What I learned spending $2 Million on Facebook Ads

March 4, 2014 - Get free updates of new posts here

The whole Facebook ads world can be very confusing.

Target this interest, don’t do this hack, make sure to exclude certain people.

Good lord, where to even begin.

Over the past two years, I’ve spent over $2,000,000 buying Facebook ads (see below) and when I worked there I helped build their ad system.

Needless to say I have some experience and can share exactly how to do profitable ad spending on Facebook.

(Read all the way to the bottom to download the Checklist to Spend Your First $100 on Facebook)

There are many advanced things that you can read about but I’m going to focus on the fundamentals. In a future post, I’ll share things like day-parting, ad-refreshing, front-loading budgeting and other buzzwords that you should be ignoring.

As marketing “month” continues, (Create a Podcast, Hit #1 on Amazon, Growing Your Blog, Creating a Marketing Plan), I wanted to help people get started with advertising.

A few caveats about online advertising:

Be patient. It can take a day to 6 months to get your online advertising to be profitable.

Not every advertising channel will work for everyone. I’ve spent $100,000+ on Google advertising and only made back $25,000. If you do the math, that’s not good :)

When you do find a channel that’s profitable, spend as much as you can, while you can. When I was advertising on a newsletter I found I was spending $750 a week to sponsor and making $1,500 back within 2 weeks. That’s an awesome time to ROI. I didn’t sponsor more than twice a month since I didn’t want to annoy their readers. A friend yelled at me to do more. I moved to four times a month and the ROI stayed at the same rate. I realized there’s a lot of noise online so
it’s okay to advertise
hard.

Advertising decays. Over time you need to refresh your advertising if it’s working. At AppSumo we had a full-time person just refreshing our ads a few times a day. It’s a bit easier with news feed ads vs right-side ads.

Profit is all that matters. Ignore people who claim they get some really high Click-through-rate CTR (% of people that actually click their ad). If you are spending but not making money, stop.

Look for free marketing opportunities first. In How to make $1,000 a month business course I personally encourage people NOT to spend on ads until they’ve exhausted other marketing activities. It’s too easy to spend a lot on ads without great results.

Now here’s the step by step instructions on how to spend your first $100 on Facebook:

Step 1: Create your Facebook campaign.

Step 2: Choose clicks to website. You can do website conversion but I’d wait on that. Remember we are keeping your first $100 as stupid simple as possible. My progression of spending was not $100,000 the first month, it was actually $400.

Step 3: Create your Ad.

a) You need a Facebook fan page to place ads in the newsfeed. Create one here, it’s free and takes a few minutes.

b) Generally I keep the images simple, ideally of yourself or something not boring.
Look at this boring advertisement, yawn! Such a neat idea for a product.

c) Try to create an ad that uses natural text versus something that seems like an advertisement.

Imagine what you naturally write/post on Facebook vs something that seems like a paid placement.

Here’s behind the scenes of setting it up:

1- Connect to a fan page
2- Call to action: Choose “Learn More”
3- Headline: Give away something for free
4- Text: Social proof showing why the reader should care
5- News Feed Link Description: Give call to action for them to get benefit
6- Remove the right column ad

Here are a couple templates, feel free to copy:

Key notes on creating your newsfeed ad:

  • Include a bit.ly link up top which will get you extra clicks
  • Use the button “Learn More,” we found it converted better than the other ones and versus having nothing.
  • Do not include a right side advertisement. Those are effective for retargeting but personally with the CTR so low it’s not worth it when you’re starting.

Step 4: When trying to figure out your first interest group to target I recommend a few options:

a) Take your top 10 best customers and search their email address / name on Facebook. Then go to their likes and create a spreadsheet of common interests. What you are doing here is finding things you can target for new customers. Look for the 1-2 similar likes across your top customers. That’s who you can target.

b) Go to a competitors fan page and look at the people who like it. Click on their profiles and do the same with option b. We did this with Macheist in the beginning of AppSumo.

c) For the experts out there, we will cover Custom Audience in a future post.

d) If those don’t work I love targeting a direct competitor. At AppSumo I started with Macheist.

Caveat: DO NOT let Facebook recommend broad interest categories. Facebook’s goal is your money. They want to show your ads to whomever is most likely to click. But it’s your job to ensure it’s targeting people that will work.

