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Facebook Ads Bidding in 2018: Everything You Need to Know (…Supported by Data)

Massimo Chieruzzi

Facebook ads bidding has a huge effect on your ad results.

If you want to beat your competitors in the Facebook ads race, it’s not just the shiny ad design and powerful copywriting that you need to master.

You also need to know how to target the right Facebook audience and optimize your ad bidding.

This article includes all the information you need to know about Facebook ads bidding in 2018.

We’ve just updated it with the latest news and insights to give you the timely overview you need for best ever campaign results, so keep on reading.

What’s the point of a great ad or a carefully selected audience if you’re screwing everything up with the wrong bidding strategy? You may end up either paying too much for your campaign, keeping it from profitability, or reaching a small portion of your potential reach and limiting yourself.

If you fail to place the right ad bids, two things might happen:

So how can you choose the right Facebook bidding strategy?

In this article, you’ll find all the information you need. But first… we’ve noticed a couple of changes in the Facebook ads bidding in these past few months.

It’s up to you: read the entire article or click here to go straight to our 2018 update.

Interested in the whole picture? Good choice! Let’s get back to the drawing board and study Facebook Ads Bidding then!

Facebook Ads bidding… 🤔 Is this an auction?

Yes! That’s the first thing you need to understand to master bidding management of Facebook Ads. When you’re creating a new campaign, you’re joining a huge, worldwide auction.

You’ll be competing with hundreds of thousands of advertisers to buy what Facebook is selling: Real estate on the News Feed, Messenger, Audience Network, and mobile apps to display your ads to the users.

While Facebook will try to satisfy every advertiser,  the space for advertisement is limited even with 1.79 Billion monthly users. Sometimes, Facebook won’t be able to fulfill all the requests. When this happens, the highest bidders will get the most placements. 

However, there are three factors that contribute to your ad delivery: your bid, relevance score, and “estimated action rates” (We’ll talk about these later in this article). So the highest bid doesn’t always win, but it is a contributing factor.

The amount you bid for a click –1,000 impressions or a conversion — is not what you’re actually going to pay. It’s just the maximum amount you’re willing to pay to win the bid. Facebook  will always make you pay only the lowest amount possible to win the bid and have your ad displayed. That means that if your competition bids $.45 and you bid $.50, you’ll only have to pay $.46 because it’s a penny higher than your competition.

Let’s map out an example, assuming that Facebook only has 3 available spots to display ads and there are 4 advertisers bidding. The real system is much more complicated than this; this is an hyper-simplification:
Advertiser A bid $0,3
Advertiser B bid $0,5
Advertiser C bid $0,5
Advertiser D bid $10

In this example, advertiser A will likely be left out and will receive low to zero impressions. Advertisers B and C will get a good amount of impressions at a price somewhere between $0,31 and $0,5. Advertiser D will probably get more impressions at a price just slightly above those of B & C. Around $0,35 and $0,6. No way is he going to pay $10!

There are two important takeaways here:

Factors That Affect if You “Win” The Bid

So how do you make sure that you “win” your bid, as Facebook puts it? There are a few factors to keep in mind, all of which influence whether or not your ad will be shown to the people you most want to see it.

These include:

Facebook Ads Bidding Principles

Just a couple of years ago, life as an advertiser was simple and straightforward. You could only bid for your ads by Clicks or Impressions.

With the incredibly fast evolution of Facebook’s advertising platform, however, modern advertisers have to deal with many bidding strategies: CPM, CPC, Conversions, Daily Unique Reach, Post Engagement etc.

These terms, overall, aren’t used quite as frequently anymore; Facebook has you bid on other specifics now. That being said, these terms are still important in order to understand what you’re paying for and why, so we’re going to take a close look at them.

Let’s go through each one and try to understand when you should use these and how.

CPM Bidding

With CPM (Cost Per Mile) bidding, the amount you’re bidding is the maximum you want to pay to deliver 1,000 ad impressions to the members of your target audience.

CPM is the most unpredictable bidding method, and you may want to stay away from it as you might spend lots of money without any results.

Big brands may want to use CPM since it’s the most likely to deliver a lot of impressions.

What if you’re not a big brand?

If you’re not really looking for specific results, but just want to create brand awareness by displaying your brand to a wide audience on Facebook, CPM could be a good fit.

CPC Bidding

Once the most used Facebook bidding strategy, CPC (Cost Per Click) allows you to bid for clicks.

This means that you’re going to pay only when a user clicks on your ads. Sounds great, doesn’t it? Your banner could be displayed 1 billion times without you paying a cent if it doesn’t receive clicks.

In 2015, Facebook changed the CPC bidding method so that you won’t pay for any kind of click on your ads (e.g. like, a comment, a share, a click to a website, “continue reading,” etc.)

Now, the CPC accounts for what Facebook calls “link clicks” — i.e., the clicks related to certain ad objectives:

When bidding on CPC, keep in mind one thing: Facebook, of course, wants to maximize profits. If your ad is has a low relevance score and nobody’s clicking on it, Facebook will soon stop delivering it. After all, it’s more profitable for them to have a $0,1 ad that gets clicked 1,000 times rather than a $5 ad that gets clicked only 5 times.

