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Facebook Bidding Unraveled: Choosing the right bid type for you

Entering the world of Facebook advertising can be a daunting prospect. Let's be honest; it's a gargantuan auction happening around the clock between countless advertisers battling to have their Ads shown. To make this a more efficient process, Facebook allows advertisers to use four primary types of bidding: CPMCPCCPA and oCPM.

Where does bidding fit into the Facebook advertising structure?

Bidding and budgeting go hand-in-hand in the advertising world, and they are both applied at the Ad Set level.

Facebook Ad Structure by Adparlor

Why does it matter what bid type I use?

As an advertiser, it is important to understand:

  • what you are trying to achieve (e.g. mobile app installs)
  • who your audiences are (that let you achieve your goals)
  • what your audience will respond to

The key to getting ahead is by choosing the best bid types for your advertising objectives, then determining the best bidding strategy to reach the right people. The bid type you use affects not only how efficiently Facebook spends your budget, but also who your Ads ultimately reach. In some cases you may need to perform a simple A/B test to pick the best bid type for your objectives. We've condensed our years of first-hand experience into the following guidelines below.

Note: If you use Facebook Ads Manager, you will see 'different' options to select from - these are actually the same bid models - read more on bidding on Facebook Ads Manager vs AdParlor.

How do I choose the right bid type?

The four bid types are closely related. When choosing your bid type, you should consider the following:

  1. What your advertising goals are
  2. Who will actually see your Ads

1. Bid types for each advertising goal

Different bid types are suited for different advertising goals. The table below provides a summary comparison:

 

CPM* (cost per thousand impressions)

CPC (cost per click) CPA (cost per action) oCPM* (optimized cost per thousand impressions)
Your main objective Impressions Clicks Specific Actions (page likes, offer claims, offsite link clicks or mobile app installs)

Actions (any action from impressions to offsite actions using tracking pixels) 

 

Reach (unique impressions)

What you pay for Impressions Clicks Actions Impressions
How Facebook narrows down your effective audience from your target audience Targets all users (everyone has eyes)  Looks for users most likely to click on your ad Looks for users most likely to perform your desired conversion action Looks for users most likely to perform your desired conversion action
What your bid value means Maximum amount you're willing to pay for 1000 impressions Maximum amount you're willing to pay for 1 click Maximum amount you're willing to pay for 1 conversion action What your CPA goal is for 1 conversion action
What you actually get charged Facebook uses a displacement-cost pricing system - you will never be charged more than your max bid value Facebook uses a displacement-cost pricing system - you will never be charged more than your max bid value Facebook uses a displacement-cost pricing system - you will never be charged more than your max bid value Facebook will not set a hard limit on the maximum bid amount (read more)
When should you use this bid type Awareness campaigns, or if you are re-targeting a highly valuable existing customer group using a Custom Audience (for maximum reach across these users) If you want to drive clicks but do not care what type, or if you actually have an offsite conversion objective and need to gather data before switching to oCPM (sequence bid testing) If you want users to complete a specific action and only want to pay for users who actually perform that action If you want users to complete a specific action but want more flexibility in who Facebook will display your Ads to**

* The 'M' in CPM and oCPM stands for mille, which means thousand.

** You have may have noticed that CPA and oCPM bidding seem similar at a high level. There are a few differences; the key one being who takes the risk when the targeted users who interact with your Ad do not perform the desired action. With CPA, Facebook only charges you for successful actions, so they will deliver your Ads more conservatively to ensure only the users likely to perform the desired action will see your Ad. In this scenario, Facebook are the ones taking the risk that a user who interacts with the Ad may not perform the desired action. As a result, higher bids are typically required for CPA campaigns to gain traction. 

With oCPM, Facebook charges you for each impression. Like with CPA bidding, Facebook will only show your Ads to users that are likely to perform your desired action; your defined action is called the "conversion spec". However, in many cases, these users who are shown the Ad do not actually end up performing the desired action but you still have to pay for those impressions; so you are the one taking the risk. That being said, oCPM bidding allows you to increase your reach and may allow you to hit lower actual CPA targets as it is a less conservative approach.

Choosing between the two can be difficult, so we often recommend performing an A/B test.

Some tips from our Ad Operations Specialists

CPA

You cannot bid CPA toward mobile app install for a brand new Ad Account. Your Ad Account must register 7 days with conversion rates above 5% to make this bid type available. 

oCPM to Actions

If you are getting poor delivery on campaigns where your campaign objective is very deep (e.g. offsite purchases), try changing your campaign objective to a 'shallower' action such as link clicks (while still tracking the offsite purchase pixel). This allows Facebook to optimize towards an action that is more likely to happen with a higher frequency, which means their Ad delivery algorithms are more likely to serve your Ad. 

Additionally, changing your oCPM bid affects the Facebook algorithm’s ability to optimize delivery as it needs to accumulate data to make better decisions. As a result, Facebook recommends changing your oCPM bid no more than 3 times per day; any more changes may negatively affect your delivery.

2. Targeted vs Effective Audience

Who can I reach with my Ads? Read on...

 

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