When it comes to crafting the perfect advertising campaign, everyone always focuses the attention on a stunning ads design or selecting the perfect targeting audience. Very few people take in account another critical factor: The bidding strategy.
What’s the point of a great ad or of a carefully selected audience if you’re then screwing everything up with the wrong bidding strategy? You may end up either paying too much for your campaign or reaching a small portion of your potential reach. We’ve already discussed basic bidding strategies in our guides but it’s now time for a more in-depth analysis. Let’s get back to the drawing board and study Facebook Ads Bidding.
Bidding? Is this an auction?
Yes! That’s the first thing you need to understand to master bidding management of Facebook Ads. When you’re creating a new campaign, you’re joining a huge, worldwide auction.
You’re competing with hundreds of thousands of advertisers to buy what Facebook is selling: Real estate on its website and mobile apps to display your message to the users.
While Facebook will try to satisfy every advertiser, even with 1 Billion users, the space for advertisement is limited. Sometimes, Facebook won’t be able to fulfill all the requests. When this happens, the highest bidders will get the most impressions.
The amount you bid for a click –1,000 impressions or a conversion — is not what you’re actually going to pay. It’s just the maximum amount you’re willing to pay to win the bid. Facebook (and Google AdWords) will always make you pay only the lowest amount possible to win the bid and have your ad displayed.
Let’s map out an example, assuming that Facebook only has 3 available spots to display ads and there are 4 advertisers bidding. The real system is much more complex than this, this is an hyper-simplification:
Advertiser A bid $0,3
Advertiser B bid $0,5
Advertiser C bid $0,5
Advertiser D bid $10
In this example, advertiser A will likely be left out and will receive low to zero impressions. Advertisers B and C will get a good amount of impressions at a price somewhere between $0,31 and $0,5. Advertiser D will probably get more impressions at a price just slightly above those of B & C. Around $0,35 and $0,6. No way is he going to pay $10!
There are two important takeaways here:
- If you try to bid too low, your campaign may not get the exposure it deserves and you won’t reach your goals. Remember, you always get what you pay for.
- Don’t worry about bidding a high amount. You’ll still end up paying the lowest amount possible in the auction to get your ads delivered.
Facebook Ads Bidding Strategies
Just a couple of years ago, life as an advertiser was simple and straightforward. You could only bid for your ads by Clicks or Impressions. With the incredibly fast evolution of Facebook’s advertising platform however, modern advertisers have to deal with four different bidding strategies: CPC, CPM, oCPM, CPA.
The differences are often not simple to understand, so let’s do a quick recap. This picture from Facebook will help:
Simple isn’t it ? Let’s go through each one and try to understand when you should use them and how.
The amount you’re bidding is the maximum you want to pay to deliver 1,000 impressions of your ad to users. It’s the toughest one and you may want to stay away from it as you could spend lots of money without any result.
Big brands may want to use CPM since it’s the most likely to deliver a lot of impressions. If you’re not really looking for specific results, but just want to create brand awareness by displaying your brand to everyone on Facebook , CPM could be a good fit.
Once the most used Facebook bidding strategy, CPC allows you to bid for clicks. This means that you’re going to pay only when a user clicks on your ads. Sounds great, doesn’t it? Your banner could be displayed 1 billion times without you paying a cent if it doesn’t receive clicks.
There is however one drawback. With CPC bidding, you’re going to pay for every kind of click on your ad. So, if you’re promoting an external website on the News Feed, you’re not only going to pay for clicks on your external link, but also for clicks on your Facebook page name, like, share and comment buttons. It’s not a big issue, but a lot of people don’t like paying for 200 clicks with only 120 going towards their website.
When bidding with CPC, keep in mind one thing: Facebook, of course, wants to maximize profits. If your ad is poor and nobody’s clicking on it, Facebook will soon stop delivering it. After all, it’s more profitable for them to have a $0,1 ad that gets clicked 1,000 times rather than a $5 ad that gets clicked only 5 times. This is key for effective CPC bidding: The better your CTR is, the lower your CPC will be. In the end, a higher CTR will grant Facebook the highest revenues.
Nowadays, oCPM is by far the most common bidding option. oCPM is a kind of strange bid. You’re not really bidding, but you’re telling Facebook your desired maximum cost for your goal’s action. The delivery of your ads will be optimized to display ads only to those users likely to complete the desired action.
When you create an oCPM campaign, you can specify what your Facebook bidding strategy should be optimized for: Website conversions, Website Clicks, Engagement, Reach, Page Likes, Mobile App installs, and so on. How effective is it? Extremely! And it’s also Facebook’s default bidding method for new ads.
Overall, when running a campaign with oCPM bidding, you can expect to have a cost per 1,000 impressions — much higher than the average CPM bidding. However, Facebook will carefully choose who will see your ads and will generate way more conversions than usual. So, while you’ll pay more to display your ads, the overall cost per conversion will be much cheaper. That’s the only thing you should care about!
You can read some advanced oCPM optimization tactics in our slides about The DO’s & DON’Ts of Facebook Ads:
Cost Per Action bidding is another recently introduced method which has proven to be really effective when you only want to pay for specific actions. It’s pretty similar to oCPM. However, instead of bidding for 1,000 impressions, you’re directly bidding for the maximum amount you’d like to pay every time a specific action is completed by a user through advertising.
For example, you can bid how much you’re willing to pay for a like on your page or for an installation of your mobile app. It really works well and it allows for more granular control over your budget. The only drawback is that Facebook CPA Bidding is only available for a limited set of actions: Mobile App installs, Page Likes, offer claims and link click. Yes, you’ve read it right: You cannot use CPA to promote external website conversions.
A Facebook Ads bidding experiment…
Here at AdEspresso, we don’t like talking without supporting what we say with data. So, we did a little experiment and created 4 identical campaigns to drive likes to our Facebook page (you can also check out Jon Loomer experiment).
Each campaign had the same budget, ads’ design, and targeting options. The only difference was the bidding strategy used: CPM, CPC, oCPM, CPA. Let’s see how they performed using AdEspresso‘s campaigns comparison.
While this is just a small experiment with a low budget, it mirrors what we see across millions of dollars of campaigns going through AdEspresso. Let’s see what we’ve got:
- The CPC campaign generated the highest number of clicks. However, only 20% of those that clicked then liked our page.
- The CPM campaign delivered a huge amount of impressions: 316,100! However, the return was little: 2 Likes.
- oCPM, as we had imagined, was really good at delivering our ads only to interested people: With only 8,000 impressions, it set the record of 53 likes with the lowest cost per like at $0.982. Thought it had a few very expensive impressions, it was a great overall ROI.
- The CPA campaign also performed really well and lost to oCPM by an insignificant $0.073 in terms of cost per like. However, it required 2 times the impressions of the oCPM campaign to achieve this goal.
What’s your favorite Facebook ads bidding strategy? Have you already experimented with the different types of bidding strategies? Let us know in the comments and remember: While the data shown in this post should apply to most of you, never assume anything. Always test everything!