimonial from a past client can often encourage other people to write their own positive experiences of the brand or product.
Add a CTA
When you read copy that you agree with, or have a positive reaction to a video, you’ll often look to turn that positive reaction into an actionable choice. Simply adding “click the link to see the product” can be enough to increase your click-through rate 10–15%.
People are often asking themselves “what now” after they read something and you should be the voice that directs them towards that answer.
This is a very simple one that a lot of people miss out on. By prompting a response, you should have an increase in comments and engagement. You can put up two shots of the same product in a carousel and simply put “A or B?” and watch the comments roll in.
6. Adjust your demographics
On the far right of your ads manager, you’ll see a column that says “breakdown.” This will allow you to break down your campaigns to see how each demographic is performing.
The big three that I focus on to lower CPM costs and improve conversion rates and overall results are age, sex, country. What you’ll often notice is there’s an inverse effect between CPM and conversions.
For example, a lot of eastern European countries will have lower CPM, but you’ll find they rarely convert.
The countries I generally stick to for maximum conversions are the United States, Canada, United Kingdom, and Australia. Of these four, you’ll find that Canada is the cheapest, with the best conversion rates, but I generally start with these four and optimize from there. I find that I’ll often be left with the United States and Canada, depending on the home country of the company’s operations.
Depending on your brand and product line, you’ll find one of the genders generally have a better reaction to your ads. If money is limited, you’ll definitely want to focus on one gender before scaling up.
With ages, you’ll definitely notice an inverse effect on CPM and conversion rates. The 18–24 age group rarely clicks or buys products directly from Facebook, making them one of the cheapest CPM groups. On the flip side, 55+ is usually the most expensive, but they’re not always the best buyers (depending on your product).
Beyond this, there are a lot of other ways to lower CPM, but I tried to steer clear of ways to reduce CPM that would impact your cost per acquisition or sales since the goal of e-commerce is to generate as much revenue as possible.
If there’s anything I missed, or you have any questions, I’d love to hear them!