CPM vs CPC: Which Is Better For Facebook Ads? Round 2

A couple weeks ago we posted our thoughts on the discussion of whether to use CPM or CPC when bidding on Facebook ads. After doing further research on the topic, I’ve decided that it would be useful to post an update. The primary update is that while there is still value from using CPM ads, using CPC is much better for initial testing. Here’s a more comprehensive overview.

Bidding CPC Will Get You More Clicks

The most important thing to note is that by bidding a specific CPC rate on ads, you will get more clicks by default than if you bid CPM. That’s because Facebook tends to position CPC ads in areas of the page that will generate more clicks (higher up the page). This not only generates greater revenue for Facebook, but it also helps CPC advertisers generate higher click through rates. However if you want to pay less for your clicks, there’s a time where switching to CPM will pay off.

High Click Through Rates Will Yield Lower CPMs

As illustrated in the image below, we ran a small test of identical ads to see how they would perform. For these ads, we went after those demographics that had previously performed best for us (a tactic that I will highlight in more detail during a future post). The result was that CPM ads performed the best because we targeted a demographic which had already responded favorably to our advertisements.

Test Ads With CPC
As such, it’s best to test ads with CPC to find out which demographics will perform the best. I previously noted that CPM was best for testing, however the problem with that is that you’ll end up paying for ads which generate low click through rates. The best way to proceed is to run tests using CPC bidding and then once you’ve discovered the best performing ads as well as the best demographics, run CPM campaigns as it will lower your overall CPM and CPC rates on average.

Testing Is Key

Ultimately testing is key for any performance advertiser. One of the leading third-party Facebook advertisers that I spoke to the other day, told me that of all the ads they run only two percent perform well. That means there’s a good chance that the first few ads you’ve created are not the most effective ones. With this in mind, bid on a CPC basis so you limit how much you’ll spend and can guarantee that all your money will at least be spent on users taking an action (a click).

We emphasized this fact a couple weeks ago. At the time, I wrote “As defined in our Facebook marketing dictionary, optimization is the process through which an advertiser minimizes the cost of advertising while simultaneously maximizing performance to reach the ad campaign objectives. Optimization is a luxury for those that have money to test ads. If you don’t have the time to invest in optimization, you are going to end up spending more for your individual ads.”

Free Facebook Ads Credits

Want to run tests for your own Facebook Page? Facebook has been kind enough to give us $25 in free Facebook Ad credits for all new advertisers.1 You can redeem the coupon code by creating your first ad here and then entering the coupon code “afblog-sept2010“. Additionally, if you want to stay up to date on the latest Facebook marketing strategies, click here to subscribe to our Facebook Marketing weekly newsletter.

1. “The promotional coupon code for Facebook Ads of USD $25 are valid only for purchase of advertising through Facebook’s online advertising system. Advertisers will be charged for incremental cost of advertising that exceeds the promotional credit. Advertisers will need to suspend their ads if they do not wish to receive additional charges beyond the initial promotional credit amount. Subject to ad approval, valid registration and acceptance of the generally applicable Facebook Advertising Terms and Conditions at http://www.facebook.com/terms_ads.php. The promotional coupon code and advertising credits are non-transferable and may not be sold or bartered. Offer may be revoked at any time for any reason by Facebook. Quantities are limited. You may only redeem this promotional coupon code if you do not currently have an advertiser account on Facebook. Once you register for an advertiser account, you may only redeem one promotional code coupon. Promotional coupon codes are valid only for purchase of Facebook Ads, and must be applied to a new Facebook advertiser’s account within 15 days of the creation of the account and used within 90 days of such application to a new account. Promotional coupon codes expire 9/30/2010 and cannot be applied to a Facebook advertising account after the expiration date. Facebook promotional coupon code is being offered by Facebook to users of AllFacebook.com. Facebook is solely responsible for all questions or issues related to the use such codes or Facebook Ads.”