Facebook is running one of the largest auctions on the Internet and it enables anyone to buy advertising space on Facebook through the online auction. However, the auction doesn’t work like a traditional one: the highest bid is not always enough to win it. A well-performing ad – e.g. high click-through rate and positive ad engagement – with a combination of high enough bid will allow you to win the auction and get your ad shown on Facebook.
Selecting the most suitable bidding type helps you to improve your campaign performance. At the moment Facebook offers four different options: Cost per click (CPC), Cost per thousand impressions (CPM), Optimized CPM (oCPM) and Cost per action (CPA). There is no golden rule for the right type, thus I recommend you to test different options. However, there are some tips for you how to go forward with testing.
Cost per click is one of the most used types for bidding since it gives stable results and is easy to understand: you only pay for clicks. If you want to get likes, comments, shares or clicks, go with this option. Another common type is Cost per thousand impressions: you pay when someone sees your ad. CPM works best with highly targeted audiences, like with small Custom Audiences and Lookalikes and for maximizing the campaign reach.
Optimized CPM is the most innovative bidding type invented by Facebook’s smart engineers. It identifies the people from your audience who are most likely to take a specified action – e.g. purchase a product at your web store – on your ad. However, oCPM needs a lot of data in order to find the right people from a broad audience. oCPM is not recommended if your target audience is smaller than 100 000 people or your campaign gets less than 25 conversions per day.
The first day of your campaign does matter: achieving high click-through and conversion rates are crucial success factors, especially with oCPM. The more click and conversion data the campaign gets, the smarter the oCPM algorithm becomes. If you have trouble getting the 25 daily conversions with oCPM, you can try to change the action from a web store purchase to a landing page or upper at the conversion funnel.
Cost per action type uses the same algorithm as oCPM but only works with mobile app installs, page likes, offer claims, and link clicks. While CPM and oCPM charge by the amount of impressions, CPA charges you by the amount of real conversions.
The last words about the world of bidding: it is only one part of marketing performance optimization, but very crucial one. If you don’t understand the basic concepts well enough, you won’t win the right auctions and get your ads shown or end up paying too much. In the next post I will go deeper into the topic and explain when to increase or decrease the bid and how often should the bid be manipulated. Feel free to comment the post and ask tricky questions, I am here to help you.
Kalle Tiihonen works as an Account Manager/Growth Hacker at Smartly.io, one of the highest growing Facebook PMDs in Europe.