Understanding Facebook Ads for Small Businesses [Complete Guide]

Facebook Ads have become an essential part of marketing campaigns for businesses of all sizes. Facebook reports, "Today, three million businesses actively advertise on Facebook. That's three million companies from all over the world, with more than 70% from outside of the US." 

Businesses are shifting their ad budgets from traditional methods like television and radio to more budget-friendly resources like Facebook and Instagram, and with 70% of the current marketing being outside of the United States, this leaves an immense opportunity on the table for smaller brick-and-mortar businesses in the US. 

You have seen reports on results businesses are getting, and I can guarantee you've seen a dozen ads on your timeline from "Facebook Marketing Gurus" promising you the world. 

In this article, I am going to share with you the fundamentals behind Facebook Ads so you can launch a campaign for your business, or hire a marketing professional with confidence. 

Understanding Facebook ads for small businesses [Complete Guide Included]

1. Understanding the Algorithm
2. How the Bidding Process Works
3. Utilizing Facebook Pixel Tracking
4. Understanding Business Manager
5. How to Select Your Audience
6. How to Create a Campaign
7. Directing the Flow of Traffic
8. Measuring & Managing Your Campaign Performance

Understanding the Algorithm

When you got a brand new bike as a kid, did you read the owner's manual before riding it, or did you hop right on the bike? A bicycle may be an over-simplistic example, but you get the point. 

Reading the entire operation manual can seem tedious and time-consuming. In this section, I will break down the algorithm or operation manual, behind Facebook ads and cover the main topics you need to understand to get the most out of your marketing efforts. 

The Facebook Ads Algorithm comprised three parts; a Bid, Expected Action, and Relevance Score. 

Bid

Your bid consists of what you are willing to pay to reach your audience. Facebook knows this by the daily or lifetime budget you place at the campaign or ad set level, something we will discuss in further detail later. 

Expected Action

A few factors make up Expected Actions. The first is the probability of your selected audience taking action. Facebook gathers data on users continuously, from the engagement you take on websites with the Facebook Pixel to the actions you take on Facebook. They measure things like when a user abandons an online shopping cart or scroll away from an ad before clicking on the call to action, and give them an engagement rating. 

The second is the relevance of your offer to your target audience. Facebook's number one priority is user experience if they see that your ad does not align with the needs of the audience you selected your relevance score will lower. 

Would an advertisement for dentures perform well with a target audience made up of 18 to 25-year-old males? 

Quality Score

The Quality Score is a rating tagged to your ad account. Taking into account things like the age of your ad account, the amount of ad spend you've given, how responsive you are to comments, and shares on your ad, Facebook gives you a quality score. 

If you ever plan to contract out your Facebook ads, knowing this will keep you from paying for a service that throws up ads and doesn't manage their performance. 

How the Bidding Process Works

With traditional marketing resources like television and radio, you pay a set price for a spot before the ad going live, regardless of engagement or views. Digital avenues like Google Adwords and Facebook Ads differ, benefiting smaller businesses. Instead of paying for the placement, you pay for the ad performance.

Pay For Action Not For Placement

Unlike traditional marketing, with Facebook Ads, you pay based on user engagement. Facebook looks at things like impressions made or link clicks, and charges you based on the results. That means if your ads are optimized for link clicks, but the creative and offer are not inline with your target audience, you may end up paying very little because Facebook will limit the number of times is shows your ad. 

While fixing an ad can be a tedious process if you are unsure of how to optimize it, something I will explain later, it saves small businesses from dumping money into an ad that doesn't work. 

Lowest Cost Bidding

Facebook offers automated bidding, or lowest cost, for marketers that are unsure of manual bidding. The goal of automated bidding is to provide users with the highest intent at the lowest possible price. You may pay a higher fee at the Cost Per Thousand Impressions metric, but the user's high intention will result in a less expensive lead. 

If you are new to Facebook ads or are creating a new campaign, I would highly suggest sticking with the lowest cost bidding until you have a high performing ad set and want to lower your cost per acquisition. 

Understanding Business Manager

Business Manager is the dashboard Facebook provides to set up and manage your ad campaigns. If you haven't already, visit www.business.facebook.com to create your business manager account. 