Step 5: Narrow Your Target Audience. When I first started advertising AppSumo and Monthly1k.com I try to target less than 10,000 audiences. The narrower your target group the more likely you are to have a higher CTR and ultimate conversion to email subscriber or buying customer. If your audience is broad, go more narrow geographically.

Anyone who brags about paying a low CPC (cost per click) is likely getting a horrible ROI (the profit from the amount of money you spent on the advertising). Spent $50, made $100 in profit, roi = 100/50 = 200%) is likely not showing the amount of profit they got from that campaign.

Step 6: Do not buy likes. I hate when people brag about how many likes their fan page has. Facebook controls that communication with your customer, you don’t. Would you like to only talk to your wife through another person. I can’t imagine you would.
When you do Facebook posts, etc, you have almost no say on how many people it will reach. It makes sense to create a free fan page and promote it but do not spend money towards it in the beginning.

Step 7: For the age and gender category, again look at the demographics of your top customers or the people you have email addresses for. The narrower the BETTER. For the Monthly1k course we targeted 25-40 year olds who are in the United States.

Step 8: For the other categories: Languages, Connections and more Categories. I personally encourage you not to touch these in the beginning. Yes, I know the dissenters out there will complain to optimize everything, but I am trying to streamline the process so you can start investing immediately.

Step 9: For countries: Try to pick one or even go deep within a specific city or state. Focus on ONE state / country to begin with. Remember, do less than 10,000 people total.

Step 10: Avoid showing your ads to mobile traffic. You can choose this from the Power Editor but I won’t get into that tool at this time. Most likely your page is not mobile designed and that traffic is less likely to purchase or sign up for an email address. After you get your campaign working that is something you can begin optimizing for mobile.

Step 11: Budget and pricing your Facebook ad
Start small. Set your daily budget at $3.33 (this’ll ensure you don’t spend more than $100 a month).

Aim for $.75 a click. (Don’t worry if that seems high; it’s only 4.4 clicks). The point is to get some clicks to your ad going and then you can lower the amount.
A few notes for you to benchmark your performance with:

  • On most paying products we’ve advertised the conversion from click to paying customer is about .1-2%.
  • Conversion rate to collecting an email should be around 20%.

Things I’ll cover in a future article: retargeting and conversion tracking.

Step 12: Now you’ve gotten started. Congrats… but the real thing is profit. So how do you track your ROI and make your money back?

To start, do stupid ghetto math. Here’s how I do it with advertising Okdork.com:

I spend around $3 / email per sign up.

On some emails I will proudly mention things I’m working on like our How to Start a $1,000 a month business course and our new product SumoMe (free tool for getting more emails / shares on your site).

Surprisingly that is one of the top ways we’ve sold the course this year. Each course makes us around $267 after refunds / dropouts / etc. So I do back of the envelope math as follows:
Course Profit = $267
Email Cost = $3
$267 / $3 = 89

So if 1 out of 89 people via new email signups buy the course then buying ads is profitable.

With AppSumo we’ve built our own internal system to calculate this but I’m showing you the fundamentals for a less complex business. In the next week, we are releasing a simple tracking tool for free via SumoMe, grab it now for free.

Good luck advertising :) Leave a comment on OkDork and share your questions or experiences with Facebook ads.
Love,
Noah

Click on the image below to Download the Checklist to Spend Your First $100 on Facebook
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53 responses to “What I learned spending $2 Million on Facebook Ads

  1. Micky Deming Reply

    Marketing month again?! Haha

    This is freaking brilliant.

    When you advertise with the ultimate goal of selling a higher priced item, have you seen better results from driving the traffic straight to the high-priced item or from giving something away for an email address and then working up toward a bigger purchase?

  2. Nick Kizirnis Reply

    Dang Noah, that’s just about the best explanation of how to get started with Facebook Ads I’ve seen. I’ve tried out some ads with mixed results just to see how it works, which was a decent learning experience, but I should have waited until I could read this! Thanks, I can’t wait to read the next posts (and no I haven’t spent any $$ on ads for my How to Make $1K/month work … the validation steps you teach made that unnecessary (oh, thanks again!).

  3. Sarah Arrow Reply

    Fantastic, I’m going to have to book mark and come back later to digest the entire post.

    Okay some questions – is there a niche where FB advertising does not work well? I’ve tried it with transport and the interaction was minimal and ROI non-existent. My transport business is hyper-local and very specialised so in theory we should have been able to get a better response. The reality of course was far different.

