Are you running ad campaigns on Facebook and feel dizzy when it comes to calculating your return on investment? Have no fear. I'm going to show you how to accurately calculate ROI on Facebook Ads, and offer a calculator to make it fast and simple for you. *Get the calculator here.
What is ROI
We want to make sure that for every dollar we give Facebook, that it generates some kind of return. According to this article in The Simple Dollar, an annual rate of return on long-term stock investments might be around 7%. For people looking to invest, this gives them a number to shoot for, knowing that the market is volatile and needs to be looked at annually and over the course of many years.
When looking at Facebook Ads ROI, many only look at their Cost Per Click, and forget to calculate what their Cost Per LEAD actually is. In the example below, my cost per click on a recent campaign is .79 cents, which is very good by Facebook standards. However, my cost per lead is much higher based on other factors at $6.58. Let's break these numbers down and get to the all important ROI.
To calculate ROI for Facebook Ads, there are 4 important numbers to know. These numbers are taken from a recent ad campaign I did for an ebook:
Knowing these numbers will help us take a step by step approach to calculating these next important metrics that will eventually get us to our ROI:
TAKE A DEEP BREATH!
Many people running Facebook Ads only concentrate on their CPC (cost per click), but if you want to know your true ROI, calculating your CPL and CPA will get you to a true ROI.
I created the following spreadsheet for you in Google Drive to help you plug in all those numbers and instantly get your ROI. No need for you to do the complicated equations above. Click the image for the spreadsheet.
If you're running Facebook Ads to generate leads ONLY, just use the spreadsheet to calculate your Cost Per Lead. In my case, I will be creating a new program soon, and just want to generate enough leads to be able to share my new product later. Since the product isn't created yet, I don't have any sales numbers at this time.
I hope this helps you get a clearer picture of how your Facebook Ad campaigns are working for you.