5 Things You Should Know About Facebook Ad Bidding

How to Lower Facebook Advertising Costs

Facebook bidding is one of the most important factors that contribute to increased advertising costs. Understanding Facebook ad bidding will give you a leg up on other advertisers. Knowing how bidding works means you can easily lower your advertising costs.

Facebook bidding is affected by 5 different parts:

• Campaign Objective
• Optimization
• Bid Type
• Bid Cost
• Conversion Window

1. Campaign Objective

In the past, accomplish different objectives with online advertising was difficult. Generally speaking, you would mostly focus on driving impressions, and then measure the cost of those impressions, or the cost of events on your website from those impressions. Campaigns weren’t all that flexible.

You could also bid on the cost per ad click. You told the advertiser how much you were willing to pay to drive traffic to your site, and the advertiser worked to match that. Your end objective didn’t really matter, as long as your got your target cost per click.

Oh how things have changed…

Facebook pioneered the ability to run campaigns based on your final objective. When you start creating ads, Facebook forces you to choose a campaign objective. Choosing a campaign objective changes the type of bidding you can do as well as the creative and targeting options.

The image above shows your just how many different advertising options are available.

Facebook breaks objectives out into three groups:

Awareness

• Boost posts
• Promote a page
• Reach people near your business
• Increase brand awareness

Consideration

• Send people to your site
• App installations
• Raise event attendance
• Get video views
• Collect leads

Conversion

• Increase website conversions
• Increase app engagement
• Claim offers
• Promote a product catalogue
• Get people to visit a store

Each of these affect the type of ads, targeting options and ad settings you use.

2. Optimization

Because of the vast amount of data Facebook has on each user, it serves ads much more intelligently. But it still requires us to tell Facebook how we want them served.

You need to choose how you want your ads to deliver. The optimization choice affects who sees your ads, so Facebook can drive the lowest possible costs. Optimization for ad delivery is all about finding the most efficient way to achieve as many results as possible.

You can think of the difference between objective and optimization as this: objective is what you want to accomplish, and optimization is the process by-which Facebook achieves that objective.

Generally speaking, there are four different ad optimization delivery options:

• Conversions – Facebook finds people who are most likely to convert on yoru website. This is based on your historical account data and user data
• Impression – Every auction you win will cause your ads to deliver, no matter what.
• Link Click to Website – Get the most website traffic at the lowest possible cost
• Daily Unique Reach – People see your ads once per day.

3. Bid Type

Historically, online advertising networks charged advertisers on a cost per mille (CPM) standard. CPM means advertisers bid a fixed cost to reach 1,000 people.

As we showed in the previous part, Facebook provides different ways of optimizing to reach each audience. Regardless of what you optimize for, you need to tell Facebook how much you are willing to spend to achieve your desired outcome.

Facebook gives you two different ways to set a bid for each audience: automatic and manual bidding.

Automatic Bids

Automatic bids are chosen by Facebook. The costs vary auction-by-auction – the bid is chosen based on the likelihood to reach those people.

On a smaller audience with many more competitors, Facebook might set the bid at $50. Whereas a larger audience with less competition could be $20. We’ve found the average automatic bid is set to $20. It all depends on audience competition.

Automatic bids will result in more daily budget spend, and in our experience, higher ad costs. Why? One simple reason that most people don’t realize – your daily spend is weighted more heavily than your cost per objective. That means Facebook will try to spend your entire budget each day, getting you the maximum amount of possible results while maximizing your advertising budget.

With that assumption, automatic bidding should be used if you 1) need to spend your money every day 2) don’t know the value of your conversion 3) don’t care about the cost per result.

Manual Bids

Manual bids are set by you. You set the maximum amount you’re willing to pay for the result your ad set is optimized for.

Manual bidding is the preferred method of bidding. You should always choose manual bidding, even if you aren’t sure of your expected results.

Why? Because your costs will inevitably be much lower than they would be if you chose automatic. Facebook is trying to find people at or below your manual bid, and won’t show it to people who might convert at that cost. Your daily spend may be lower, but if someone is only worth $2, your daily budget won’t matter – what matters is keeping your costs low.

4. Bid Costs

The bid cost matters if you choose manual bidding (which you should always do).

Facebook provides a suggested bid range. This data is based on likelihood of delivery, historical performance, platform and competition for that audience. Facebook recommends that you bid within the suggested range to make sure you’re winning enough auctions.

There are lots of reasons to disregard that advice. For example, in a recent campaign we bid $2.50 per conversion even though Facebook recommended a minimum bid of $15.

What happened? We achieved results below $2.50 but didn’t spend the entire budget. Because you are choosing what to pay for, you likely won’t spend your maximum budget. But that didn’t matter – we only wanted conversions below that cost.

If you want to learn more about the differences between average and maximum bidding, check out our blogpost on new Facebook advertising updates.

5. Conversion Window

A newer Facebook feature for bidding is the expected conversion window.

Sometimes website conversions take longer than just arriving on a website and completing the action. The conversion window setting is the length of time you expect someone to complete an action after they click on or view your ad.

You have two options:

1. 1-day
2. 7-days

Both of these options are designed to help Facebook find your best audience.

So which one should you choose? It depends on when people convert. If your conversion action takes longer than one day, you should consider selecting 7-days. If it’s usually the same day, select 1-day.

Now you understand Facebook bidding and optimization. Unfortunately, bids are just one part of how Facebook determines how much your ads cost.

The next section looks at Facebook’s Total Score and how that affects ad costs.