    Marketing month? Darn, I’ve missed the others, I shall go and track them down.

    1. Eugen Oprea Reply

      Hey Sarah, because your business is hyperlocal, have you tried to narrow down the audience that will see the ads.

      Obviously, it will not make sense for someone in a different region to see it.

      1. Sarah Arrow Reply

        Yes, I only use the narrowed down local audience and restricted to Essex, UK. I’m thinking that unless people have an immediate need for what you’re promoting then they will be oblivious to your ads. That in my opinion makes AdWords more powerful as the adverts are shown when a person is searching for what you’re selling.

  4. Laurenz Reply

    Hi folks,
    I basically agree with Noah’s opinion. However, I do have 3 more recommendations.
    I am sorry for my English – my mother tongue ist German…

    -) Include a question in the header of your ad. E.g. “Want to become an entrepreneur?” and then
    do the proof that Noah’s course (or your product) works… Goal: in my point of view it makes sense, that only those who wan’t to become an entrepreneur should click.

    -) You can increase conversion rate, if you DON’T direct the people to an external website.
    Let’s integrate a landingpage in a facebook-tab of your facebook-fanpage. My experience is that
    people feel uncertain if the landingpage ist not within facebook.

    -) I agree with Noah that fans of a facebook-page can be valueless. For sure, having their
    email-address is the best case. However, have you already tried to get both (fan & email-address)?
    In my point of view, the worst case is the following: they click on your FACEBOOK-AD and they DON’T
    SIGN UP and they DON’T BECOME a fan. They are lost forever.
    As a result: integrate your landingpage within a facebook-tab of your fansite AND integrate a facebook-likegate. Just try it.

    -) Regarding Noah’s profitability accounting: you should not ignore the following formula: Cost per Acquisition has to be lower than Customer Lifetime Value. So, try to estimate CLV.

    -) Converting Facebook-Fans into paying customers: there are a lot of tactics to convert facebook fans…

    With all those things we were able to decrease cost per email from € 3.- to € 0,8.-.

    Looking forward to your response/critics/…

    @ Noah: I am looking forward to your post regarding CUSTOM-AUDIENCES…

    all the best, Laurenz

    1. bum Reply

      Laurenz, thanks for adding this to Noah’s great tutorial. Building my page now, but how do I do what you said: “integrate your landingpage within a facebook-tab of your fansite AND integrate a facebook-likegate.” ? Noah, if you have tips on this or another tutorial I’d love to see it.

    2. Manuel Reply

      Great article Noah. And great contribution Laurenz! I do agree that the most important kpi to look for is the CLV in order to get profitable campaigns.

      @Laurenz as I am another european reader of Noah´s blog, I would like to share and talk to you some insights about Fb ads.

      Shall we get in contact?

      Thanks

      Best

      Manuel

  5. Christopher Hill Reply

    Thanks Noah!
    I went in to amend one of our ads, and the layout is quite different.
    For example, we ONLY had the option of a right hand ad, the option for the Newsfeed is not even there.
    Also, I cannot choose “Call to Action” (learn more) -that box does not appear.
    There is something called Conversion Tracking Pixel, which you dont seem to have – what is this?
    Also, in the examples you give, you don’t appear to include a bit.ly link, but then you recommend this, yes?
    Thanks again!

    1. Greg Reply

      Christopher, when you try to edit the existing ad you can’t add “Learn More”. You can do it only when you are creating a new ad.

  6. Farhang Reply

    WOW, this article is really good about Facebook ads, because there are less course about Fb ads compared to Adwords, but really people do spend on facebook huge amount of money. i spend a lot and not gained much, my ads targeted almost 80 million people but you said less than 10,000..

    thank you for your valuable insights about Fb ads

  7. Shmuel Reply

    Really great help, Noah. Thank you so much.
    Noah, this might be for you in case you didn’t yet heard of it:
    In general. its a pain to determine who is your right audience. I got an unbelievable tool that lets me search for very specific keywords. It then crawls through facebook events, groups and pages that match that keyword. Then you can select that specific group and export those FB IDs into a cvs file. Then you can import this custom list into your own ads via custom audience. Its one of the sickest tools Ive used.
    Its called audiencemakr, cost $10. But no clue where to get it.
    I got it from a dude I follow.