Setting Up Business Manager

After creating the account with a business name and email address, the first step to establishing your business manager is to claim a Facebook Page. By claiming a page, you are letting Facebook know this is not a spam account. 

To claim a page:

• Click on the dropdown menu in the top left corner of the screen
• Click Business Settings
• Click Pages in the left-hand column
• Click Add New Page
• Click Claim A Page
• Enter the page name
• Click Claim Page
• If you are an admin of the page, it will auto-accept

Setting Up Report Columns

Reporting Columns are where you see your ad campaign results. Facebook has pre-made reporting columns based on ad objectives like Messages and Leads. 

Setting up a custom reporting column will give you a better understanding of where your users are dropping off and what parts of your campaign needs fixing, two things I will cover later in this article. 

To customize your reporting columns, you will first need to install event-based pixels on your website or sales funnel. Once installed, you can set up your reporting column to show those pixels in the order they are from the beginning of the funnel to the end.

Utilizing Facebook Pixel Tracking

Can you recall when you were browsing an online store, looking at specific products without making a purchase, and then seeing the same products in an ad on your Facebook timeline? 

How did Facebook know you were looking at that shirt in that color? 

Welcome to the Facebook Pixel. A pixel is a piece of code you install on your website to track users' actions. Facebook then matches that user data to a Facebook profile, allowing you to understand better who your audience is and how your ads are performing. 

Functions of Pixel

The Facebook Pixel creates three opportunities for marketers that take small business campaigns to a new level; retargeting, audience building, and ad performance measurement. 

Retargeting

When you visit a website, you are leaving a digital footprint. With a Facebook Pixel installed, marketers can understand the pages you visit and the products or services that interest you. The information is shipped back to Facebook, allowing you to retarget potential customers with the specific products or services they need, optimizing your marketing budget. This retargeted advertising is done by establishing custom audiences.

Audience Building

Custom Audiences are a vital asset for businesses. Using the Facebook Pixel data, marketers can group people based on the actions they took or their specific geographic/demographic data. Another way to create an audience is from a list of existing customers, all you need is their name and email address, but the more data points you have, the better. 

Measuring ad Performance 

As we discussed earlier, your reporting columns help to show the performance of your marketing campaigns. Using Facebook Pixel Standard Events will give you the flow of visitors, and where they drop off. We will later discuss how to read the reporting columns and make changes for improved ad results. 

Two Types of Pixels

There are two main types of Facebook Pixel; the base pixel, and the event-based pixels. 

Base Pixel

The Base Pixel is a generic piece of code placed across your entire website. This pixel will collect data on everyone that visits your site, regardless of the actions they take or the pages they visit. 

Event-Based Pixels

An Event Pixel shows data for a specific action or page on your website. The naming conventions for these pixels reflect the action desired. For example, if you are sending visitors to a landing page to schedule an appointment, you would include an event pixel titled "Schedule" on this page only. 

The only reason you would add this pixel on another page is if you plan to retarget both actions at the same time; otherwise, the pixel "Schedule" would only reside on this one page. 

Installing the Pixel

Facebook gives your three ways to install the Facebook Pixel. The first and quickest is to send the code to your website developer and have them install it. The second is choosing between a website platform, like Wix or Webflow, that partners with Facebook. This second option gives you a guided tutorial. The third option is installing the code yourself into the head tag of your website or website pages. 

Testing the Pixel -FB Pixel Helper

An easy way to test if a Facebook pixel is on your website or a competitor's website is downloading the Google Chrome Plug-in called Facebook Pixel Helper. 

How to Select Your Audience

Unlike traditional marketing quotes on how many readers or listeners they have in total, Facebook allows you to determine the specific group or audience you would like to target. Knowing your audience will help optimize your ad spend, and as we discovered earlier, it will also improve your relevance score because you are sharing content that interests the selected audience. 

Audiences Based on Facebook's Data

If you are building a new account and don't yet have custom audiences, you can use Facebook's 6 data points to define your audience. 

Location

Location can range from which country they live in down to a certain mile radius around your brick-and-mortar location. 

Age

The age range of your selected audience. 

Interests

Their interests or the pages they like on Facebook.

Demographics

Things like their career title, education level, gender, etc..

Behavior

The devices they use or the actions they take.

Connections

People connected to the Facebook page you are advertising.

