Free guide on account structure, budget benchmarks, audiences, ad creatives, and more.
Who can benefit from reading this guide:
- Biz owners and brand operators who want to move past the ‘boost post’ button and want to use paid ads as another traffic+revenue channel
- Beginner/junior-level marketers either in-house or at an agency who want some additional insight and info
- Most valuable for those spending in the $0 – $15,000/month range
Who probably won’t benefit from reading this guide:
- Folks spending $25-50k+/mo on ads, either as a marketer or operator. This is a “getting started” guide. Most brands I know don’t start out spending that much from the get.
- Experts and grizzled veterans; you ~probably~ know more than me if this is you. You likely won’t learn much here. But if you do decide to read on, you can provide any thoughts/feedback or share with someone just starting off!
- If you’ve never been inside the Ads Manager before. I will not be showing a step by step guide on which buttons to click or how to navigate the ever changing UI. Facebook Blueprint is a great place for learning that and there are many other great resources for this.
- #’s – CPA, ROAS, setting benchmarks
- $ and budget allocation
- Account Structure in 2020
- Ad Creatives and Copy
- How to test
- How to scale
- Resources for continued learning
Paid Ads on Facebook is a single advertising tactic. It’s one channel. It’s not some end all, be all, magic bullet.
It is still an investment and there is inherent ‘risk’ when spending money on marketing and advertising.
Just like money you spend to place a radio ad, a TV ad, a billboard, Google Ads, just because you put money in, doesn’t mean you’ll always get money out.
That being said, Facebook Ads in 2020 are still really powerful. It is really competitive, costs continue to rise, platform instability, attribution challenges, but it is still one of the best options out there for many businesses and brands.
The flexibility to test unlimited messages and creatives, audiences, in real-time and not wait weeks or months to see the results from other tactics is quite unmatched.
If you’re sitting on your Facebook Ads dashboard tinkering and spamming refresh, you might as well be day trading stocks. Don’t do this! They both change over time but in the long run, if you’re making smart choices, it’ll be well worth it and pay off.
Let’s get into setting yourself up for success with Facebook Ads in 2020.
Warning, if your product stinks, your offer isn’t unique or clear, adding traffic (from any source) isn’t going to fix that, in fact, the opposite. It’s only going to expose the ‘offer’ problem, not fix it.
2. Numbers – CPA, ROAS, Profit
Do not spend a dime on Facebook Ads if you do not know your goal CPA (cost per acquisition) ROAS (return on ad spend) and similar target metrics.
One of the benefits of using this channel is that you can track performance pretty well. Make sure you know what is good for YOU.
Don’t get distracted by people touting 5x ROAS or 12x ROAS, with or without screenshots, and seeing your 1.8x or 2.5x and think you’re doing something wrong.
Profitability is the key. Sustainable profitability.
Besides, if your ROAS was THAT high.. Wouldn’t you want to spend more and make more money instead of just sharing a high number to make yourself or your company look good?
How do I figure out my initial benchmark goal CPA and ROAS? This can vary wildly for stores with multiple SKUs and product lines.
Follow me down this path of math and numbers.
Super simplified and a good place to start for your benchmark targets are:
Average order value (AOV) – Total Costs to fulfill average order (COGS+others) = Growth Profit
AOV * Target Margin ($ made per order) = Target Net $
Growth Profit – Target Net $ = Cost Per Acquisition (CPA) Target
AOV/CPA = Return on Ad Spend (ROAS) Target
These are two of your leading metrics when you’re starting off running ads.
$100 AOV – $20 COGS+ = $80 Growth Profit
$100 AOV * 30% Target Margin = $30 Target Net $
$80 Growth Profit – $30 Target Net $ = $50 CPA
$100/$50 = 2.00x ROAS
Knowing these will help guide you of when to turn on new creative, turn off audiences, and how to scale, and more,.
If you stop reading here, you’ll be ahead of most advertisers when they start out. Knowing YOUR brand’s numbers is half the battle.
Note – if you have multiple SKUs and a wide range of products, pricing, margins, this won’t be a true ROAS/CPA goal. Over time, you should find that number for each SKU.
3. Money and Budget Allocation
Most brands that are starting off are going to want to focus on driving new traffic to their store. Not many have a huge organic social presence or capture a lot of customers from SEO.
