Ad bidding plays a large part in your overall Facebook advertising strategy. A proper ad bidding strategy is necessary to make your ad campaigns a success. Without it, you could lose money on your campaigns even if your ad copy and audience targeting are on point.
Using the wrong bidding strategy can result in paying too much for conversions or ads not being delivered because of bidding too low.
Today we’re going to discuss how Facebook ad bidding works and what are the best bidding strategies to use.
How does Facebook ad bidding work?
Facebook’s ad bidding system is essentially an auction where advertisers are bidding for their ads to be placed in Facebook’s various ad placement locations. While the highest bid usually gets the most ad placements, the size of your bid isn’t the only determining factor for ad delivery. This is what makes Facebook’s bidding system different from other auction advertising models.
The auction system is designed to balance the needs of advertisers with the needs of Facebook’s users by allowing advertisers to make money and serving relevant content to users.
The three main factors that influence ad delivery include:
Your bid – This is the maximum amount that you will potentially pay to win a bid. Facebook’s system is designed to allow you to pay the lowest possible amount that still wins you the bid. E.g. If your highest-bidding competitor set their maximum bid to $1, and you set yours to $1.5, you’ll only need to pay $1.01 to win the bid, not the full $1.5 amount.
Relevance score – Your ad’s relevance score is determined by taking into account all the positive interactions that users have with your ad such as liking, commenting, or clicking on it versus all the negative interactions such as hiding the ad or ignoring it. Your ad’s relevance score is very important to Facebook. Having a high relevance score means that your ad will help people spend more time on Facebook.
Estimated action rates – a behind-the-scenes aspect of Facebook’s ad delivery algorithm. If the algorithm estimates that your ad will receive a high number of actions, it will give your ad priority against other ads.
Ad delivery options
Facebook currently offers two ad delivery options: standard and accelerated. Standard delivery is designed to distribute your ad spend evenly throughout the duration of your campaign (e.g. If you set a $70 budget for a 7-day campaign, Facebook will try to spend around $10 every day). This is the default delivery option.
Accelerated delivery tries to spend your ad budget and get the best results as quickly as possible. Using accelerated delivery might be useful when you’re in a rush to get your ads in front of people (e.g. before a holiday).
Ad delivery optimization
Facebook also allows you to choose an objective for ad delivery optimization. The currently available objectives include:
- Conversions – This is the default option. When using the Conversions objective, Facebook will try to deliver your ads to users who are the most likely to convert.
- Link Clicks – This option will make Facebook optimize your ads to get as many clicks from users as possible.
- Impressions – If you use the Impressions objective, Facebook will try to show your ad to as many users as possible.
- Daily Unique Reach – This option allows you to deliver your ads to every member of your audience once per day. This is a great option if you’re offering a limited offer to a small remarketing audience.
- Post Engagement – The Post Engagement optimization delivers your ads to users who are most likely to interact with your ads by liking, sharing, or commenting.
- Brand Awareness – Designed to deliver ads to people who are most likely to pay attention to them.
- Leads – Allows you to show your ads to people who are most likely to give out their information (e.g. their email address).
- Landing Page Views – Designed to show you ads to people who are most likely to view your landing page.
The three bidding strategies you have at your disposal are the lowest cost, lowest cost with a bid cap, and target cost.
The lowest cost strategy is designed to get your ad in as many ad placements as possible at the lowest possible cost.
The drawback to using this method is that you have no control over your actual ad costs.
Lowest cost with a bid cap
Similar to the lowest cost strategy, but also allows you to set a bid cap, which prevents Facebook from bidding an amount higher than the one you set to be your bid cap. You can use this strategy to ensure that you won’t be bidding any higher than what each conversion earns you.
However, if you set the bid cap too low, Facebook might have problems spending your entire ad budget. Facebook recommends examining your previous campaigns and using the average cost per result as the starting bid cap. As for your daily budget, Facebook’s recommendation is to set it to at least five times your bid cap.
The target cost strategy is designed to maintain an average cost per conversion. When using this strategy, Facebook can bid above and below the amount you set as the target cost but will try to keep the overall average cost at around the amount of your target cost number. You should use this strategy if you’re trying to get as many conversions as possible. The target cost strategy is also ideal for scaling campaigns because it allows you to limit your average cost per conversion so you can safely increase your campaign budget.
This strategy can be used with the following campaign objectives:
- App Installs
- Lead Generation
- Catalog Sales
A possible issue with using the target cost strategy is that you might experience high fluctuations in cost before Facebook’s learning phase is over (it takes a total of 50 events in one week for Facebook to complete its learning phase for your ad).
Which strategy you should choose depends on your specific offer and your overall goals. Most advertisers should probably start with the lowest cost strategy and gather some data before attempting to use the other two strategies.
To be able to run profitable Facebook campaigns, it’s important that you understand how Facebook’s bidding system works. Depending on your goals, you will need to decide on a specific ad delivery type and optimization, as well as a bidding strategy. As always, you’ll need to do ample testing to discover which combination of delivery type, optimization, and bidding strategy works best for you.
If you would like to find out more about how Hunch can help you up your bidding game, then please get in touch for a FREE strategy call.