      1. Christopher Hill Reply

        Hey Noah,
        Thanks so much for this! Some questions though:
        I went in to amend one of our ads, and the layout is quite different.
        For example, we ONLY had the option of a right hand ad, the option for the Newsfeed is not even there.
        Also, I cannot choose “Call to Action” (learn more) -that box does not appear.
        There is something called Conversion Tracking Pixel, which you dont seem to have – what is this?
        Also, in the examples you give, you don’t appear to include a bit.ly link, but then you recommend this, yes?
        Thanks again!

  8. Sophia Reply

    Awesome! Only problem is I am unable to input my own interests according to the likes of the competitors. The ad forces me to choose from categories. I input it in the line but it disappears. Anybody know how to deal with this?

      1. Sophia Reply

        I just wanted to update and include that, as of right now, Facebook does not allow entering in a specific Group/Page such as a competitor. I have been in contact with Facebook about it and that is what they told me. Correct me if I’m wrong. :)

  9. Parker Condit Reply

    Noah, this is great since I just started Facebook ads two weeks ago. So far getting 1000% ROI and have been ignoring CTRs. I’m glad I have been doing some things right so far. The thing I really want to add is the “Learn More” button but I can’t seem to find that option when I’m creating an AD. Regardless, this was really helpful and gave me more confidence to increase my daily AD budget. Thanks a lot!

  10. Mukwal Reply

    Hi Noah,

    Great article and insights. I have been using a tool called Fan Harvest for my fb ads and boy, I have never seen such great CTR and follow up. What the tool does is, you can give it your competitors’ facebook pages and it will analyze them and give you those people who are REAL human beings who are genuinely interested in your competitors.

    With a campaign that I ran, I had about 5000 people from the tool and spending $10 on a like campaign I reached 2300 of them in a day. I got 92 likes, 21 people visited my site and they spent 5 minutes on average. Had 54 page views.

    I highly recommend this tool. Check it out at http://fanharvest.com/

  11. Eugen Oprea Reply

    Hey Noah,

    I just love the simplicity of this. I’ve read quite a few resources about Facebook ads, with little success.

    However, your article made me realize that I was letting Facebook get my money, without properly targeting the people I want to reach to.

    So my biggest takeaway from this post is the fact that I should choose a really small audience to target and move away from Facebook’s Optimized CPM.

    Thanks!

  12. Richard Webb Reply

    Awesome post Noah, as always. Love the blog, AppSumo and the monthly1k course.

    A quick tip – you can kind of automate step 4b) by typing:

    “Pages liked by people who like [competitor's page]“, or
    “Favorite interests of people who like [competitor's page]”

    into the Facebook search box. Kind of works for 4a) as well, but only with names, not email addresses (as far as I can tell).

    The best thing is you can also use “and” and “or” to search multiple pages/people at once. It’s absolute magic.

    Enjoy!

  13. Victoria Reply

    Love it. I am not a beginner and in my own exploration of facebook ads with several clients and small budgets, I always opt for tight targeting and manually bypass the “easy” options facebook provides in favor of anything marked “advanced”. Facebook has a brilliant system for micro-targeting but many still think the biggest reach wins. I set up a batch of ads, see which one does the best, and start dropping the price on it. Tweaking the ads is a critical part of the campaign. And when you do it with a CPC model manually bidding, you kind of have to be on it, making changes to not waste funds. The ad manager has a robust analytic system for really seeing how they perform. And much of that is all on the regular space. Power Editor is where they test new features so good to use it if you understand the system. I’ll be keeping an eye on you, Noah! Great resource. Thanks!

  14. Lenny Ramirez Reply

    Can we add Graph Search for the research? Thanks for the awesome post. Can’t wait for the more advanced stuff :)

  15. Ryan H Reply

    G-day Noah,
    Thank you so much for writing this post, I have been wanting to try my hand at paid advertising through facebook for a while now, and this has made it much easier to jump in!
    I have a question regarding your SumoMe tool, I use Weebly to set up my websites because I know NOTHING about coding and it’s all drag and drop. I’d love to be abele to use the SumoMe tool, but I don’t know how to add the code to my site. If you or any other readers of this article know how, I’d love to hear from you.
    Thanks again, your emails and articles are an inspiration, nice work mate!

    Ryan H.

  16. mark greenman Reply

    This was a really great article Noah, thank you for taking the time to write it.