Lookalike Audiences

As long as you have a group of 100 people or more from one country, you can give Facebook their information, and Facebook will create an audience of people that closely match them.

Creating Your Audience

You can create your audience based on Facebook Pixel data, people who have engaged with your ad on Facebook, and a spreadsheet with data of customer customers. 

How to Create a Campaign

Creating and optimizing a Facebook Campaign is a much larger topic than can be covered in one article. With things like ad retargeting and multi-step funnels, there are numerous ways you can position your ad creative and ad spend. Today I am going to share a one-step ad campaign with you that is great for businesses getting started. 

If there are any specific questions you may have that are not covered here, or at any other point in this article, please leave a comment section below and I will take that into account when creating new pieces for this site. 

Determine Your Objective

Facebook offers three categories of campaign objectives, each being part of the Buyer's Journey, Awareness, Consideration, and Conversion. 

For a one-step funnel, I would suggest going with Conversions objective for E-commerce, and Conversions, Messages, or Lead Generation for a service-based business. 

Naming Your Campaign

When I was younger, I had a manager tell me, "Make the instructions so clear your grandmother could walk in and understand what to do." When it comes to naming your Ad Campaigns, Ad Sets, and Ads, be very clear as to what they are and how they are different to reduce time during the review process. 

For a one-step campaign, put 1 step, then the action you desire to be taken, and the type of audience in the campaign. If you are testing audience performance, add a "mixed audience."

Example: 1 step - Appointment Sign-up - Lookalike

CBO

Campaign Budget Optimization, CBO, spreads your budget across all the ad sets in your campaign. For anyone starting, I would suggest sticking with turning CBO on. The benefit of CBO is that Facebook will track your ad sets' performance and move more of your budget towards the ad sets performing well. 

Campaign Structure

The campaign is home to your general objective, which may be getting leads to sign-up for an appointment or having people purchase your product. The next level is the Ad Set, which is home to marketing choices like which audience you want to communicate with and where you want the ads placed. The next and last level is the Ad. Here you select the creative for your user to see and the link they will be directed to when engaging with your ad. 

Within one Campaign, you can have multiple Ad Sets, each with numerous Ad variations. 

Creating Ad Sets

Creating multiple ad sets allows you to test things like audience and creative performance. While they may fall under the same ad campaign, using various ad sets helps you categorize the different types of marketing tactics you are using to achieve your campaign goal. 

Building Ad Creative

Building creative is a topic much larger than I can cover in this article. If you would like to read more in-depth on the subject, please leave a comment at the bottom of this article so I can add it to my writing plan for this website. 

What I will share is the importance of testing. You must throw the idea of traditional marketing out of the window. Throwing up an ad and hoping it performs is not how Facebook ads work. Before I launch a client's campaign, I test out which audience performs best, which photo or video works best, which type of ad copy performs well, and which headline draws in the highest click-through-rate.

If you want to run an effective Ad Campaign, you need to accept the time dedication it will take to monitor and tweak. 

Selecting Your Pixel

I would suggest optimizing your campaign for the last step in your process. If you are an eCommerce brand, this could be a pixel called "Purchase" installed on the order confirmation page. If you are generating leads, it may be a pixel called "Lead" on the sign-up confirmation page. 

Facebook does expect 50 conversions per week for the pixel you select. With that, start with the last step in your funnel, and if you notice your conversions are not matching up to this standard, you can go back into the Campaign creator and change the pixel selected to an earlier step in your funnel. 

Directing the Flow of Traffic

Ever wondered what it's like to be the police officer directing traffic during an event? 

No? 

Well, let's act as you have. 

It is their job to set up the cones ahead of time and direct people on which path to follow, making it as easy as possible to get to the parking lot. 

It is your job as a digital marketer to build the path for users to take and reduce as much friction as possible between them and the offer you have available.

Lead Generation

One of the biggest and most frequent mistakes I see businesses make with directing traffic is having a clearly defined offer on the ad, but the call to action button sends users to the homepage, and not an offer or product page. By doing this, you are expecting the user to purchase your offer, and you are relying on them to figure out where your offer is. 

This expectation may work for Louis Vuitton or Supreme offering 50% off, but not for the rest of us. 

Create a landing page designed for the offer on your campaign and map out each step the user would need to take to obtain that offer. Do they need to schedule an appointment? Then create a page following the landing page with an automated calendar scheduling system. 

