The ROAS Formula: How To Keep Your Facebook Advertising Cost Down (4 Super Important Metrics That Tend To Slip Everyone’s Attention)

by | Jul 6, 2021 | Best ROAS, Facebook Ads

A ROAS formula to find out what the your facebook ads cost

Every online store needs to keep an eye on their Facebook advertising costs. That is they want to be sustainable, profitable, and bring a good ROAS back to the business.

In theory, it’s all super simple.
The total amount of profit generated by those Facebook ads needs to be greater than the expenses those ads occurred (hence ROAS is so important, but more on that topic here).

However, two things happen that prevent eCommerce stores from keeping their Facebook advertising cost down and their ROAS on track. There is too little analysis done on the Facebook ads reporting. Or there is too much analysis of everything that’s there and I also refer to this as total analysis paralysis.

Neither of them is ideal. So let’s have a look at the best way to make the most out of your budget and keep your Facebook advertising costs down as low as possible with the highest return on ad spend and ultimately the highest return on investment.

RELATED: Facebook Ads For Ecommerce: The Truth About Getting Ridiculous ROAS Even After iOS Updates [New Method]

Facebook Ads Reporting On The Ad Set Level Is A MUST

Here’s the thing…

Those of you who are scared of numbers log into your Facebook ads manager only to see a bunch of data and then close it right down.

It’s too much for you. I know. I understand where you’re coming from. However, if you think you can use the Ads app on your mobile phone to manage your Facebook Ads, I’m sorry but that is not going to help you get the highest possible ROAS (return on ad spend) and will most certainly not help you make more money with your store.

Similarly, those of you who are a bit of “numbers enthusiasts”, track everything about your Facebook ads.
And forever analyze the Facebook ads creatives, how many views and clicks each of the images, videos, and copies got. Sorry, but that is also not going to help you get the most out of your Facebook ads budget.

Why? Because you're probably missing the bigger picture (otherwise you wouldn’t be reading this).

Why Report At The Ad Set Level

In order to best manage your Facebook ads, reporting needs to be done on the Ad Set Level (image below).
The reason for that is because on the ad set level we’ve got all of the details available to us. But at the same time, it’s allowing us to avoid analysis paralysis. In other words, the Ad Set level is allowing us to draw some powerful insights from our Facebook Ads.

Facebook ad set level Screenshot

RELATED: How To Set Up Facebook Ads Campaign For Your eCommerce Store [The Step By Step Guide]

Not All Facebook Ads Metrics Are Equally Important

The next thing in making sure that you’re not spending more than you have to on your Facebook ads is choosing the metrics that are really important but ditching those that aren’t. Because looking at too many metrics at once can become overwhelming. It can also become misleading and that’s the part you really want to avoid.

So Which Facebook Ads Metrics matter the most?

When it comes to the basics, there needs to be a visibility of when a specific campaign started. How much has it spent so far, what’s the daily budget and how many purchases or sales it generated.

Besides that, there are 4 super important Facebook ads metrics you need to track to keep the performance in check. Here they are, in order of importance.

Facebook Ads Reporting: CPM or Cost Per Mil.

CPM Screenshot - Cost per 1,000 impressions

In other words, how much money are you paying for 1,000 impressions? Remember, when it comes to keeping Facebook advertising costs down, we’re essentially paying for the opportunity to have users looking at our ads or eyes on offer. And CPM is telling you how much are you paying for that specific Facebook audience you’re targeting. The more expensive the audience the more expensive each click on your offer.

But do you want CPM to be “cheap”? Definitely not.
And that’s because a cheap CPM is usually associated with poor Facebook ad targeting and hence with a low-quality audience that is never going to buy from you. Which can end up costing you more. So striking the right balance is super important here.

Those of you who are not new to Facebook ads would have observed an increase in CPM since the Apple iOS14 update took place and in this case, it’s not due to paying for a high-quality audience. Rather the opposite – it might be due to struggling to win the online auction. More on that topic here.

Facebook Ads Reporting: CTR Link Click Through %

CTR Link Click Through Rate Screenshot

Please don´t confuse CTR Link Click-Through % with CTR % (click-through rate). CTR Link Click-Through % is the percentage of all people who clicked on your offer. In other words, those people who actually took action based on what you want them to do. In eCommerce, this normally means hitting the ‘shop now’ button. This metric measures how relevant is your Facebook Ad creative (image, video, text) to the audience that you are targeting. If not many people are clicking, then you’re either not targeting the right audience on Facebook or your Facebook ad is just not attractive enough.

Your regular CTR % (click-through rate) just counts anyone who clicked on anything. They could have liked your ad, commented on it, clicked on the text, or clicked on your business profile page. But unless a shopper clicks the ‘shop now’ button they’re not a shopper in my opinion and definitely not as likely to buy.

So you don’t want this metric to distract you from what’s really going on. Because the regular CTR % always ‘looks’ better than the actual CTR Link Click-Through % but it’s the latter that really matters.

Facebook Ads Reporting: CPC Link $

CPC - Cost Per Click Screenshot

Let´s look at the above two metrics. The cost of the audience and the percentage of people who clicked on the CTA (call to action) button. It´s usually the ‘shop now’ button in eCommerce. These give you a combined metric of CPC Link or in other words Cost Per Link Click. Essentially this is the cost you’re paying for anyone to visit your website.

Of course, you want to make sure you keep this cost on track. This metric is one of the biggest clues to keeping your Facebook advertising cost down. However, the only way to influence this metric is to influence your CPM (target different audiences on Facebook). Or increase your CTR Link Click-Through %. It will require you to up your game when it comes to the Facebook Ads Creative – image, video, text.

RELATED: Facebook Ads CRUSHED After iOS 14 Update? (Do These 3 Things NOW)

Facebook Ads Reporting: ROAS (Return On Ad Spend)

Another super important metric that you always want to have included in your Facebook ads reporting is the ROAS (return on ad spend) as this is a crucial piece of information really helping you keep an eye on the cost of your ads.

ROAS Formula:
Campaign Revenue divided by Campaign Cost = ROAS

ROAS calculates the total return rate of a specific campaign, ad set, or ad generated in sales on your website. For example, if ROAS is 3 on a specific ad set level it means that whatever you spent on that specific ad set (a specific audience as specified by your targeting) for that particular duration (look at the dates you selected in your reporting) has brought in 3 times as much revenue from the sales attributed specifically to this ad set.

A ROAS Formula

More Reasons To Report At The Ad Set Level

Providing your store has been set up the right way (particularly post iOS14 update), Facebook has pretty good visibility of which specific promotion has generated the sale. If you generated 100 sales, Facebook attributes these sales and the revenue to specific ads, ad sets, and campaigns. Based on which one of these the user clicked on last before they purchased.

Hence, if your ROAS is let’s say 5 on the campaign level, you might see that different ad sets in that campaign have a different ROAS. As not all audiences have brought in the same amount of sales (yet another reason why we always look at the reporting on the Ad Set level).

Ok so now that you have the most important metrics that will help you keep track of your ad costs, the next step is to have the right set-up to make sure that you’re seeing everything at glance. Watch this video where I explain how to set it up literally in a few short clicks.

– Silvia Myers

PS: Comment below if you have any more questions or any thoughts on this. I’d love to help.

Silvia Myers

Silvia Myers

eCom Expert & Shopify Coach

Silvia Myers is an eCommerce coach helping online stores achieve incredible ROAS (return on ad spend) through digital marketing and online selling platforms.

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