High CPMs on Facebook Ads: The Pros, Cons & What to Consider for eCommerce

High CPMs on Facebook Ads: The Pros, Cons & What to Consider for eCommerce

Are your Facebook Ads costing you an arm and a leg? You're not alone. Many eCommerce businesses struggle with soaring Cost Per Mille (CPM) rates, making it difficult to achieve a positive return on ad spend (ROAS). Sound familiar? This article dives into the pros and cons of addressing high CPMs, the factors contributing to these costs, and what you can do to optimize your campaigns.

What It Is

High CPMs, or high costs per thousand impressions, on Facebook Ads mean you're paying a premium for each time your ad is shown. While a high CPM doesn't always equate to poor performance – it can sometimes indicate high demand or a competitive niche – it can quickly erode your advertising budget and hinder profitability. When CPMs are high, it becomes more challenging to acquire new customers at a sustainable cost.

The Pros of Addressing High CPMs

Focusing on lowering your CPMs can get you several advantages for your eCommerce business. Here's a breakdown:

• Improved Profitability: Reducing your advertising costs directly translates to increased profit margins. If you can maintain or increase conversion rates while lowering CPMs, you'll see a significant boost in your bottom line. This is especially crucial for eCommerce businesses that rely on consistent sales to stay afloat.
• Increased Scalability: Lower CPMs provide greater flexibility in scaling your ad campaigns. You can afford to reach a wider audience and test new strategies without blowing your budget. This allows for faster growth and market penetration.
• Better Budget Allocation: When you're not overspending on impressions, you can reallocate your budget to other areas, such as A/B testing, landing page optimization, or exploring new advertising channels. This diversification can lead to more efficient marketing efforts.
• Enhanced ROAS: A lower CPM, combined with effective targeting and compelling ad creatives, will improve your Return on Ad Spend (ROAS). A higher ROAS makes your campaigns more attractive to investors and stakeholders.
• Competitive Advantage: Optimizing for lower CPMs can give you an edge over competitors who are struggling with high advertising costs. You can outbid them for ad placements, reach a larger audience, and capture more market share.

The Cons of Addressing High CPMs

While the benefits are clear, lowering CPMs isn't without its challenges. Consider these potential downsides:

• Time and Resources: Optimizing for lower CPMs often requires significant time and effort. You'll need to conduct thorough research, test different ad creatives and targeting options, and continuously monitor your campaigns. This can be a heavy lift for smaller teams or businesses with limited resources.
• Risk of Reduced Reach: Aggressively pursuing lower CPMs might lead to narrowing your target audience, potentially reducing the overall reach of your ads. You might miss out on valuable customers if you're too focused on cost-efficiency.
• Complexity: Facebook's advertising platform is complex, with numerous variables that influence CPMs. Understanding these variables and implementing effective optimization strategies requires a deep understanding of the platform and marketing principles.
• Constant Monitoring: The advertising landscape is constantly changing, so you need to continuously monitor your campaigns and adapt your strategies to maintain lower CPMs. This requires ongoing analysis and adjustments.
• Potential for Lower Quality Traffic: Lowering CPMs might lead to targeting less qualified audiences, potentially leading to lower conversion rates. It's crucial to strike a balance between cost-efficiency and audience quality.

Who It's For

Addressing high CPMs matters for several groups within the eCommerce ecosystem:

• eCommerce Brands: Businesses of all sizes that rely on Facebook Ads to drive traffic and sales. This is especially true for those experiencing shrinking profit margins because of rising advertising costs.
• CRO Specialists: Professionals responsible for optimizing conversion rates and improving the overall performance of marketing campaigns. Lowering CPMs is a key aspect of conversion optimization.
• Digital Marketers: Individuals managing advertising campaigns, including those responsible for Facebook Ads, who need to maximize the effectiveness of their ad spend.
• Growth Teams: Teams focused on driving business growth through marketing efforts. Lowering CPMs is a direct lever for achieving sustainable growth.
• UX Teams: Teams focused on user experience. A good user experience will directly impact conversion rates, and therefore, the cost-effectiveness of your ads.

Who Should Skip It

While lowering CPMs is beneficial for most, some businesses might not prioritize it immediately:

• Businesses with Unlimited Budgets: Companies with ample marketing budgets might not be as concerned with CPMs, as they can afford to spend more to reach a wider audience.
• Businesses in Highly Niche Markets: Companies targeting very specific audiences might experience higher CPMs due to limited competition and high-value customers. Focusing on conversion rates may be more beneficial than trying to lower CPMs.
• Businesses with Low Customer Lifetime Value (CLTV): If your customers don't generate significant revenue over time, lowering CPMs might not be as critical as focusing on other aspects of the customer journey.

