Facebook today offers a variety of bidding options ranging from CPC and CPM to OCPM and CPA. Each bidding option is associated with a particular objective and it’s important for every advertiser to understand each type to drive the best ROI from the platform.
In this post we are going to discuss each of these various bid types in detail. This post also aims to help you make better decisions for your next Facebook campaign!
Why bidding is important?
While running a successful Facebook ad campaign, every advertiser needs to focus on a few key ingredients like a powerful ad title, attention-grabbing images, crisp ad copies, precise targeting and lastly and more importantly the right bid. With the wrong bidding strategy, even with a great ad you might end up paying more than what you should actually pay Facebook or you might end up reaching out to a very small audience. With the right bidding strategy and a great ad creative you are poised to drive maximum returns on your investment from the platform.
What are the different bidding types on Facebook?
Facebook when it started off used to support only 2 types of bidding options i.e. Cost per Click (CPC) and Cost per Mille (CPM). But over the last couple of years, Facebook has simplified its bidding process in order to attract the less evolved digital advertisers and help them drive the best ROI from the platform.
During the ad creation process, once you decide on the creative and the targeting parameters you will be taken to pricing section where you have a choice about how you want to pay. Facebook currently offers 4 types of bidding options:
Cost per Mille (CPM)
What: Cost per Mille (CPM) means cost per thousand impressions (Mille is 1000 in Latin). By choosing this option you indicate that you are ready to pay Facebook on the delivery of 1000 ad impressions. It is the simplest form of bid type available on Facebook. The system optimizes to deliver impressions within the target group chosen and not really focusing on accumulating actions.
Why: It’s meant for advertisers who are looking to create brand awareness. If you are not really looking at specific actions but intend only to show your ad to the users by delivering impressions then CPM could be apt for you.
Cost per Click (CPC)
What: Cost per click (CPC) means you will be paying Facebook on each and every click that happens on the ad. It’s the most commonly used bid option on Facebook. So if you are promoting an ad using CPC bid type, then you will only be charged on the clicks your ad gets irrespective of the fact that it may have taken millions of impressions for Facebook to get those clicks. The ad will be delivered to those set of people within the target audience who are most likely to click on the ad.
In the background, Facebook optimises on the ads which has the highest click through rate (CTR) and prioritises them. That’s why ads with higher CTRs record the lower CPCs whereas the ones with low CTRs record higher CPCs. From a revenue point of view, it makes sense for Facebook to show an ad which gets clicked 1000 times at $1.00 CPC than to show an ad which gets clicked only 100 times at $5.00 CPC.
Why: Cost per click (CPC) bidding is suited for you in few scenarios like below:
- If you want to keep it simple and want to pay Facebook only when anyone clicks on your ad.
- If you have limited advertising budget and don’t really want to experiment much
- If you are targeting a specific group of Facebook users and you want them to perform a particular action, like clicking through to your website or buying your product through a sales landing page or maybe promoting a Facebook page for likes or post engagement
Optimized Cost per Mille (OCPM)
What: Optimized Cost per Mille (OCPM) is Facebook’s proprietary bidding type where Facebook optimizes to show your ad to a specific set of users who are most likely to execute the desired action and you pay them on 1000 impression. In OCPM, you have two options:
- You choose the default setting and let Facebook take control of bidding and optimization towards the desired action
- You manually set the maximum value you want to pay against a particular goal. Note these values are not bids but like soft goals to the system basis which the system adjusts its bidding strategy.
Currently, advertisers can optimize their campaigns based on the following goals:
- Actions: Optimize on certain actions that happen on Facebook, e.g., Page Likes, App Installs, Post likes, comments etc. You can specify actions using conversion specs.
- Reach: Optimize to maximize reach within the target audience
- Clicks: Optimize to get clicks.
- Social Impressions: Optimize for impressions with social context, i.e. with the names of one or more of the user’s friends attached to the ad who have already liked the page or installed the app.
While running an OCPM campaign, you can expect to get average cost per 1000 impressions much higher than your average traditional CPM bidding. In OCPM, Facebook carefully chooses the audience who are more likely to execute the desired action and hence you will end up getting more conversions than usual.
As OCPM tries to deliver your impressions to the people most likely to take the desired action within your target audience, there is one issue you should be aware of. OCPM needs a large target audience as a basis for the optimization, so you can’t target too narrow. Facebook defines this as greater than 1 million users. So if you are targeting a small audience chances are you may not find the desired audience within the target group who are likely to the action
Why: If you are looking at optimizing your campaigns to a desired action like page likes, post engagement, event RSVPs etc. with a large audience (preferably more than 1 million) then OCPM will be the right bid type for you. OCPM predicts who is more likely to convert and it needs time and training to understand your prospective customers. So in case your campaign is targeted to a small audience and you don’t have enough time to learn and execute, OCPM is not recommended.
Cost per Action (CPA)
What: With Cost per Action (CPA) you pay for the actual actions your ad results in. You set a bid and indicate the maximum cost you are ready to incur for the particular action. You pay Facebook only when the desired action takes place and you won’t be charged for the impressions and clicks Facebook consumed to get that action.
