Informative

Facebook Bidding Guide: How to use CPM, CPC, oCPM & CPA

Facebook bidding guide: How to use CPM, CPC, oCPM & CPA?

We’ve been getting a lot of questions about the best way to setup a bidding strategy for Facebook campaigns. By default ad campaigns on Facebook run using oCPM. But this is not always the best option to go with. That’s why we’ve created this 3 step guide to help you choose the best bidding strategy on Facebook and get the most out of your campaign budget.

1. Define your business goal

It can be quite tricky to define your exact goal. Basically there are 2 different main goals you can choose from independent from Facebook.

You either go for:

• Brand Awareness
• or Conversions

We’ll call these your business goals. It is absolutely crucial to choose one of them and not both. However it’s a bonus if you are running a conversion campaign and see in an increase in brand awareness. Or the other way around. But don’t make the mistake to promise your manager or client you can do both.

There are multiple strategies to go about building a successful campaign for your chosen goal, but for now we’ll go with a basic strategy which should get you started right away without any rocket science.

2. Choose your bidding strategy

Now your business goal is set you can pick your bidding strategy quite easily.

Building a Facebook ad campaign you can set Facebook to optimise for different “bid types”.

• Impressions (CPM): Cost Per Mille, or cost per 1000 impressions
• Clicks (CPC): Cost Per Click: the price you pay for every click
• Conversions (oCPM)
• Actions (CPA)

It’s good to know that Facebook uses a Vickrey auction model. This means that the highest bidder wins but the price paid is the second highest bid. The goal of this auction is to give you an incentive to bid your true value. So whatever you set for your CPM, CPC, oCPM or CPA, set it to a value which it really is worth to you. For example, If I want people to click to my website and I’m willing to pay $1 per click, I’ll set my CPC to 1. Or if I want new users to download my app, but I only want to pay $2 per install, I’ll set my CPA to 2.

Brand Awareness:

If your main business goal is Brand Awareness, the best way to go is CPM as impressions are the best way to reach as many people as possible for a fixed price. Sometimes we also get questions if page post engagement is part of Brand Awareness as well. However in this case you want as many people engaging with your content as possible. So instead of just looking at your ad you want people to do something. And asking people to do something is not part of your brand awareness business goal.

As a small side note, CPM is not exclusively tied to brand awareness campaigns. I’ve written an advanced article on how CPM bidding can also help you with your conversion campaigns as well.

Conversions

The business goal conversions is a little bit more extensive since it can cover more situations. A conversion is anything you want a user to do from signing up for your newsletter to buying something in your web store. This is also the most challenging goal you can have in terms of advertising. It’s not only a matter of bidding, but also setting up the right ad creatives and building a tailored audience to get the most out of your campaign. But for now we’ll just focus on the bidding strategy instead.

So with conversions in mind you’ll have to ask yourself what you want your target audience to do. Based on the answer you can easily pick your matching bid type.

• Do you want your users to download your mobile app? If yes, then you want Facebook to bid for actions, so CPA.
• Do you want your users to click on your ad? If yes, then you want Facebook to bid for clicks, so CPC.
• Do you want Facebook to automatically optimize for your Facebook campaign goal (website conversions, post engagement, offer claims etc) then your best bet is oCPM.

Default Facebook will choose oCPM for all your campaigns. oCPM is a bid type which helps you automatically optimize for your goal. You could see it as an auto pilot combination of CPC and CPM with Facebook trying to find the people most likely to show the desired behavior.

There are also some disadvantages to oCPM. One major drawback is that it is built for large audiences of >1 million. If you have a small niche you want to target, chances are that it won’t be able to find the right optimization given the limited audience size. Another one is that you’re completely relying on Facebook to optimize your campaign. And that doesn’t necessarily work out well all the time.

3. Evaluate your strategy

Measuring your campaign is key in reaching your optimal outcome. Now you’ve chosen your business goal and your bidding strategy it’s time to evaluate how your campaign is performing from the bidding perspective. If your campaign is not performing well, there are a lot of things you can do. Do you have the right creatives? Is your targeting right? Did you think thoroughly about your audience funnel? Does your business goal translate back to all parts of your campaign? But often it’s also a matter of evaluating your bidding strategy. I’ve seen campaigns performing poorly to become highly successful only after switching to another bidding strategy.

The safe way is to start off with oCPM. Whatever your results are you can try to switch the exact same campaign to for example CPC later to see if you get better results. Remember to give each change some time to settle down to get a representative analysis. Also try not to make multiple changes at once. Making just one change at a time will help you pinpoint the exact balance your campaign needs to succeed.

How is your experience with each different bid type on Facebook? I’m looking forward to hear your stories!