Understanding the Costs of Social Media Advertising

Accruing annual expenses such as MLS dues, local/state association fees, and license renewals is an expected part of being in the real estate business. In addition to those costs, you showcase your listings on search portals like Homes.com to generate more quality leads. Every dollar you spend on your business is to reach more leads, listings, and clients.

Social media is a great way to meet new clients, and its advertising power will continue to rise, so why not create a social media ad budget that will ensure the growth your real estate business? However, before simply spending ad dollars on social media, you need to understand the costs associated with advertising on these platforms.

Understanding Social Ad Costs

Billing Objective

Each social platform offers a different user experience, so it makes sense for them to offer different ways to advertise based on how their platform is set up. The most commonly used billing options are:

• Cost/pay-per-click (CPC / PPC) – CPC is a billing option in which you pay only when a viewer clicks on your ad placement. This method is offered by most of the social platforms and is the most common type used by advertisers.
• Cost-per-thousand impressions (CPM) – With this billing option, you're only charged for every 1,000 views.
• Cost-per-view (CPV) – If you have CPV ads, you are charged every time someone views your ad. Some platforms considered a "view" as any interactions with the ad, such as clicks on the call to action, cards, or banners.
• Cost-per-action/conversion (CPA) – Another billing option some platforms use is to charge you when someone takes a specific action on your ad which is determined when creating the ad. This action may be downloading an app, signing up for newsletter, or offering lead information.
• Cost per like – With cost per like ads, you only pay when a viewer likes your page, photo, or ad.

Bidding Options

Social media ad placements work on an auction model. The highest bidder gets their ad shown on viewers' news feeds. The two most commonly used bidding options are:

• Maximum bidding – This option lets you pick the maximum amount you will spend on an advertisement to achieve your objective.
• Automatic bidding – Choosing this option allows the platform to set an amount per ad placement, which will depend on your objective, but never goes over your budget.

Budget Types

Social platforms allow you to choose (usually) between two different options on your ad budget. The budget is the total amount of money you are willing to spend per ad placement.

• Daily budget – This budget type prevents the platform from spending more than your desired daily budget. The ad will be displayed each day until your predetermined end date or until you manually go into the ad options and stop the ad.
• Lifetime budget – With a lifetime budget, you allow the platform to decide how much to spend daily. Just like automatic bidding, the platform's algorithm makes sure that your ad dollar gets the best objective outcome without going over the limit.

Ad Cost

You set up your ad by selecting your billing objective, determining a bidding option, and setting a budget type, but how much are you really getting charged for your ad placement?

Your bid tells the social platform how to much you are willing to spend when auctioning your ad to reach viewers. The amount you actually spend is only $0.01 higher than the next highest bidder: the amount needed to beat your competition. Meaning the amount spent per ad is actually less than what you set as your maximum.

If your ad wins the auction, you aren't automatically charged for the placement. Depending on the billing objective, you only get charged when the objective is completed.

For example, imagine you decide on a billing objective of CPC, place a maximum bid of $5.00, and set a lifetime budget of $100. If two competitors placed their max bids at $3.00, and $4.25, because your bid is higher, you win the auction and your ad will cost $4.26. However, since you choose CPC, you will only get charged once a viewer clicks on the link. This will continue to happen until you either manually stop the ad or it reaches its lifetime budget.

Organic reach throughout various social channels is on the decline and to reach new consumers, social users are going to have to buy their way into audience's newsfeeds.

To view the original article, visit the Homes.com blog.