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Options, options and more options is what Facebook offers you when deciding how you would like to be charged for your ads. When you first setup a campaign on Facebook, you will be bombarded with several options, without doing adequate research, you could end up paying more than you ought to.

Facebook uses several different acronyms to describe their payment options, but we have gone one further and broken it all down for you.

Cost-per-click (CPC)

Cost-per-click or otherwise known as pay-per-click (PPC) is a method where you’re charged each time an ad is clicked. CPC is usually the safest way to play as you don’t pay for impressions but actual clicks.

Cost-per-mille (CPM)

This model is based on how much you’re willing to pay for every 1,000 impressions. An impression is each time somebody views your ad, they don’t necessarily have to click on the ad for you to be charged. If your budget is $10, this means you’re willing to pay $10 for 1,000 impressions, even if nobody clicks the ad.

On average, typical banner ads have a click-through rate (CTR) of around 0.1%. This means for every 1,000 impressions you will get one click, making your CPC $10. However, a well crafted banner with a killer description can skyrocket your click-through rate potentially making it a more favorable method than CPC.

Note: 1,000 impressions does not mean 1,000 unique users seeing your ad, it’s quite possible for one user to see your ad more than once.

Optimized cost-per-mille (oCPM)

Very much like the cost-per-mille option, an oCPM works in the same way except ads are optimized to reach people who are more likely to make the desired action. For example, users who have shown to respond to similar ads as yours will be targeted.

Unlike all other payment models, oCPM bids on your behalf once you select the objectives of your campaign and the budget. Using oCPM, Facebook lets you select five objectives, they include:

Reach – To maximize the amount of impressions you receive.

Action – Facebook makes a competitive bid when it believes it can generate an action. An action can be anything from a page like, a click or an app install.

Social impression – Maximize the amount of social impressions your campaign receives.

Clicks – Increasing the amount of clicks your ad will get using their unique bidding system.

oCPM utilizes a dynamic bidding feature allowing it to frequently provide greater results compared to any other pricing model.

Cost-per-like (CPL)

This model only applies to campaigns with the goal of attaining more Facebook likes. You make a bid for what you’re willing to pay each time somebody likes your page.

Cost-per-action (CPA)

Cost-per-action model is only used when you select the ‘Website Conversion’ option. You make a bid for what you’re willing to pay for each user who is re-directed to your website.

Facebook pricing model

Facebook implements the same pricing model as we mentioned in our Twitter Ads: A Crash Course article, which is the auction format. In a nutshell, you select the amount you’re prepared to pay per action, and each time that action is preformed you’re charged. Facebook lets you set a daily, weekly or lifetime budget for your campaign to ensure you never go over budget. For example, if you select daily or weekly, when the budget has reached its limit, all ads will stop until the following day or week. A lifetime budget will keep on going until the lifetime budget is complete.

“If I pick how much I want to pay per action, I should bid low right?”

Not exactly. If you set your bid per action to let’s say $0.05 there’s around a 99% chance that your ad will never be seen, why? Because it makes Facebook no money. Depending on your ad type, keywords and target market Facebook will suggest to you a ‘recommended bid’, this is what they believe is best to get you the highest amount of actions per cost. We suggested using that number as a ball park figure and run some tests to find what the optimal bid is for your particular ad. Remember, there is no magic number.

Which payment model to use?

The million dollar question! CPC, CPM and oCPM are all valid options and it really depends on your ad experience and needs. If this is your first time launching a Facebook campaign, an oCPM is the best way to go because it’s created to optimize your bids and is fully automated. Facebook will work behind the scenes to show your ads to people who are most likely to click.

If you want full control of your bids are have some experience with Facebook campaigns, then using the CPC or CPA price modelling is most suitable. Finally, if you have been reading all our blog posts and doing extensive research on how to best optimize every characteristic of your ad, then there’s no better option than CPM.

Each pricing model provides you with its own benefits and drawbacks, one isn’t necessarily better than the other and your goals, budget and experience in creating campaigns play a huge factor. If you would like to know more about optimizing Facebook ads, check out our How to Create the Perfect Facebook Ad – A Step-by-Step Playbook article.

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