Knowing you need new people to your site first, here are my recommended starting structure ranges for budget broken down by part of the funnel:
- TOFU/Cold/Prospecting = 65-75%
- MOFU/Warm/Retargeting = 10-20%
- BOFU/Hot/Retargeting = 5-15%
- Retention/Loyalty = 5-10%
This will vary by account, AOV, seasonality, and time of year.
Ex: If you’re spending $3,000/month(about $100/day) you’ll be spending $70 on TOFU, $20 on MOFU, and $10 on BOFU.
Retention plays generally are worth it after you have a decent amount of purchasers, a product that has repeatability in purchasing, or new products that came out.
MOFU – you may not have enough social engagers, video views, website traffic, etc to make this audience worth while to start off. You may want to combine MOFU and BOFU when you first start off.
BOFU – you may not have enough View Content (VC) or Add to Carts (ATC) to make this audience size big enough.
Keep a close eye on your reach and frequency numbers for this. If you’re blasting an audience with more than 1 ad per day, aka frequency >1/day, I’d decrease the spend or combine these groups until you have a larger audience. 2-4 times per week is fine.
Your TOFU campaigns should hopefully break even in terms of ROAS.
Your MOFU and BOFU should be where you make your money. These folks are more interested and engaged with your brand already – serve them ads with different creatives and messages! More on creative + copy later.
Final parting note on budget allocation, I recommend to make sure you have least 1x CPA available for each ad set. So if you have a CPA of $20 and 3 ad sets, you ‘need’ $60/day.
Create profitable campaigns now with the
Facebook Ad Spending Cheatsheet
This cheatsheet helps eCommerce brands identify appropriate target costs and a budget that’s right for them.
4. Starting account structure in 2020 (as of March)
The big bad Campaign Budget Optimization (CBO) was supposed to have been rolled out by now. CBO has been out for two years already but has been slated to become mandatory and the only option, no more Ad Budget Optimization (ABO), but that has been pushed back several times now.
Generally, the bigger and broader the better with CBO. Long gone are the days of creating 1 ad specific for each of your 82 audiences and splitting them out across dozens of campaigns and ad sets.
Account simplification is part of Facebook’s Power 5 playbook they are pushing: https://www.facebook.com/business/m/power-five
(I’m more of a Power 3.5er, personally. Haven’t had much luck with Dynamic Creative Testing (DCT) yet and sometimes use minimums on ad sets within CBO’s
So, where do I recommend you start? Here you go:
- 1 campaign for TOFU that is a large lookalike (6-10%; if applicable/enough pixel data)
- 1 campaign for TOFU that is small lookalike (1-5%; if applicable/enough pixel data)
- 1 campaign for TOFU that is interest based
- 1 campaign for MOFU that can contain things like social engagers, video viewers, social profile followers
- 1 campaign for BOFU that can contain things like website visitors, view content, add to cart
-Exclude purchase for all of the above
-Exclude website visitors from TOFU (and MOFU) if you are putting web traffic in BOFU
By including these exclusions (heh) you will have a more accurate picture of which audience and ad takes credit for the purchases.
Keep your campaigns and ad sets narrow. You need to consolidate drops in buckets. When you’re first starting off, you want your spend and data to be in as few groups as possible so you and Facebook can learn as quick as possible.
NOTE: I have very, very recently started doing a consolidated campaign structure, credits to my friends over at Common Thread Collective.
Still testing but it looks a little something like creating campaigns BY PRODUCT or category depending on your budget. Then having TOFU/MOFU/BOFU or prospecting/retargeting split out by adsets but all within ONE CBO.
More in-depth breakdown of each part of the funnel here:
If you have enough Pixel Data for ‘purchasers’ then, PUR LLA (purchase, lookalike) is a great start typically.
Some have been finding lately, especially with CBO (campaign budget optimization) that broader is better. Meaning, either completely open targeting OR larger LLAs (6%-10%).