    I’ve played around with the “boost post” feature on my companies fan page, targeting 10 general interests related to my field (I make outdoor/survival gear so I was targeting interests in the military, hiking, certain brands of knives, etc) while trying to reach as wide an audience as possible. The last campaign I ran was for $100, 7 days, reached 22k people, and generated about $270 in sales, avg a 2% conversion rate.

    I’m going to to apply your formula to my next go around, and I will report back with how it goes.

    Take care,
    Mark

  17. Lisha Reply

    Hi Noah,

    This is such great info for me right now because I am planning on starting my first facebook ad to a website very soon. I have done some facebook Like ad campaigns for other people’s facebook pages, but I have not made an ad leading to a website yet.

    Question, how do you refresh an ad on facebook? I didn’t realize this was even a thing!

    Thanks :)

    ~Lisha

    1. Lisha Reply

      Okay, so maybe I will just answer my question myself. When reading this post, I was thinking that refreshing the ad was something complicated, but after doing some research, it’s basically just changing the images, wording, etc of the ads from time to time, which I had already been doing, so I guess I’m good to go!

      Thanks for all the tips, Noah :)

      ~Lisha

  18. Jerry Low Reply

    Hey Noah I have been searching and reading for Facebook marketing all day and this is the best guide I have seen so far. Love how you make complicated things look simple.

    P/S: I found okdork via your ‘How I got fired from Facebook’ post. It’s funny to jump from that post to here – where you, sort of, promoting FB marketing services. :)

    Cheers, Jerry Low

  19. j Reply

    Thanks for putting this together Noah. I followed along step by step for a website click campaign but I’m currently receiving 1 click per $3.50 – the only thing I did differently from your guide was selecting “automatically optimize bids” instead of manually bidding at .75c – should I try switching to the .75c manual bid?

  20. Matt Collins Reply

    For a small business owner like myself, this is a great starting point. I will be doing some FB ads when I have offers and I’ll be using this guide to get started. Comments are very full of insights too!

  21. Anand Reply

    Hey Noah

    I was trying to create my first newsfeed ad but I have not been able to insert a bitly link in the newsfeed text. I get an error notification that reads something like “Your ad text cannot contain 2 punctuation marks or signs in a row. Please remove these to continue”. Any idea what needs to be done here?

  22. Ryan Reply

    My newsfeed ad is only showing a video and no clickable element to the site page I want them to go to. There is no learn more button showing. Does anybody know how to fix this?

  23. David W Reply

    Hi Noah, great article. I followed it to the “T” but I’m about a week into the FB campaign and I only have 20 “reach” and no clicks of the 20. I believe I had the target audience narrowed to about 8500. Should I broaden my “target audience” to “reach” more people?

    Thanks, Tallyho!

    1. Greg M. Reply

      David,

      I’m actually practicing what was in this article since April. I would say 95% of what was written here is very correct. And that 5% might be your personal case, or when you start scalling it.

      I guess there are two reasons why you don’t get clicks: 1) the $ amount of your bid, and 2) the narrow audiences. Try to work with these variables. Also if your ad is already sometime live and it doesn’t perform the likelihood that Facebook graded it as underperforming is very ight. And by doing so Facebook limits your bidding. Try to start a new same typ of campaign.

      Currently what I do is I start with oCPC and then when it starts to run well I switch to bid CPC. I noticed when the CTR is about 2%-3% Facebook continues to run your ad even if you lowered your bid.

      Hope this helps you!

  24. Anthony Rosas Reply

    Noah,
    Thanks for this radical info. I have been pouring over your blog post on Tim Ferris’ blog you did a few years ago about creating a digital product (chihuahua book) and selling it online using Facebook and Reditt ads etc, Where in the process of creating a digital product would you start use Facebook ads? I plan on using the app, Fiverr to source people to do data research on a few topics and also see how many people on Facebook my potential market could be. Your help is much appreciated.

  25. Mickey Reply

    Thank you again Chief Sumo. If any new sumo-lings would like more info on facebook ads, and SEM, Chief sponsored Tommy Griffith’s second online class “Paid Search Marketing Course,” unfortunately the promo is no longer going on :( but Tommy’s material is phenomenal and has so many tutorials and walkthrus (similar to this one Chief Sumo has so kindly blessed us with) that’ll save you lots of headaches.

    Cheers my friends,

    Mickey