Are you interested in those Facebook News Feed ads, or perhaps thinking about adding paid social to your digital marketing mix? Maybe you’re like many of our clients and already experimenting with Facebook advertising. Whatever your situation, you’ve likely pondered the question: Does Facebook advertising actually work? It’s a completely valid question, no matter your familiarity with paid social. The good news is there’s a simple answer: yes, Facebook advertising works incredibly well. But instead of stopping there, I want to explore why Facebook advertising is a must-have for any business’s digital strategy. In this guide, we’ll:

• Explore the mechanics of Facebook advertising
• Take a quick trip through the history of Facebook advertising
• Analyze the data that proves the remarkable effectiveness of Facebook ads and why you need them We’ve got a lot to cover, so let’s jump right in. (Or try our new Facebook ad tool, the Facebook Advertising Opportunity Calculator, to see firsthand what Facebook ads could do for you.) Short on time? Download this post for free to read later!

How Does Facebook Advertising Work?

Asking “Does Facebook advertising work?” is fair, but before we see if it does (spoiler: it does), we need to understand how it works.

Image via Facebook The core difference between paid search and paid social boils down to this: paid search helps potential customers find your business, while paid social helps your business find potential customers. Facebook advertising achieves this by enabling you to target specific audiences interested in your offerings using Facebook’s vast user data. First, define your campaign objective—what you want your Facebook ads to achieve. This could be driving website traffic, encouraging app downloads, generating leads, or boosting sales. Next, tell Facebook who to show your ads to. This is where audience segmentation comes in—providing Facebook with your ideal customer profile so they display your ads only to users matching your desired behaviors and demographics. Facebook offers thousands of custom audience parameters for highly refined targeting. You can even upload existing customer data to create “lookalike” audiences based on your chosen parameters.

Then, design your ads. Facebook ads are visually appealing, aligning with how people use Facebook, especially on mobile devices – no tiny, text-heavy ads here. Finally, use data and analytics to assess your Facebook ads’ performance, allowing adjustments for improved impression share, click-through rate, and more, just like in a paid search campaign.

The Facebook Ad Auction

Like Google Ads (previously Google AdWords) and Bing Ads, Facebook uses an auction system to decide which ads users see. However, Facebook advertising has unique elements, starting with competitive value. A Facebook ad’s competitive value combines an advertiser’s maximum bid (the amount they’re willing to pay per desired user action) and the ad’s intrinsic quality bid (how engaging the ad is for users and Facebook). While the exact formula for intrinsic quality bid is a secret, Facebook admits it includes factors like clicks, likes, shares, and overall ad feedback.

Factors like user age and demographics can also affect bid costs. Image via AdWeek. However, advertisers have different objectives and desired user actions. So, Facebook advertising determines an advertiser’s maximum bid using the estimated cost-per-thousand impressions (eCPM) of an ad. This system ensures fair competition, regardless of objectives or ad formats. To learn more about how Facebook applies this calculation to various ads and objectives, refer to this section of the Facebook for Business support documentation.

A Brief History of Facebook Advertising

Knowing how Facebook advertising works, let’s rewind to the platform’s early days and its rapid ascent to global dominance to understand its effectiveness.

Facebook Flyers

Many marketers believe Facebook’s advertising journey began in 2012, right before its underwhelming IPO (quickly forgotten in later years). While Facebook did introduce numerous advertising options then, its advertising history dates back to its humble beginnings in 2004 with Facebook Flyers.

These inexpensive, basic ads were the digital version of college campus notice boards. Aimed at individuals and small businesses targeting students during Facebook’s initial academic boom, Flyers cost $10 to $40 per day, promoting events, services like dog-walking, part-time jobs—typical campus notice fare. While Flyers might seem like a quick cash grab by Mark Zuckerberg to cover hosting costs (Facebook was still thefacebook.com then), they had elements of modern paid social ads. Advertisers could choose from themes, precursors to today’s diverse ad formats. Images were encouraged for higher CTRs, a common practice today. Flyers had character limits (25 for headlines, 200 for text), encouraged landing page links (still relevant and recommended), and allowed budget setting and visibility control. Flyers could even target users based on demographics, much like today. Looking back, Zuckerberg’s long-term monetization plan for his burgeoning site becomes clear. While 2012 sparked speculation that Facebook’s monetization aimed to appease investors, this strategy was clearly in play from the start.

