Facebook Ads Manager can seem confusing to many. Although the basic principle of Meta Ads is simple, it is often difficult to understand the different metrics that need to be taken into account when creating paid ads on the Facebook platform. To help you better understand these metrics and what they mean, I'd like to talk about them in more detail.
CPM (Cost Per Mille) or cost per 1000 users reached.
CPM indicates how much it costs an advertiser to serve 1000 ad impressions to a selected audience. By understanding this metric, it is possible to assess the effectiveness and cost of advertising, especially when comparing different campaigns or marketing channels, such as FB ads vs TikTok vs Google ads.
CPM Valuation Examples and Usage
Comparing campaigns Suppose you are running two different campaigns - one to raise awareness of new brands and one to sell specific products. You notice that the CPM for the brand awareness campaign is €5 and for the product sales campaign €12. This means that the cost of attracting new customers is higher and may be due to higher competition for a particular product or audience. This information can be used to adjust the strategy of , for example by optimising the content or targeting.
Industry competition For example, if your company operates in a highly competitive technology sector, the CPM value may be higher compared to a less competitive sector such as niche local services. This means that your advertising will need to be allocated a higher budget to achieve the desired results. Comparing CPM with the industry average can help you draw conclusions about advertising effectiveness and budget allocation.
Low CPM and High Effectiveness For example, if you see that the CPM is low, e.g. €3, and the ad is also driving high engagement and conversions, this may indicate that the content of your ad is highly relevant to your chosen target audience. This is ideal as a low cost per 1000 impressions means good effectiveness and a high return on investment.
CPM Comparison with Other Channels Let's say you are running campaigns on both Facebook and Google Ads. You notice that the CPM for Facebook is €10 and for Google Ads €15. Here, the cost of Facebook Ads to reach 1000 people is lower, which may mean that the platform is more effective at reaching that particular audience. Based on this data, you can choose where to allocate a higher budget to maximise the impact of your advertising.
CPM Optimisation Strategies
Reviewing the target audience Often a high CPM can be a sign that an ad is aimed at a highly competitive audience. Changing audience parameters, for example by narrowing or broadening demographic criteria, can reduce CPM and therefore cost per impression.
Improving the content of the ad A high CPM can also be the result of an ad not being interesting or relevant enough for the target audience. Revising the text, visuals or offer of an ad can increase the quality and relevance of the ad, which often reduces costs.
Use Broader Ad Targets Facebook offers a range of campaign targets - from visibility to conversions. Campaigns that target visibility tend to have lower CPMs because they are less directly action-oriented. If your goal is to reach users broadly, for example in the case of a new product launch, a visibility campaign might be more profitable.
ROAS = Revenue / Advertising expenditure
ROAS (Return on Ad Spend) is a measure of the return on ad spend by comparing the revenue generated with the money invested. ROAS is calculated as the ratio of revenue to advertising expenditure
ROAS = Revenue / Ad Spend
If ROAS is 5, this means that for every €1 you spend on advertising, you get €5 in revenue.
Why is ROAS an important indicator?
Measuring the return on advertising budget: ROAS gives a clear picture of the effectiveness of advertising and shows whether it is helping to achieve a positive return. This makes it easier to understand how well the advertising budget is returning
Budget optimisation: Knowing which campaign or ad generates the highest ROAS allows you to make decisions to increase the budget of campaigns that generate the most benefit and work with less successful campaigns to optimise them.
Comparing effectiveness: ROAS allows you to compare different campaigns or channels, e.g. Facebook, Google. See how ROAs, such as Facebook, Facebook, TikTok or Instagram, can be used to determine which channels are most effective in driving sales.
How to evaluate ROAS?
Sector and context: Depending on the sector and objectives, different ROAS values are considered optimal. For example, e-commerce companies usually want a ROAS of around 4-5, while in highly competitive industries it can be more difficult to achieve such a value.
Positive ROAS: If your ROAS is greater than 1, this means that the campaign is generating revenue in excess of advertising spend and is therefore profitable. If the ROAS is less than 1, you are investing more money than you are generating in revenue, which means you need to optimise your campaign.
Comparison between campaigns: If you have multiple campaigns, you can compare their ROAS values with each other. For example, if one campaign achieves a ROAS of 7 and another only 2, you can judge which ads are more effective and which you should invest more in.
How to improve ROAS?
Optimal targeting: Choosing the right target audience can improve ad relevance and conversion, which in turn has a positive impact on ROAS.
