Facebook Ads Manager is one of the best advertising channels for engaging target buyers and driving revenue, accounting for 18% of total digital advertising spend in 2023. With over 3 billion users worldwide, Facebook offers marketers a unique opportunity to deliver targeted promotions and engage their target audience.
But as average Facebook Ads Manager costs have increased significantly since 2019, it’s important for paid media marketers to manage their spend in the channel strategically. By tracking and optimizing Facebook Return on Ad Spend (ROAS), marketers can ensure they’re making the most of Facebook’s advanced advertising network without blowing their advertising budget.
What is Return on Ad Spend (ROAS)?
Return on Ad Spend (ROAS) is an essential marketing metric that is used to measure the amount of revenue generated per dollar invested in an advertising campaign. By analyzing ROAS, marketers can understand how well their advertising programs are performing and make better decisions on how to invest.
Calculating Facebook ROAS
ROAS is calculated by dividing the amount of revenue attributed to a specific advertising campaign by the total cost of the campaign.
Campaign revenue
_____________________ = ROAS
Campaign costs
To calculate Facebook ROAS, divide the revenue attributed to a specific Facebook Advertising campaign, or group of campaigns, by campaign costs. For example, if you have $2000 revenue attributed to Facebook Ads in Q1 across all campaigns, and your total Facebook Ads costs for Q1 are $1000, you will have a Facebook ROAS of 2.
Total revenue attributed to Facebook Ads campaigns in Q1
______________________________________________ = Facebook ROAS
Total Facebook Ads campaign costs in Q1
To learn more, you can see our step-by-step breakdown of how to calculate ROAS here.
How to increase Facebook ROAS
Making optimizations to increase Facebook ROAS is critical for scaling your investments in the channel. The good news is that there are numerous steps you can take to increase Facebook ROAS and get more revenue out of every dollar invested.
- Set up ROAS Goal in Facebook Ads Manager
One of the first steps you can take to increase Facebook ROAS is to establish a target ROAS goal when creating a campaign in Facebook Ads manager. ROAS goals, one of several bid strategy options offered in Facebook Ads manager, provides Facebook with guidance on how they should bid for your campaign at ad auction.
Once ROAS goal is set, Facebook will “try to deliver against that over the campaign's lifetime, dynamically bidding as high as needed to maximize results.”
While Facebook does not guarantee that they will hit the ROAS goal specified, setting a ROAS goal in Facebook Ads Manager will give Facebook guidance on how to bid for your ad placements during a campaign, decreasing the chances of runaway campaign costs and wasted spend.
To learn more about ROAS goals and how to set them up, you can read Facebook’s instructions here.
- Leverage A/B testing in Facebook Ads Manager
As discussed in our article on increasing ROAS, testing and optimizing your ad creative is critical for increasing the number of target users that engage with your campaign. The average Facebook user is served thousands of advertisements per day. By continually testing creative and copy, you can identify the ad variants that capture your target audience’s attention, and reallocate your budget accordingly.
A great way to get started is to use Facebook’s A/B testing capabilities, which allows you to compare two variants of an ad strategy by changing variables such as ad images, ad text, audience or placement. Once you’ve created and launched your A/B test, Facebook will serve each variant to a distinct segment of your target audience, then determine which variant performs best.
One of the benefits of leveraging Facebook’s A/B testing functionality, as opposed to creating two campaigns and comparing them manually, is that Facebook A/B testing helps ensure that your audiences will be evenly split and statistically comparable.
To learn more about how to run an A/B test on Facebook, you can read the set up instructions here.
- Fine-tune audience targeting
In addition to leveraging Facebook’s campaign optimization solutions, you can also leverage external solutions alongside Facebook to improve the targeting of your Facebook campaigns.
