A Beginner's Guide to Understanding Facebook Ads

The Facebook Ad Dictionary | A Beginner’s Guide to Understanding Facebook Ads

 A Beginner's Guide to Understanding Facebook Ads

I am an advocate of the use of Facebook ads especially for small & medium businesses.

If you haven’t read why I think this, you can check it out here.

However, to make Facebook work well for you and your business, you have to be able to understand the ins and outs of the Facebook ad platform.

So this is why we have this post. This is to help first-timers navigate through Facebook Ads Manager.

In this post, we’ll list down important terms which you’ll find yourself using frequently.

But before that, it is important to discuss…

 

How does Facebook Advertising work?

It’s not complicated really.

The main concept is that Facebook shows you ads which it thinks will be relevant for you.

Facebook creates a profile of its users based on their behavior. Some points of information they use to determine what you might be interested might be:

  • The Facebook Pages you like
  • The types of post you interact with
  • The actions you take on certain website like subscribing and purchasing

You can actually check what Facebook thinks you’re interested in. Here’s mine:

My ad preferences

 

It seems right since these are my interests. But…

I have actually no interest in Indiegogo nor have I used it. I don’t recall interacting with anything with regards to crowdfunding so I don’t know why it’s there.

Having said that, note that Facebook is not perfect. It can, at times, assume wrong things about you. This is why sometimes, you see ads on your feed which are of no relevance to you.

When you see an ad which you wonder why it’s showing up in your news feed, you can click on the arrow on the upper right of the ad. From there, select ‘Why am I seeing this?’ to find out why.

Why am I seeing this?

So what does this mean for businesses like yours?

This means that you can set your ads to show only to those people who are most like your customers. That’s a huge advantage especially compared to traditional advertising!

This ensures that your ads will appear to the specific people you want it to appear to.

Another important concept to understand is bidding but we’ll break that down in another post.

Now that you have a better idea on how Facebook Advertising works, let’s get you prepared to start by breaking down the terms you’ll be encountering.

Facebook Ad Dictionary

Campaign – The highest level of the ad campaign structure where advertisers choose objectives.

Ad Set – Levels in the ad campaign structure where you set your budget and define your audience.

Ad – The posts you show to your audience.

Engagement – Any interaction with your post (likes, reactions, comments, shares, etc)

Clicks (All) – Any click that was made on your ad. These include:

  • Engagement
  • Clicking on videos to play audio
  • Clicking “See More” for long posts
  • Clicking the link you provide

Clicks (Link) – Only the clicks which lead the users to a website you set.

Reach – The number of users who have seen your ads

Impressions – The number of time your ad was shown

Frequency – the number of time a user has seen your ad. Can be computed by dividing impressions by reach.

CTR – Short for Clickthrough rate. It’s computed by dividing the number of clicks by the number of impressions and multiplying it by 100%. This metric is a gauge on how well your ads have been resonating with your audience.

CPC – Short for cost per click and is a metric to help you determine how much you’re spending for each person who clicked on your ad. It is computed by dividing the total amount you spent by the number of clicks your ad got.

Conversions – this is the general term for the actions you want users to take. It can be in the form of purchases, sign ups, lead, registrations, etc.

Other Important Terms

There are terms which you won’t really see in Facebook Ads Manager but you may be encountering especially when you read more about Facebook Ads.

Here are some of them:

Return on Ad Spend (ROAS) – This is probably the most important metric to check to see whether advertising on Facebook is effective for your business.

ROAS tells you how much profit you receive as compared to the cost of advertising.

To get this, compute for the profits you earned directly from your Facebook Ads. Then divide it by the total amount you spent on advertising. Express the answer in percentage and you have your ROAS.

If you’re ROAS is below 0%, then something’s not working. It means that you’re spending more than you are earning.

 

CPA – Short for Cost per Acquisition or Cost per action.

This refers to how much each of your chosen conversions cost.

Like ROAS, it helps you determine whether or not your advertising efforts are effective or not.

To compute for CPA, simply divide total ad spend by the number of conversions you have.

As long as your CPA is lower than the cost of your product, then you’re doing great.

 

Funnel – This is the model followed by a lot of businesses whether they know it or not.

To illustrate, take for example a hotel who targets Families of 4 in Metro Manila. These people fall into the group of prospects of the hotel.

The hotel then reaches out to their prospects through promotion and some people call the hotel to express interest in staying with them. These interested people become leads.

The sales team then follows up with these leads and get them to book a weekend at the hotel. They have now converted (hence, the term ‘conversions’) from a lead to a customer.

But usually, it doesn’t stop there. During the stay, the hotel staff tries to ensure that the guest has a great stay so that they will, later on, convert from being just a customer to a repeat customer.

This process is called a funnel because of how it is shaped as illustrated below:

Funnel

Even More Terms

There are other more terms and concepts to be understood in this field but I don’t want to give you information overload in this one post.

And besides, some of these need their own post for you to understand them.

So in the meantime, I’ll just list them down here and link them to their posts.

  • Pixels
  • Retargeting
  • Custom Audiences
  • Lookalike Audiences

Have any other terms you’ve seen that you don’t understand? Let me know and I’ll try to help!

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