Improving your ad text: By testing different ad texts and visuals, you can find the best combination that speaks to your audience and encourages them to take a specific action, thus improving your ad effectiveness and ROAS.
Sales funnel optimisation: Optimising not only your advertising but also your sales funnel is important to increase ROAS. If the landing page is optimised and easy for users to navigate, they are more likely to take the desired action, which has a positive impact on revenue.
Budget review and reallocation: By analysing the ROAS of different campaigns, you can review the budget and reallocate funds to the most effective campaigns or channels to maximise returns.
ROAS Valuation Examples
Positive ROAS For example, you invest €1000 in advertising and it generates €5000 in revenue. In this case, the ROAS is 5, which means that every €1 spent generates €5 in revenue. This indicates that the advertising campaign is profitable.
Low ROAS Suppose you spend €2000 but only generate €1000 in revenue. This means that the ROAS is 0.5, which indicates that your advertising expenditure exceeds your revenue. In this situation, it is important to analyse where the problems are and make the necessary improvements, such as changing the landing page targeting or the ad content.
Comparing ROAS between channels For example, Facebook ads generate ROAS 6, while Google ads generate ROAS 4. This means that Facebook ads are more effective and generate a higher ROI in this case, so it may be more beneficial to increase the budget for Facebook campaigns.
HOOK Rate = 3 seconds video play / Impressions
Hook rate is a measure of how effectively an ad captures the audience's attention and encourages them to take the next action. Hook rate is often used to measure shorter video ads or content on social media platforms such as TikTok, Instagram or Facebook, where users browse content quickly and the ad needs to be able to grab attention in the first few seconds.
Hook rate = Users who watched the first 3 seconds / Total viewers
Why is Hook Rate an important indicator?
Attract attention: on social media platforms, it's important to grab your audience's attention in the first few seconds to keep them watching. Hook rate allows you to measure how well an ad is able to capture this attention and how many users stay engaged.
Effectiveness of the advertising message: Hook rate helps to understand whether the initial part of the ad is engaging enough to capture the audience's attention. If the hook rate is low, it indicates that the initial text or visual material is not effective enough to reach users.
User behaviour analysis: On social media platforms, users often move quickly between content. Hook rate is an effective indicator to understand how users react to the first few seconds of an ad and whether they are willing to engage further.
How to assess Hook Rate?
Industry and platform: the value of the hook rate may depend on the platform on which the ad is shown. For example, for TikTok or Instagram ads, where attention needs to be held for a very short time, hook rate is critical. Comparing hook rates between different platforms or sectors can help determine which strategies are more successful in capturing attention.
Comparison between campaigns: If you are running several campaigns and the hook rate for one campaign is much higher than another, this indicates that the particular ad is better at capturing the audience's attention. This allows you to analyse which elements are working best and which may need to be improved in other campaigns.
Optimal hook rate: The optimal hook rate depends on your objectives and platform. Generally, a higher hook rate (above 50%) is considered good as it indicates that most viewers continue watching after the initial seconds. If the hook rate is lower, analyse what might need to be changed in the first part of the ad to attract more viewers' attention.
How to improve Hook Rate?
Strong start: to improve hook rate, you need to have a strong call-to-action or visual element at the start of the ad that grabs attention. This can be an interesting question, an eye-catching visual or an emotional stimulus that immediately appeals to the audience.
Clear and precise message: In the first seconds it is important to clearly communicate the main message or the solution to the problem. Viewers need to be quickly informed about how the ad relates to their needs or interests.
Dynamic visuals: Change shots, b-roll, use movement and dynamic visuals to capture the viewer's attention. A bright start with fast movements and emotionally rich content helps to keep the viewer's interest.
Target audience awareness: tailor your advertising content to your specific target audience to match their interests and needs. If an ad is designed with the target audience in mind, they are more likely to keep watching.
Hook Rate Valuation Examples
Low Hook Rate For example, your video ad has a hook rate of only 20%. This means that 80% of viewers will leave the ad in the first few seconds. This could indicate that the start of the ad is not engaging enough. In this case, it is recommended to revise the first seconds and make them more engaging, for example with a question or an emotional narrative.
High Hook Rate Let's say your ad has a hook rate of 60%, which means that most of the audience keeps watching after the first few seconds. This shows an effective start that successfully engages users. This ad structure can be used in other campaigns to achieve similar effectiveness.