Alternatives to Directly Addressing High CPMs

Sometimes, directly attacking high CPMs isn't the best approach. Consider these alternatives:

• Improve Ad Relevance: Ensure your ads are highly relevant to your target audience. Facebook rewards relevance with lower CPMs. This involves A/B testing different ad creatives, headlines, and descriptions to identify what resonates best with your audience. Remember to test different ad formats, too, such as video versus images.
• Optimize Landing Pages: Ensure your landing pages are optimized for conversions. A poor landing page experience can lead to a lower quality score, which can drive up CPMs. Focus on clear calls to action, fast loading times, and mobile-friendliness.
• Refine Targeting: Continuously refine your audience targeting to reach the most relevant users. Use Facebook's detailed targeting options, lookalike audiences, and custom audiences to focus on the most likely converters. A/B test different targeting parameters.
• Improve Website Conversion Rate: A higher conversion rate can offset the impact of high CPMs. Focusing on improving your website's user experience, streamlining the checkout process, and implementing effective calls to action can significantly boost your conversion rates.
• Diversify Advertising Channels: Don't put all your eggs in one basket. Explore other advertising platforms, such as Google Ads, Instagram, Pinterest, or TikTok, to diversify your marketing efforts and reduce your reliance on Facebook.

Statistics and Examples

Let's look at some statistics and examples to illustrate the points discussed:

1. High CPMs Impact: According to a study by WordStream, the average CPM for Facebook Ads can range from $10 to $30, but in highly competitive industries, it can easily exceed $50. This demonstrates the potential cost implications for eCommerce businesses.
2. Cart Abandonment Impact: Approximately 70% of carts are abandoned, according to the Baymard Institute. This shows that your checkout process needs to be optimized to increase your conversion rates, which will help make your ads more effective.
3. The Impact of Optimization: A case study by Marketing Dive revealed that a company was able to lower its CPM by 40% and increase its conversion rate by 20% by implementing A/B testing and refining its targeting. This highlights the effectiveness of optimization strategies.

Important Note: While the numbers vary wildly depending on the industry and the quality of the campaign, it is vital to keep an eye on your CPMs so you can optimize them.

Reddit Insights

Let's see what the Reddit community has to say about high CPMs.

One user in r/FacebookAds (b7151ff1-5cea-4f53-b8f9-9434d1749b75) expressed concern about very high CPMs, stating, "For a while now, my Purchase CPMs have been extremely high (anywhere from ~$300 to $600+)." This is a significant issue and demonstrates the real-world challenges businesses face.

Another user in r/digital_marketing (f49c3e11-8f18-4ad7-aebe-6187915b94b) mentioned the frustration with ad platform complexities, which can contribute to the difficulty in managing and optimizing campaigns to control CPMs. “Tools for social are driving me insane (esp video). what are you ACTUALLY using?”

Actionable Takeaways

To effectively address high CPMs on Facebook Ads, consider these actionable steps:

• Conduct a Thorough Audit: Analyze your current campaigns to identify areas for improvement. Review your ad creatives, targeting parameters, landing pages, and website conversion rates. Use a tool like CRO Benchmark to get an in-depth audit of your website.
• A/B Test Everything: Continuously test different ad creatives, headlines, targeting options, and landing pages to identify what resonates best with your audience. A/B testing is a cornerstone of conversion optimization.
• Refine Your Targeting: Use Facebook's detailed targeting options, lookalike audiences, and custom audiences to reach the most relevant users. Regularly update your targeting based on campaign performance.
• Optimize Landing Pages: Ensure your landing pages are optimized for conversions. Focus on clear calls to action, fast loading times, and mobile-friendliness.
• Improve Website Conversion Rate: Focus on improving your website's user experience, streamlining the checkout process, and implementing effective calls to action. A higher conversion rate can offset the impact of high CPMs.
• Monitor and Analyze: Continuously monitor your campaign performance and analyze the data to identify trends and areas for improvement. Use Facebook's analytics tools and third-party analytics platforms to gain insights into your campaign performance.
• Consider a Conversion Optimization Audit: An audit can provide a data-driven breakdown of your website's strengths and weaknesses, identifying areas to improve your ads. Tools like CRO Benchmark can help you identify weaknesses in your advertising strategy.

Ultimately

High CPMs on Facebook Ads can be a significant challenge for eCommerce businesses, but by understanding the pros and cons of addressing these costs and implementing effective optimization strategies, you can improve your profitability, increase scalability, and gain a competitive advantage. Remember to conduct a thorough audit, A/B test everything, refine your targeting, optimize your landing pages, and continuously monitor your campaign performance. By taking these steps, you can turn high CPMs into a manageable cost and drive sustainable growth for your business. The right tools and strategies are essential for success, and a CRO audit is the perfect place to start.