Facebook Bidding Strategies & Types – All You Need to Know

Facebook, like many online advertising channels, requires advertisers like you to bid for limited ad space that it displays to its users. Most often, the company that offers the highest bid will get to show their ad to a customer, and the rest will have to do without. 

The problem is that creating a compelling Facebook advertising strategy is difficult. Not only do you have to consider how much you’re going to bid, but you also have to think about who you’re going to target, how you’re going to do it (e.g., what ad copy to use), and what the next stage in your sales funnel will entail.  

As you may already be aware, Facebook’s advertising delivery system depends on bids. Advertisers compete with each other to show their ads to target customer by specifying a maximum amount that they are willing to pay for space. The more you are willing to spend, the more likely you are to outcompete everyone else targeting that specific space and get your advert in front of your audience. 

Facebook, however, gives you several options for how you spend your marketing budget – what it calls “bidding strategies” – so that you can decide when, where, and how much you pay when placing an ad. Yes, the bidding strategies are cleverly designed to make sure that Facebook makes the most money possible, but there are essential differences between them that could give you a crucial advantage. 

Let’s take a look at the three ad bidding strategies that Facebook offers its users.

Lowest Cost

Lowest cost might be a bit of a misnomer – after all, the “lowest cost” method can lead to a significant overall bill. But the purpose of this option is to cater to businesses who don’t know how much each prospect is worth and need some direction from Facebook itself. 

The way that lowest cost bidding works is relatively straightforward: the advertiser tells Facebook how many people that they would like to reach each month and then the platform will start bidding so that your ads are displayed at a rate that fulfils your specific objectives. 

Of course, without proper research, your objectives could be wildly optimistic (or pessimistic), and you may end up over- or under-spending. What’s more, because you don’t set a budget using the lowest cost method, your monthly marketing bills can fluctuate from month to month, making this particular bidding strategy unattractive to firms that like to keep spending consistent throughout the year.

Lowest Cost With Bid Cap

Firms that like to keep an eye on how much they spend usually prefer “lowest cost with bid cap.” This works just the same way as lowest cost, but with the added feature of limiting how much you bid to keep “cost per action” below a specified limit. You can set the cap to whatever you like. But the important thing is that it acts as a safety control, preventing you from blowing through your advertising money quickly and spending uneconomical amounts on each conversion. 

So which advertisers benefit from this bidding strategy? In general, it’s advertisers who are clearer on how much each conversion is worth. There’s no point spending £10 to convert a customer if they only generate £7 in profit. 

Lowest cost with bid cap is also beneficial for companies who have to stick to a strict budget. By preventing bids above a certain threshold, companies can prevent large bids from emptying their Facebook accounts of money.

Target Cost

Target cost is probably the most sophisticated of all Facebook bidding strategies – or at least the one that requires you to be the clearest about your objectives. The first step in target cost bidding is to choose something the Facebook can measure; either conversions, catalogues, app downloads or lead generation. Next, the advertiser has to set the average cost per result (be it a download, a lead, a conversion or something else). Setting the average cost per result is different from setting a cap. Instead of never being allowed to bid more than the cap, setting an average cost per result permits Facebook to offer more on the advertiser’s behalf in certain situations it feels warrant it, and less in others. 

The purpose of the target cost strategy is to give users more control over how their marketing pounds get spent, but the cost is that you have to know a lot more information. You need to know, for instance, how much each result is worth and what objectives you’re trying to accomplish. One of the perks of “target cost” is that when you do eventually come to increase your budget, it will make sure that your specific bid is maintained.

Which Bid Strategy Is Best?

It’s important to point out that there is no “best” bid strategy for ads on Facebook. What each approach does offer, however, are some pros and cons which may help companies in some situations and hinder them in others. 

The main perk of the “lowest cost” strategy is efficiency. Facebook will try to get you the cheapest bid for advertising space per result over a short period of time. The problem with “lowest cost” is that you may not get the same performance as you increase the amount you spend on the platform, or if competitors start ramping up their advertising efforts. 

Target cost gets rid of the issue of cost-per-event stability by targeting average-cost-per result. This means that you can increase the amount that you spend on the platform and see the same performance from each additional pound. But target cost only works as intended once the learning phase is complete. Naturally, it takes time for the system to determine what “average cost” actually is, and so you can end up with cost fluctuations, at least in the short term. 

In general, most marketing experts recommend that advertisers use target cost for long-term campaigns, whereas lowest cost may be better for shorter campaigns or in situations where you see an advantage in creating instant buzz. But there are no hard-and-fast rules: it’s possible to get outstanding long-term results using lowest cost and terrible results using target cost for long campaigns.

Automatic Bidding - Machine Learning

Most people use automatic bidding on Facebook Ads, however manual bidding can also be used effectively. this is different to Google AdWords we manual bidding is used more often than automatic bidding.

Auction vs Reach and Frequency Bidding.

Reach and Frequency requires audiences over two hundred thousand.

Facebook holds auctions that take into account each of these advertisers’ bids for an opportunity to serve an ad impression to someone like Sally. Facebook also consider how interesting and relevant we think Sally will find each of these advertisers’ ads, and how likely she would take an action such as clicking or making a purchase after seeing the ad.

Ad relevance- (quality score) x bid – competition.

If you’re driving actions on your mobile app or website, you’re likely using this optimization already.

Conversion optimization allows you to optimize your ad delivery specifically for the outcomes you care about by showing your ads to the people most likely to convert. Our conversion optimization model makes adjustments to advertiser bids to serve ads to the people most likely to convert, bidding more aggressively for these people.

This tool is ideal for driving actions on websites or mobile apps with the Facebook pixel or SDK in place, respectively.

. If you opt into this feature, you allow Facebook learn more about your audience when there’s not enough conversion data to optimize for the conversion event on the Facebook pixel that the ad set is being optimized for.

We typically need about 50 conversions per week per ad set. Because clicks are more common than conversions, falling back to click optimization will allow for more delivery while we continue to learn more about who in your target audience is most likely to convert as a result of your ad.

Note that during this period, your average conversion costs may be higher than usual because we are using automatic bidding for link clicks.

When to use Automatic or Manual

Automatic

Saves time. Machine algorithm has access to more variables and data points. Works well as the top of funnel. Can be faster with ad copy with more signals early on.

Manual

More control. Works better when less conversion data. Works well at the bottom of the funnel

Images- of Automatic & Manual

More details on these – with some text to support images.

What is machine learning bidding. 

Automatic bidding uses machine learning to predict which people are the best prospects and bid hire accordingly. This can be very effective with both Facebook and Google AdWords When there’s lots of conversion results data to learn from.

There is no definitive number of conversions because the the number of variables varies by situation. The machine can sometimes identify simple patterns using a single variable like a demographic job title or 2 variables such as interest and job title, where as other time otherwise there is multiple variables involved.  in this case the machine needs more data or more people to be able to identify consistent patterns of good prospects vs medium prospects vs poor prospects.

The conversion action which is used for bid optimisation can be a sale or a lead completed through a form on your website or App. Upon Facebook it can also be your Facebook page engagement, or lead ads form such as form entries not completed. The event can also be higher up the funnel such as link click, page likes, brand lift, TRP and more.

Google use click data which is a funnel step that is above impression data. Impression data can use various signals.

Automatic vs Manual

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