Currently, Facebook supports Cost per Action (CPA) bidding on the below list of actions:
- Page Likes (available only through a Preferred Marketing Developer)
- Offer Claims (available only through a Preferred Marketing Developer)
- Offsite Link Clicks (available only through a Preferred Marketing Developer)
- Mobile App Installs ( available through Power editor)
Why: If you are looking to optimize your campaign on the CPA supported actions and you are looking to control costs then Cost per Action bidding type will help you drive the best ROI and minimize the spill over.
Key insights from our experience
We have worked with over 500 brands across 5000 campaigns over the last 5 years across Southeast Asia and India. With that kind of experience behind our back, our operations team are experts when it comes to bid management and driving the best ROI from the platform. Listing down a few insights from our campaign management experience which should help you in your decision making process while choosing the right bid type:
1. COMMON OBJECTIVES & BID TYPES
2. REGIONAL INSIGHTS
- Before the introduction of OCPM buy type, 95% of the campaigns ran on CPC bidding
- Post the introduction of OCPM, advertisers have started flocking towards it for campaigns where they need to drive more actions.
- CPC buys – 60%
- OCPM buys – 30%
- CPM buys – 8%
- CPM buys – 2%
3. Brands under different verticals prefer different bidding options. To explain:
- Brands under Banking & Financial Services, Travel, Automobiles and Consumer durables prefer a mix of OCPM and CPC buys
- Ecommerce brands are more action-led and hence they do few CPA buys in addition to the regular OCPM and CPC buys
- Entertainment and Retail brands have stuck to CPC buys and are yet to experiment with other bid types
- Almost all campaigns here run on a mix of OCPM and CPC buys focused on getting more reach and driving actions.
- Generally, 70% of the campaigns run on OCPM and the remaining 30% run on CPC.
- Unlike India where there are certain brands who prefer running their campaigns only on CPC, in Southeast Asia brands run campaigns on a mix of CPC and OCPM buys
While every bid type helps an advertiser achieve a certain objective, each bid type also has its set of challenges. We are listing down a few challenges that every Facebook advertiser should be careful about while running their campaigns:
Cost Per Click (CPC):
At times, when the campaign objective is to drive actions and the campaign is booked on CPC, we have observed that the eCPA is higher in comparison to what you would have incurred in an OCPM campaign. Hence would recommend CPC model only if you are going to evaluate the success of the campaign on the basis of clicks you have received. For actions, ideally go for OCPM model.
Optimized CPM (OCPM):
Since OCPM targets people who are likely to engage with your ad, it reaches out to only a section of the entire target audience. Hence at times, if expected delivery volumes are high, OCPM falls short of delivering those high numbers. Apart from that, also since we cannot set a bid on OCPM, the eCPM recorded is higher than expected. OCPM is recommended only if the target audience is more than 500,000 and is not ideal for smaller audiences.
Cost per Mille (CPM):
CPM is particularly effective only for reach campaigns and is not recommended for driving actions or engagements. CPM campaigns generally record the low CTRs since the overall objective here is to burn impressions and not accumulate actions.
Cost per Action (CPA):
Since Facebook is optimizing towards actions it’s shown to only those users who are more likely to take that action hence the volumes at times are bit of a concern. If you are looking to drive volumes then you may face difficulties to achieve those numbers. It’s best recommended for campaigns with smaller budgets.
Komli’s Social Ads Platform makes it easier
Komli’s social ads platform supports all Facebook bidding options including Cost per Action (CPA) bidding on actions like page likes, offer claims, mobile app installs and offsite link clicks. Depending on what your objective is you could choose any bidding option.
Our platform also allows you to seamlessly A/B test between different bid types. For e.g.- if you want to test if OCPM is working better than CPC then you could simply ‘Add’ an extra bidding option of OCPM to the existing CPC one and in a few seconds two campaigns which are exactly identical except for the budding type will be created.
Apart from providing you with flexibility on bidding options, our platform can optimize campaigns by focusing on one particular action you desire. Goal driven optimization helps you drive higher volumes at lower costs and helps you achieve specific business or marketing goals. For e.g.: if your overall objective is to drive link clicks on your post, you could define the same in your rule (with an expected CPA attached to it) and the system will then optimize with that soft goal in the background to keep your costs within the limits.
Ideally, if you are not an experienced Facebook advertiser it’s better to use the Optimized CPM option where the bidding and optimization is automated. You will pay Facebook on a CPM basis but in the background Facebook will study your data and deliver impressions only to those users who are likely to take that desired action.
After gaining some experience on running Facebook ads, you can start playing with manual bidding, specifying how much you are willing to pay for each click (CPC) or for every 1,000 impressions (CPM) or each desired action (CPA).
Komli’s Social ads platform gives you total control over your campaigns and flexibility with support to all bidding options. In addition to that, the goal-driven optimization works towards driving the best ROI from the platform. Flexibility also exists in terms of service you could choose to run your own campaigns on our platform or else use are in-house Facebook advertising experts to run the campaign for you.
If you would like to know more about our social ads platform, please visit our website
Contact our sales team at http://www.komli.com/in/contact for a live demo.