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Joaquin Lopez

The Differences Between Facebook Bidding Strategies

1st Feb 2021 Social Media, Facebook, Paid Social Media Blog, Social Media 5 minutes to read

Facebook bidding strategies can be very confusing to new users especially if you don’t have any marketing background. Getting your head around these bid strategies can also take time and if you have no idea on how to use them, they could cause issues to your accounts without you even realizing. In this blog, we will take a deep dive into the three main bidding strategies and how they can help you with your ads. Hopefully, you will have a better understanding of each strategy and you will be able to use them to your advantage.

Facebook’s definition of bids: “A bid represents what you’re willing to pay to achieve your desired result from someone in your target audience.”

Lowest Cost (Default)

Lowest Cost is the default setting on all ad objectives on Facebook and if you’ve been running any ads on Facebook, I can guarantee that they have been running Lowest Cost. 

How does Lowest Cost work?

Lowest Cost bids aims to achieve the most results for your budget no matter the cost. Lowest cost bid strategy tells Facebook to bid with the goal of getting you the lowest possible cost per optimisation event (leads, purchases) while also spending your entire budget by the end of the day, the end of your ad set or the end of your campaign schedule. 

Pros:

  • Obtaining the most volume with no CPA in mind
  • Spending your allocated budget
  • Good if you have no KPIs or goals in mind
  • Great for Website Traffic, Reach, Engagement, Video View objectives
  • Tends to get cheap CPC, Engagement, and Reach & Impression costs
  • Identify your average Cost Per Result/Action
  • Likely to get out of learning phase

Cons:

  • High and expensive Cost Per Result/Action
  • No control over your CPA, CPC, CPM
  • Not recommended for long term use

When to use this bidding strategy:

I recommend using Lowest Cost on website traffic ads, reach ads, and engagement ads. This will provide you with the most results possible, bit as these objectives tend to be quite cheap, you won’t need as much control. Using Lowest Cost on conversion, leads, and app installs should be used lightly and only towards the start of your advertising journey. Use this to find your average CPA. If you find that your CPA is sky high, it may be a good idea to start looking at cost or bid cap. If you are comfortable with the CPA you have been receiving, we recommend to leave lowest cost strategy on your ads, but make sure to keep a close eye on costs as you may begin to saturate your audience and you’ll find unexpected CPA costs. CPA differs from business to business and product to product, and some industries experience higher CPA than others. It’s key to identify your average costs, and working this out in relation to your margins. 

Cost Cap

Facebook states “it is important to remember that the more control you maintain over costs, the more constraints you place on our platform to find lower-cost opportunities for your desired outcomes.”

How does Cost Cap work?

With cost cap, you will have more control over your bidding. By setting a cost cap, you are telling Facebook to obtain the most volume for your benchmarked cost. For example, if you have a cost cap of £10, you are telling Facebook that you don’t want to spend more than £10 per result/action.

Pros:

  • Controlling your CPA
  • Keeping in line with KPIs and goals
  • Obtaining volume without sacrificing control
  • Great for conversion, lead generation, and app install objective ads
  • Cheaper CPA
  • Great for strict CPA goals

Cons: 

  • Restricts your budget
  • Budget may not spend fully (slower ad spend)
  • Likely to remain in learning phase
  • Cost may increase as budget increases
  • Ad may not serve
  • Audience size dependent

When to use this bidding strategy:

I recommend using cost cap when you have a strict CPA goal in mind. This works better for lead generation ads in my experience, we have also seen good results when using this on conversions, though keep in mind that if you increase your budget, you may see fluctuations in your CPA. Feel free to test this on website traffic ads if you feel like your CPC is high. We don’t recommend using this on reach or engagement objectives as this may slow down your spend and your ad may not serve at all.

Bid Cap

How does Bid Cap work?

With bid cap, you are telling Facebook the maximum to spend in the auction. For example, if you set a bid cap of £5, you are telling Facebook that you want to spend £5 or less for your ad to be shown, and not a penny more, when competing against other advertisers for the same audience. This bidding strategy provides the most control over your ads and is generally a preferred bidding strategy on Facebook. Bid is not the same as your average cost of results/action.

Pros:

  • Controls how much Facebook can bid in the auction
  • Tightly control the cost of your optimization events
  • Won’t spend more than your desired bid cap per auction
  • Beat your competitors at the auction

Cons:

  • Spend may be constricted 
  • Does not control the CPA
  • Requires more frequent bid changes
  • You must calculate bids based on projected conversion rates
  • May not spend full budget
  • Likely to remain in learning phase
  • Ad might not deliver if bid cap is too low

When to use this bidding strategy:

We recommend using this bidding strategy on conversions to control how much you are willing to spend to show your ad to your audience. It is best to set your bid cap to double your CPA goal. We have worked that this works best from our findings; however, each business and industry is different so start with a low bid cap and work your way up depending on delivery.

Use this information to your advantage and use cost and bid caps on ads with high CPA. You should be able to see a difference in just a few days. Hopefully, this gives you the insight you need on how to control your ads proactively. For more advice on Facebook ads, make sure to read through our other blogs.

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Joaquin Lopez

Senior Paid Media Executive

A sci-fi movie buff, gamer, lover of dystopian fiction and self-taught bassist, we’ve concluded that Joaquin has quite the creative streak. A recent trip to Japan unearthed a love for ramen noodles, so we now know what to bribe him with! Fun fact: originally from Chile, Joaquin’s surname means ‘son of wolf’.

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