The is key to effective CPC bidding is this: The higher your CTR, the lower your CPC. In the end, a higher click-through rate will grant Facebook the highest revenues.

Bidding on Conversions

When you bid on Conversions, Facebook will do its best to deliver your ads to the target audience members who are most likely to convert — to fill your ad set’s objective.

The type of conversions depends on your campaign objective. If you select the Page Likes campaign objective, bidding on Page Likes is actually bidding on Conversions. When your ad campaign’s objective is to get more leads, the conversion will be getting a new lead, etc.

Bidding on Conversions will most likely bring you the best campaign results, as Facebook will deliver your ads to people who are most interested in your offer. If you bid on Conversions and place a manual bid, you can tell Facebook how much you’re willing to pay for a conversion (e.g. a Facebook Page like or app download).

When bidding on Conversions that happen on an external site, make sure that you have the Facebook Pixel installed (if you don’t and are a WordPress user, just use our free WordPress Facebook Pixel Plug-In to make it super simple). Otherwise, Facebook won’t be able to gather results and optimize your ad delivery.

A Facebook Ads bidding experiment…

Here at AdEspresso, we don’t like talking without supporting what we say with data.

So, we did a little experiment and created 4 identical campaigns to drive likes to our Facebook page (you can also check out Jon Loomer experiment).

Each campaign had the same budget, ads’ design, and targeting options. The only difference was the bidding strategy used: CPM, CPC, oCPM, CPA (note that by 2018, the bidding options have changed, as you’ll see in-depth in the next few sections).

Let’s see how they performed using AdEspresso‘s campaign comparison.

While this is just a small experiment with a low budget, it mirrors what we see across millions of dollars of campaigns going through AdEspresso.

Let’s see what we’ve got:

  • The CPC campaign generated the highest number of clicks. However, only 20% of those that clicked then liked our page.
  • The CPM campaign delivered a huge amount of impressions: 316,100! However, the return was little: 2 Likes.
  • oCPM, as we had imagined, was really good at delivering our ads only to interested people: With only 8,000 impressions, it set the record of 53 likes with the lowest cost per like at $0.982. Thought it had a few very expensive impressions, it was a great overall ROI.
  • The CPA campaign also performed really well and lost to oCPM by an insignificant $0.073 regarding cost per like. However, it required 2 times the impressions of the oCPM campaign to achieve this goal.

 2018 Update: Maximum and Average Bids, Conversion Windows, & More

Facebook never sleeps,  and we’re seeing slight changes to the ad platform month over month. In fact, you can find all the latest news in this article about Facebook updates.

The biggest change in Facebook’s bidding tactics this year has been with their manual bidding system. This update reflects the new bidding options and interface changes. 

Let’s take a look at what’s new now.

Where to Customize & View Your Bidding Options

To customize and view your bidding options, go to the “Budget and Schedule” section.

This can be found in the Ad Set part of Facebook campaign creation.

You’ll see “show advanced options” underneath where you can set up additional bidding options.

When you’re at the bidding section in Facebook Ads and click on the “Advanced options” cue, here’s what you’ll see:

You’ll notice a few things that may look new to you. These include:

We’re going to look at each of these a little more in depth.

Conversion Window

Have you ever seen an ad, clicked, and maybe even looked at a product page or added something to a cart, but then not come back until a week later to actually purchase it? Maybe you wanted to check out your other options first and do some research, or maybe you just plain forgot. Or, it’s possible that you needed to see ads from the same company several times before you felt familiar enough with the brand to click.

That’s why having a carefully-considered conversion window is so important. If someone sees or clicks on your ad and then converts within that conversion window, your ad is still given credit as getting those impressions.

Let’s say, for example, that your conversion window is only set to one day. (I typically don’t recommend this). Someone sees on your ad, clicks, and loves a product but realizes their credit card is in their car. They don’t come back and buy until two days later.
Facebook’s attribution model will, therefore, show that the user clicks (and you may have paid for that), but that the ad didn’t convert– even though it did. This will throw off reporting, and it will make it difficult for you to assess which ads are actually performing well.

Now we’ll look at the same example, but under a 7-day conversion window. That conversion would now be attributed to the ad, and you’d be able to see that it worked.

See the importance?

You can also choose if you want to count conversions that happen only after clicking an ad, or after seeing one.

Sometimes, after all, it just takes someone seeing an ad in order to navigate to the site on their own or plant the seed to make the purchase.

This is particularly common with retargeting campaigns, when users don’t need to click to get to your site because they already have the URL in their cache.

 

Whether you choose a conversion window that attributes conversions to clicking alone or clicking and viewing, giving customers a few days to respond is typically a good option.

The Bidding Strategies

These bidding strategies that we have available now are similar to what we’ve had in the past, but they have different names and some slight changes, so we’re going to go into each in detail.