Facebook’s Declining Organic Reach

Now, let’s explore how Facebook gradually suppressed organic post reach, essentially forcing businesses to “pay to play.” Marketers leveraging Facebook’s organic reach suspected trouble brewing, but it was the landmark Social@Ogilvy study by Ogilvy & Mather in 2014 that exposed the shocking decline in Facebook’s organic reach. From October 2013 to February 2014, Facebook Pages across the board experienced drastically reduced organic reach, dubbed “Facebook Zero” or “Reachpocalypse”:

The rapid decline was one thing, but the real surprise (or not) was Facebook’s official stance. When questioned if throttling organic reach was financially driven, Facebook said no. An official blog post, Facebook’s VP of Advertising Technology Brian Boland claimed that the decline in organic reach was caused by several factors, cited increased content volume and News Feed algorithm refinements. These factors may have played a role, but some industry leaders weren’t convinced. Jay Baer of Convince & Convert plotted the data from the Ogilvy study against changes in Facebook’s stock value, and the findings strongly suggest the organic reach decline significantly benefited Facebook financially, intentional or not:

Image via Convince & Convert The graph shows how declining Facebook organic reach aligns with Facebook’s rising stock price. While correlation doesn’t equal causation, this data speaks volumes about how Facebook profited from many marketers’ losses, regardless of intent.

What Makes Facebook Ads So Effective?

With some background on Facebook ads, let’s delve into their effectiveness and why they’re so appealing to digital marketers.

Facebook’s Immense Global Audience

Facebook boasts approximately 1.5 BILLION users—roughly one-fifth of the global population. This impressive statistic is a favorite among Facebook advertising proponents, and for good reason. No other platform comes close to this reach, and what’s equally remarkable is the speed at which Facebook achieved this. This chart from Pew Research Center shows Facebook’s user growth from 2004 to 2013, focusing on monthly active users (MAUs), not total registered users, which would likely be much higher including inactive accounts:

This user growth is crucial for advertisers for two reasons. First, a larger audience means more granular targeting. Unlike traditional advertising, paid social prioritizes finding the right people, not the most people, a stark contrast to platforms like TV and radio. As Facebook’s user base expands, so do the potential audiences advertisers can target based on demographics, interests, buying behaviors, life events, and countless other criteria for improved Facebook advertising ROI. Second, this growth trajectory signifies how Facebook, regardless of your personal use, continues to align with evolving media consumption and consumer technology adoption, particularly mobile devices. Data from Facebook’s Q3 2015 earnings report shows 893 million daily active users accessed Facebook via mobile devices in September of last year, a 27% year-over-year increase. Moreover, 727 million users—almost half of Facebook’s MAUs—exclusively access the platform on mobile, making it one of, if not the, largest mobile-only monthly user bases globally.

Data/image via VentureBeat This data excludes WhatsApp and Instagram usage, meaning Facebook’s total global mobile penetration is even higher.

Is Facebook Dying?

Amid discussions of growth and mobile adoption, it’s important to address the inevitable (and often amusing) doomsayers and their predictions of Facebook’s downfall.

In January 2014, two researchers from Princeton University’s Department of Mechanical and Aerospace Engineering (yes, really) studied Facebook’s potential longevity, comparing social network adoption and usage fluctuations to trends in epidemiology—the study of disease spread (again, really). Based on declining Google Trends data for the keyword “Facebook,” the paper concluded that that Facebook was doomed and would begin to crumble like the Roman Empire as early as next year. Now, my grasp of algebra is limited, so I’ll trust their calculations. However, their methodology is questionable. Basing such a bold claim—Facebook’s imminent demise by 2017 despite proven, continuous growth—solely on Google Trends data seems flawed at best, negligent at worst. Naturally, the paper triggered a wave of similarly illogical articles declaring Facebook’s imminent death, struggles, and other doom-and-gloom scenarios. Apocalyptic predictions are expected when a company thrives (or doesn’t), especially with marketers and bloggers vying for clicks. However, this doesn’t mean Facebook is dying, nor should it influence your marketing strategy.

It’s true that user adoption of Facebook has slowed in some parts of the world has slowed overall, particularly in regions like the United States and parts of Asia. But with such a massive user base, market saturation was bound to impact growth eventually. This isn’t the end-of-days scenario you might hear, though. Facebook remains the world’s most popular social network, and slower growth is still growth. While other platforms have grown, they’re nowhere near Facebook’s reach. Facebook also continues to excel in user engagement. Pew Research Center data shows 70% of U.S. Facebook users access the platform daily, with 43% doing so multiple times a day. Moreover, 82% of the desirable 18-29 age group are among the most active Facebook users.

