Start-ups and small businesses are always looking for more customers, and there are a lot of potential customers on the Internet, right? But what online strategy is going to help you to gain the customers you need in a cost-effective manner? Today, let’s dive into Facebook advertising. With 750 million members, and 225 million in the U.S. alone, there’s a large audience to reach.

Similar to many other online sites, Facebook ads are a marketplace–you’re making a bid about how much you’ll pay to reach people, or how much you’ll pay if they take an action. (See some resources below for more info on how to use them.) There are a lot of people using Facebook to build their brand by increasing the amount of fans on their pages, and that is absolutely a good strategy for many companies. These fans are customers or customers waiting to happen. Fans are great–but what about revenue driven as a result of a specific advertising campaigns? Marketing 101: Your return on investment is the Gross Profit from that campaign minus the expense spent on the campaign, divided by the expense and that gives you a percentage, which you can compare to other marketing expenditures to see what is most effective for you.

Anna Strahs of AnnaB’s Gluten Free started her baking business out of her Richmond, Va., apartment about a year and a half ago, and now she has commercial ovens and a wholesale business. Anna did a targeted ad for people in Richmond who were fans of restaurants and markets that had gluten free products and went through $25 in a few hours. That money bought her the first 50 "likes" on her page. "Since then we’ve run ads intermittently, we put our Facebook page info on our packaging, and at our markets we advertise it. When we offered some cupcakes colored with vegetable dye instead of food dye, we got 11 likes, but we also got six orders. We keep up with the Facebook page more than our regular website and we get direct feedback. People recommend and share our posts on their own pages, and we’ve had restaurants that carry our products repost or share our posts.” Anna can’t directly track the revenue from the fans, but that number is increasing and she can directly tie sales to content on her Facebook page.

Manish Vora co-founded Artlog in early 2008 as a platform connecting people to contemporary art galleries, museums, and artists. “We want to help the institutions broadcast themselves online,” said Vora, “As well as combine their offline efforts, providing access to have people visit galleries, museums, and fairs.” Vora’s team recently did an internal study tracking their use of Facebook advertising as an event promotion platform. “We’ve used FB ads to target people for paid events and paid software products. We had been using Google Ads, in a very targeted manner, but Facebook’s ads were significantly cheaper, and we stopped advertising with Google six months ago. Generally, the ability for us to target age, geography and interest help us target event by event. So promoting an art crawl on New York City’s Lower East Side with Thrillist, we can target 21-26 year olds in geographic NYC. For a Chelsea neighborhood crawl on a recent Thursday, we’re working with 20-30 galleries and 1000 attendees, and we targeted a 25-45 year old audience with a different NYC geography. The flexibility from event to event and by interest makes it more effective.”

How effective? Vora estimates about 8 percent of attendees come from their Facebook ads, and their margin is such that they’re making about $200 for every $75 they spend on ads. That’s gross profit-investment/investment, or (200-75)-75/75 for a 66 percent return on investment.

A start-up using Facebook ads is Synergy Beads of Ann Arbor, Michigan. CEO Adam Dion reports that spending $50 on Facebook ads brings him between $220 and $250 of revenue per month. (ROI (250-50)-50/50=300 percent ROI!  “I believe the return rate on FB is higher because of the ability to particularly select an audience who have specific and very strong, closely related interests…rather than abstract, loosely related keywords, which is key for a niche business like ours.”

Floptopz of New Jersey creates Flipflop insoles. Their Facebook campaign has translated to 300 percent more site visits, but their sales have only covered the cost of their campaign–no extra profit. Owners Donna and Dave Hill report, “We have definitely seen good traction and traffic, but we have also capped our daily spend (as a start-up, we are budget conscious) in order to keep our budget intact.”

GovernmentAuctions.org CEO Ian Aronovich told me, “While Facebook does not work well for us to make immediate sales like, e.g., CPC ads on Google Adwords, it builds awareness of our brand and "likes" on our company page. We can then use that over time to build an innovative sales funnel.” He also noted that his typical customer is older and “While 55+ is the quickest growing demographic [on Facebook], it seems to us that until recently, they were not really engaging with brands that much (including ours) compared to the yourger demographic.” This is only one company’s experience–it will be interesting to track over time.

Vora of Artlog notes that recently the cost of the ads he’s using on Facebook have increased, though they are still effective because they’re paying less than they were with Google Ads. I had a few others e-mail me from my outreach to tell me the same thing. A Facebook spokesperson told me that this is “a result of a general increase in activity within the auction marketplace. Price is a function of auction dynamics, but businesses always have control over their budget, and Facebook's system helps them find the optimal bid that works for them.”

Are Facebook ads working for your business? Let us know your experience in the comments.

Finally, a thank you to the over 50 replies I got from posting about this story on HARO. I couldn’t reply to everyone, but they gave me great background for this piece.

Resources:

How to Advertise on Facebook

Measure Your Online Engagement