I usually start with 1% as a baseline and later try larger LLAs. *Note, keep “like sized audiences” in a campaign. Aka don’t do 1% PUR and 10% PUR. Even though they are both PUR, the 10% is likely to grab most of the spend, regardless of the performance simply because Facebook favors the larger audiences, esp with CBO*. so keep 1’s with 1’s, 10’s with 10’s, and if doing interest targeting, keep the estimated audience in the same ballpark)
So a sample TOFU campaign would be:
Campaign: 3.4.20 – TOFU – 1% LLA – CBO; or whatever your naming convention is
Ad set #1: 1% PUR LLA
Ad set #2: 1% All website visitors OR 1% ATC (add to cart)
Each of those ad sets with 2-3 ads (ad creative guidelines later)
EXCLUDE website visitors (30-90) and purchasers (30-90). You want to do your best to keep these separate so you know how each part of the funnel is performing.
Random aside, interest based targeting is not useless! Interests are a great way to scale horizontally; finding more audiences. Vertical scaling = more money into the same campaign/audience. Some stack interests and make these big audiences, others do 1 interest per 1 ad set.
This is also technically retargeting, this is for people who have engaged or interacted but aren’t quite at the add to cart or initiate checkout level of interest.
So this includes things like Post engagers, Video Viewers, Social Followers, sometimes Website Visitors (WV for you might fall into BOFU in this case).
They are aware of your brand and somehow interacted before, but didn’t purchase. They need a different proposition/benefit/offer and creative and opportunity to convert.
So you will have new ads in MOFU speaking directly to these folks.
UGC (user generated content), reviews/testimonials, things like this are usually great for MOFU/BOFU since they’re generally more aware of the brand or product at this point and need a different way to convince or sell them on buying.
2 ad sets, maybe lump all social engagers into one, all website visitors into another
2 ads each (different than TOFU)
EXCLUDE purchasers from this.
These are the folks who are VC (view content), ATC (add to cart), IC (initiate checkout) but have not yet purchased.
Dependent on your spend and estimated traffic levels, I think 30 days is a good start. Perhaps 45-60 days.
Over time, you’ll want to try to test and breakdown into 1 day, 7 day, 14 day, etc and provide specific budgets and messaging to those groups.
1-2 ad sets, not sure how much traffic/audience sizes and do a 30 day VC or ATC
2 ads each (different than TOFU, different than MOFU)
EXCLUDE purchasers from this.
BOFU is usually a good place to do DPA (dynamic product ads) the carousel that will pull out the exact products they viewed or added to their cart into the ad unit if your store has multiple products and you have a product catalog connected from Shopify to Facebook.
This is at the bottom of the section so it might get missed but I generally suggest starting with auto placements and auto/lowest cost bidding.
*Note – if you do want to do manual bidding:
Bid cap = set at goal CPA * 1.2 or 1.3 so add 20% or 30% on top. CPA = $20, bid cap at $24 or $26.
Cost cap = set at true goal CPA. CPA = $20, cost cap = $20.
We went over quite a bit of audiences in the last section under Account Structure but here is the gist and some additional context:
- When using CBO, group like sized audiences. 1% LLA (lookalike) with other 1’s, 5%’s with other 5’s, and 10%’s with other 10’s. Try not to have one interest that is 500k and another that’s 20 million. If you have to do this, try using minimum and maximum ad spend limits to force the budget to allocate a bit more evenly.
- Use exclusions – main ones being past purchasers and past website visitors. You want as accurate of a picture as possible when viewing the parts of your funnel to accurately analyze, optimize, or problem solve
- If you use custom audiences from lists, those are STATIC. They are audiences based on that one time upload. If you use Pixel based audiences, those are DYNAMIC, meaning they will update over time based on your new Pixel fires. GENERALLY Pixel audiences are better than static ones but you can test both! (especially if you have an email list but not enough events for lookalikes off Pixel data)
6. Ad creatives and copy
There are many ad buyers that focus on specific media buying tactics and trying to ‘game’ the system.
These totally can and do work, but I’m in the camp of telling you to focus your time, effort, and money into creative production so you can continuously make quality creative (videos and images) and copy to test out.
- Images or videos should be product focused (40-50% of ad space) and show the product/brand in the first 3 seconds if possible.
- Captions/text overlay are pivotal since ~80% or so of folks scroll without sound on
- Main things you want to convey: trust, previous customer experience, quality
- The order in which people ~typically~ look at is the image/video first, then headline, then back up to ad text/copy.