Ecommerce

Ecommerce is generally a one-step approach unless you are selling outside of the box type products. The call to action on your Facebook Ad will direct people to the matching product page. 

Measuring & Managing Your Campaign Performance

Understanding how to fix a broken campaign is one of the most frustrating parts for any Facebook marketer just getting started. In this section, I will share benchmarks you want to reach, how to read your reporting columns, and the importance of fixing one thing at a time. 

Understanding Your Conversion Standards

Having benchmarks when you start a campaign will help you understand the quality of your ad campaign. For anyone new to the platform, using industry standards is a great place to start and will keep you from making any unnecessary changes to your campaign structure. Once you reach the industry standard, you may look for ways to go above and beyond your competition. 

Click-Through-Rate

Facebook shared that the average CTR for ads is 1%. Meaning 1% of people that view your ad will click the call to action button. 

Landing Page

The average follow-through-rate for a landing page is 20%. Meaning 20% of people that reached your landing page will continue to the next step in your sales pipeline. 

Cost-Per-Click

Aim to get your CPC below $5. Meaning you are paying under $5 each time someone clicks on your call to action button. This number may vary depending on your industry. But in general, for small businesses under $5 is a good mark. 

Reviewing Your Reporting Columns

You spent countless hours defining your audience, installing your pixel, building a landing page, and crafting quality creative for your ad, but the results you expected aren't there. A knee-jerk response might be to roll up your sleeves, brew a pot of coffee, and start making changes to everything. 

Don't do that. 

Instead, you need to treat this process as a science experiment, changing one variable at a time. Don't get me wrong, you could change three things at once and see your results improve, but how will you know which part made the difference so you can recreate the same performance in the future. 

Break your reporting columns into sections, understand how the ad is performing on Facebook by reviewing the CTR and the Cost Per Click or CPC. Then check your landing page results by looking at the pixel on page two and dividing it by the pixel results for the landing page. Times that by 100 for your follow-through rate.

(P2/P1) x 100 = Landing Page Follow Through Rate

Example: 300 people made it to your landing page pixel "ViewedLander. Of those 300, 100 made it to the next page in your sales funnel "Schedule." 

(100/300) x 100 = 33.333%

Fixing Your Campaign

As tempting as it may be, don't fix more than one thing at a time unless you have ample experience with Facebook ads. 

Facebook Ads

If your Facebook Ad is underperforming with a low click-through-rate, look at one of two opportunities, your audience selection, or your ad creative. 

I begin all Facebook ad campaigns with three rounds of testing, in the first round, I test out 4-5 audiences to see which performs the best. If you have not tested out variations of audiences, now would be the time to do so. If you have and are still not seeing results, look into widening your audience by removing some filters like age or gender. Sometimes letting Facebook do its work targeting users brings good results. 

In the following two rounds of testing, I will find the best offer and the best creative for an ad. If you think your ad creative isn't performing, piece this out even further. Test your ad copy, then test the image or video used, then your headline. 

Landing Pages

If you notice a high bounce rate with your landing page, look into fixing one of the following; UX design, similarity, page load speed, and having your CTA above the fold. 

UX Design & Similarity

Does the imagery of your landing page match the imagery of your Facebook ad? Your goal is to keep the user's attention long enough to engage with your offer, small things like unfamiliar images and multiple styles of buttons on one page can distract or confuse the user.

Page Load Speed

Slow load speed can be a deal-breaker for many users. Google recently did a study stating, "as page load time goes from one second to 10 seconds, the probability of a mobile site visitor bouncing increases 123%." If your website or landing page has low load speed, the first step would be to optimize your images ideally below 100kb. 

To test your landing page or website visit:

https://developers.google.com/speed/pagespeed/insights/

CTA Above The Fold

The fold of a webpage is at the bottom of your web browser. Anything not visible on the initial load is below the fold. Your offer or call to action should be prominent and above the fold. Imagine clicking on a Nike ad and having to scroll down the page to find the shoes you like. 

Facebook Ads have become a marketing essential for small businesses. Understanding how the platform operates and how you can optimize your ad spend are the first steps to growing your revenue with this marketing tool.

You now have a better understanding of how to build your Facebook Ad Campaign. Get out there and crush it!