These options are:

Lowest cost prioritizes getting you as many ad placements as possible at the lowest cost.
This is great for businesses on a tight budget, and you really don’t lose anything here because Facebook still has some wiggle room to get you good placements as long as they’re on the lower end of what you could be paying.
You aren’t inherently limited on this one, and you’re a little less likely to have your ad spend just completely run away with you (though note that “lowest cost” is a very relative term).

Lowest cost with a bid cap makes sure that you’re really keeping things at or below a certain cost.
As the name of this strategy suggestions, you can set a bid cap, telling Facebook not to go any higher for any placement about a specific bid.
This can be particularly helpful if you’re on a tight budget, or if you know exactly what number you don’t want to go over.
If you’ve calculated, for instance, that no conversion is worth more than $2.59, you could set your bid cap there in order to prevent your campaigns from costing you more than they’re earning you.
Pro Tip: When calculating this, however, don’t forget to take long-term customer value into consideration instead of just one-time purchases.

Then, last but not least, we have target costs.
This strategy lets you set an approximate target cost that you want to spend per bid, but the whole point here is the average cost.
Facebook can go over it and they can go under it, as long as the average comes out to the same bid amount in the long run.
If you have a more flexible or larger budget, this can be a good option for businesses who are willing to invest more in high-priced placements.

Here’s how. In the example below, imagine you have a budget of $50 and set your average cost bid at $10. In this scenario, you’d spend $48 of your budget for 6 results at an average of $8 each.

When to use the lowest cost, or set a bid cap?

If your goal is to maximize profit and get leads at a low cost, choose the lowest cost strategy.

When to use the target cost strategy?

If your goal is to maximize the ad delivery and get as many conversions as possible (even if they cost a little more), opt for target cost.

Delivery Types

The delivery strategy that you choose is more about scheduling than it is bidding, but the two are intricately related. After all, if you decide to schedule your ads during peak competition time (say two weeks before Christmas), you’ll see your ads go up.

You can choose between standard or accelerated delivery.

Standard delivery is the default (as its name suggestions).
When you choose this option, Facebook will pace out your ad placements to keep your campaigns running evenly as possible either through the scheduled date, or what they feel is a reasonable amount of time-based on your ad spend.

Accelerated delivery, on the other hand, focuses on getting your ads out as quickly as possible.
If you’re in a rush with your campaigns (like before or an event, or, I don’t know, say two weeks before Christmas), getting as many placements for your ads at rapid speed could be the way to go. The downside to accelerated delivery is that it can end up costing more because you have to pay up to get some of those competitive spots when you’re in a hurry. To try to mitigate this, Facebook only lets you choose accelerated delivery when you’ve set a bid cap, ensuring that they’ll never go over the absolute highest bid that you’re willing to spend.

Choosing Your Optimization

Previously, when you optimized the ad delivery for Clicks, you typically paid on a CPC (or Cost Per Click) basis. If you optimized for Conversions, you’d pay on a CPA (Cost Per Action) basis.

Now, when you choose what the ad delivery optimization method, you’re choosing which groups of people you most want to see your ad.

If, for example, you optimize for Conversions, Facebook will show your ad to the users who are most likely to convert. If you choose to optimize for Post Engagement, Facebook will deliver your ads to the people who have commented, liked, and shared your ads in the past.

This is an important distinction, and you want to make sure that you’re choosing the right action, because it can directly impact the success of your campaigns.

What you choose to optimize for will also affect how you’re being charged.

If you’re optimizing for link clicks, for example, you’ll pay per click. If you’re optimizing for awareness, you’ll pay for impressions. (We’ll look at this a bit more in the next subsection).

Here are the objective options:

When creating your campaigns, you’ll notice that not all of these options are available on every campaign.

Does Optimization Affect Cost?

Here’s the thing: optimization can affect your cost, even if it’s not immediately obvious as to how and it’s difficult to track accurately. You can run the same ad, in other words, with two different optimizations, and get different costs and results.

Here’s why: the audience members who see your ads will be different based on what you optimize for. Some audience members may not be as likely to take certain types of actions as others; some will always click on an ad, for example, but others will only ever comment on one. This can affect action rates and relevance score, which can directly influence cost and whether your ad is prioritized.

What about CPC, CPM, and CPA?

In Facebook advertising, your bidding options depend on the campaign objective.

For example, if your campaign objective is set to Brand Awareness, you won’t be able to bid on conversions (as there is no conversion).

Here’s a list of campaign objectives and their matching bidding options:

Final Thoughts

The basic idea of Facebook’s ad auction has stayed the same over time: you bid on having an engaged audience see (or take action upon) your ads.

A number of factors contribute to whether or not your bid will “win” those views, and understanding all of the factors and how the process works can help you get the results you want.

All that being said, however, the bidding system has changed quite a bit over the past few years.

Some of these changes are substantial, like the ability to set bid caps or prioritize accelerated placements, while others a simple interface change that still require some new learning.

Either way, it’s good to stay up to date with all the changes to ensure that you’re on top of them, beating out the competition in the process.

What’s your favorite Facebook ads bidding strategy? Have you already experimented with the different types of bidding?

Let us know in the comments and remember: While the data shown in this post should apply to most of you, never assume anything. Always test everything!

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