True or False: Only short ad copies work on Facebook since they only show the first 3 lines in the ad.
It is completely dependent on quality of copy and creative and how it fits with the creative to what audience is receiving it.
Try images. Try videos.
Try short copy, try long form.
Try carousels. Try GIFs.
Try emojis. Try links in the ad copy.
You need to test one variable at a time, though.
Note: If you don’t want to be discount crazy/heavy for new customers, don’t have discount coupons in TOFU.
Save them for MOFU or even just BOFU as perhaps the thing that pushes them over the edge. (I prefer keeping the codes general and easy to remember or to copy+paste, so not “DISCOUNTCODESPECIAL261270” for 10% off.
More like “NEW10” or “TRY15” – or have it automatically apply at checkout. Lowest friction for the customer = best way to go. Test these different ways out.
7. How to Test
For anyone who is statistic or data expert (I’m not, quite frankly) I’m just going to say it now before I get dumpstered in the comments or my inbox:
This isn’t true official A/B testing. This isn’t true official A/B testing. This isn’t true official A/B testing.
This is not true statistical significance. Many brands can’t afford to wait around for this.
So while we are calling it A/B testing or testing, it’s not 100% accurate and scientific in approach.
More on A/B testing here and calculator here from some awesome sources not me.
Generally, you want to spend at least 1-3x or 4x your CPA for new creatives and audiences before “deciding a winner.” For most of you reading, this could mean a couple days, at least.
Over time, you may want to keep a ‘testing’ campaign and a ‘scaling’ campaign. Use a standard audience like 1% PUR LLA for the test campaign.
If you keep adding in new creatives or audiences to existing campaigns, they often don’t get the love and spend they need to thrive and actually move the needle.
They tend to get gobbled up by the previous audiences/ads, no matter the performance.
Depending on your level of spend in the account overall, you may need to be testing several times per week.
8. How to Scale
You have a positive ROAS according to your brands goals and benchmarks and are ready to invest more budget into Facebook Ads. You’ve seen stable and consistent ad performance for 7-14 days.
How do I actually spend more money? I just increase the budget, right?
Well, yes and mostly no.
There are typically two types of scaling. Horizontal and Vertical scaling.
Horizontal scaling is finding new audiences to serve ads to. New lookalike audiences and new interest groups.
This is finding more ‘buckets’ to put your water (spend) in.
Vertical scaling is increasing the budget of your existing campaigns (or adsets if you’re doing ABO).
You can’t just double the budget. Slow and steady wins the race. ~10% budget increases will generally be safe and not force you back into the learning phase or throwing off too much instability. Most accounts have the feature rolled out by now where Facebook will warn you if the edit you’re making is going to reset you back into Learning Phase.
9. Additional Learning Resources
This stuff continues to change. It’s possible this guide is completely out of date in year, or just some pieces need to be updated.
In this space, you need to stay up to date. Below are paid and free resources for your continued learning:
#1 – For educational content and running ads for yourself, there’s no better place to go than the experts and my friends at Foxwell Digital.
Andrew and his team are the absolute best. I’ve purchased several courses from him and recommend them immensely. If you’re interested in grabbing a course or two, use code “MLADY20” at checkout for 20% off.
I’m an affiliate so I will receive a small % of this with no extra cost to you, in fact, you get that 20% discount!
#2 – If you’re an eCommerce or DTC brand and want help growing your business, being more efficient, and helping focus on the next step in front of you, you have to check out The Coalition in Brand Growth Experts.
Austin’s fast forwarded my freelance business massively in just the three months I’ve been with him. You get 1 on 1 coaching through messaging with him, access to live trainings and office hour Q&A sessions, trainings and courses or event replays that normally cost hundreds or thousands to access, all for one low monthly payment each month. Not to mention you have a community and forum to interact with over 100 other brand owners, operators, and marketers to share ideas and help each other out.
Affiliate – Using that link above or this link that directs you right to checkout gets you $50 off your first month’s membership and I get a small % back if you maintain your membership.
Free Facebook Group:
You can join Andrew and David’s free Facebook Group: Facebook & Instagram Pro Ad Buyers Industry Group
Twitter Folks regarding eCommerce/DTC/Facebook Ads (Not an exhaustive list but a good start!):