Image via Business Insider In short, don’t believe the hype. Facebook is here to stay. Now that we’ve debunked some myths about Facebook’s supposed demise, let’s return to the effectiveness of Facebook ads, starting with cost and potential ROI.

Are Facebook Ads Worth It? Some Data on Facebook Costs

While advertisers consider numerous factors when launching campaigns, from reach to ad creative, it often comes down to cost-effectiveness. Thankfully, Facebook is one of the most budget-friendly advertising platforms available. However, with various ad formats, ROI depends heavily on the format. Let’s take a look. This chart, based on nexus-security data, shows the average cost-per-click (CPC) for Facebook ads at $1.72—remarkably low considering their potential:

Facebook ads are also cost-effective regarding cost-per-action (CPA). As shown below, CPAs vary widely across industries. Education and apparel have significantly lower CPAs than home improvement and technology:

For more Facebook advertising cost insights, explore the full range of nexus-security data on Facebook advertising benchmarks for your industry. While Facebook advertising costs have increased recently, they remain significantly lower than comparable PPC metrics in many cases.

Image via Salesforce Q1 2015 Advertising Benchmark report This figure displays the average cost-per-thousand impressions (CPM), cost-per-click (CPC), and click-through rate (CTR) for Facebook ads globally. Notice how in the United States, for instance, the average CPM dropped significantly from Q4 2014 to Q1 2015. In many regions (mainly English-speaking countries), CTR increased alongside this CPM decrease, indicating stronger engagement with Facebook ads in these areas. Globally, the average Facebook ad CPM decreased by 11% from Q4 2014 to Q1 2015, even after accounting for seasonal variations.

Why Advertise on Facebook: A nexus-security Case Study

While statistics like these are insightful and highlight the benefits of integrating Facebook into your digital strategy, they lack the context of real-world campaigns. Therefore, I asked Brett McHale, nexus-security’s paid social expert, to demonstrate Facebook advertising’s effectiveness through a nexus-security case study, emphasizing the importance of focusing on campaign objectives, even when it seems counterintuitive.

Ad creative for the Digital Marketer’s Road Map campaign Brett recently managed a campaign promoting “The Digital Marketer’s Road Map,” a bundle of whitepapers, blog posts, and other content resources. Previously, Brett achieved strong performance based on traditional metrics. However, in this campaign, he realized focusing on CTR and Relevance Score wasn’t translating into conversions. “With Facebook advertising, it’s crucial to align provided metrics with your end goal,” Brett explains. “Take Relevance Score and CTR—highly regarded for their interrelation, but less important if your goal is lead generation.” Before, Brett invested considerable effort in maintaining high Relevance Scores, rotating ad creative regularly, sometimes daily, to ensure freshness. This diligence yielded Relevance Scores of 7 to 9, exceeding the Facebook average, and CTRs of 4-5%, also above average.

The problem? Despite strong performance by traditional metrics, conversions remained low. So, Brett revisited his approach. “I shifted my focus back to the core value proposition and let the ads target the desired audience,” Brett says. “My Relevance Score dropped to around 4 or 5, CTR dipped as low as 0.68%, and Frequency rose to 2.00 to 3.50.” Normally, this perceived performance decline would alarm advertisers. However, the results for Brett’s campaigns were astonishing, as shown in the graphs below. This graph depicts performance over time for ad sets with high CTR and Relevance Scores:

This graph shows performance over time for ad sets with lower CTRs and Relevance Scores, but this set generated 75% more conversions than the first:

Brett’s key takeaway? Prioritize what matters to you, not just traditional metrics that might not align with your objectives. “Apply the provided metrics to your goals, not superficial expectations from some ‘guru’,” Brett advises. “If your strategy is driving clicks and lowering costs per reach, focus on Relevance Score. If you want leads and conversions, prioritize CPA. Stick to the fundamentals.”

The Bottom Line: Yes, Facebook Ads Work!

If you’ve been wondering whether Facebook ads are effective or right for you, this guide should address your concerns. Ready to dive in? Explore our comprehensive guide to Facebook video ads and the Social Ads 101 module in PPC University for our top 10 paid social hacks, creating effective lead generation Facebook ads, and more. Before launching, use our Facebook ads checklist to ensure your ads are good to go. If your Facebook ads aren’t performing, our troubleshooting guide can help.

Note: For information on the Facebook ads boycott, check out this post: #StopHateforProfit: What You Need to Know About the Facebook Ad Boycott.