One of the biggest drivers of low Facebook ROAS is not poor revenue generation, but rather inefficient campaign spend. When a campaign audience is defined using Facebook’s interest categories alone, the audience may end up including active or recent customers that are not interested in the product on offer. This inefficient targeting not only results in a poor customer experience for your active customers, but also wasted ad spend and low ROAS.
Fine-tune your Facebook Ad campaign targeting by using first-party data to create customer segments in an owned system, such as a data warehouse, and syncing them to Facebook as a Custom Audience. Once these Custom Audiences are created in Facebook Ads Manager, they can be leveraged as suppression lists on your campaign, ensuring you’re only serving ads to your target audience.
When syncing audiences to Facebook from any external or internal system, it’s important to ensure that you have the necessary privacy controls in place to support user consent management and data privacy.
Bonus: Wherever possible, sync suppression audiences to Facebook Ads Manager in real time. This will ensure that customers are removed from your advertising campaigns as soon as they have converted, optimizing campaign costs and improving the customer experience.
If you’re interested in increasing Facebook ROAS with real-time audience suppression, see how you can get started with WasteNot in just a few minutes here.
- Improve the landing page experience
Capturing your target customers’ attention with effective creative is a great start, but for most businesses, clicks do not equal revenue. Investing in improving the post-click experience is a great way to translate ad traffic into revenue and increase Facebook ROAS. Two key things that you can do to improve the post-click experience:
- Increase load speed - Recent Google research found that the chance of a user bouncing increases by 32% when page load time increases from 1 to 3 seconds; and by 90% when page load time increases from 1 to 5 seconds. Investing in shaving seconds, or even milliseconds, off of your page load speed can reduce bounce rate and increase the likelihood that your target customers will make a purchase.
- Personalize the landing page experience - McKinsey & Co. reported that 71% of customers expect personalization, and 76% of customers actually get frustrated when their experiences with brands aren’t personalized. Align your landing pages to the copy and creative in your advertising campaign to create a consistent customer experience, and leverage customer data to tailor the landing page experience to the user where possible.
What is a good Facebook ROAS?
The median Facebook ROAS for consumer brands is 1.8, according to research conducted by Databox on 636 companies. Of the sample companies, the highest Facebook ROAS was 5.35. Achieving a Facebook ROAS of 2.0 or higher is certainly good, however it’s worth noting that as with any marketing metric, it’s important to evaluate Facebook ROAS in context.
Campaign type should be considered when you are using ROAS to evaluate campaign success. For example, top-of-funnel, brand awareness campaigns may have lower ROAS than bottom-of-funnel, direct conversion campaigns. But that does not mean that you should abandon all top-of-funnel campaigns. Rather, it’s helpful to use additional metrics, such as Click Through Rate (CTR), alongside ROAS to further analyze campaign performance.
It’s also important to consider your average Customer Lifetime Value (CLTV) when evaluating ROAS. Businesses with high retention, such as Financial Services, may be willing to accept a lower ROAS score, as they know that once a customer converts they are likely to remain a customer for a long period of time. Businesses with lower retention, such as eCommerce, may expect a higher ROAS, as they have less certainty that customers will make repeat purchases over time. In fact, industry specific research conducted by Databox found that eCommerce companies had a median ROAS of 2.25, far higher than the cross-industry average of 1.8.
Key takeaways
- Facebook Ads Manager costs have increased significantly since 2019. It’s important for paid media marketers to understand Facebook ROAS so that they can manage their spend strategically.
- Establish a target ROAS goal when creating a campaign in Facebook Ads manager. This gives Facebook guidance on how to bid for your ad placements at ad auction, decreasing the chances of runaway campaign costs and wasted spend.
- Use Facebook Ads A/B testing capabilities to identify the ad variants that capture your target audience’s attention, and reallocate your budget accordingly.
- Fine-tune your Facebook Ad campaign targeting by creating customer segments in an external system and syncing them to Facebook, where they can be leveraged for suppression lists.
- Translate ad traffic into revenue by increasing page load speed and personalizing the landing page content
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