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The Difference Between Facebook Bidding Strategies

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With more than 2.89 billion monthly active users, Facebook is one of the largest and most popular social media platforms worldwide.

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If the numbers are to be believed, Facebook’s advertising revenue stood at roughly $28.5 billion in the second quarter of 2021.

That’s huge.

Millions of marketers and businesses are already utilizing Facebook Ads to reach out to their prospects and customers in an efficient manner.

And in the next few years, if all goes well, Facebook’s ad revenue will reportedly go through the roof.

Despite Facebook Ads being one of the most versatile online marketing tools, we’ve witnessed businesses lose their precious advertising dollars just because they picked the wrong Facebook bidding strategy.

And believe me – picking the wrong strategy can literally kill your ads.

That’s the reason it’s critical to dive deep into the different Facebook bidding strategies. Parallelly, we’ll understand what makes these strategies different from each other.

However, before we get down to the brass tacks, let’s learn more about the Facebook Ad Delivery System.

The Facebook Ad Delivery System

There’re literally thousands of businesses – similar to yours – trying to target the same set of audience that you desire to. So how does Facebook determine which ad to display when the opportunity arises? That’s where Facebook’s ad auction and machine learning come in.

Using Ad Auction & Machine Learning, Facebook determines when, where, and to whom to show your ads. So, every single time there’s an opportunity to display your ads in front of someone, an ad auction will take place.

You’ll be competing with other advertisers to show your ads when the opportunity arises. 

Following are the three factors that contribute to the ad delivery:

Raising your bid will boost the chances of your ad appearing in front of your target audience. But, at the same time, it is important to make sure that ads are considered highly relevant by Facebook and are subject to higher engagement.

Picking the right Facebook bidding strategy is crucial. Otherwise, you may miss out on a huge chunk of your target audience. Also, placing the bid too high may mess your precious advertising budget up. So, let’s go through each of these bidding strategies one at a time.

The Facebook Bidding Strategies

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Following are the three Facebook Bidding Strategies:

  • Lowest Cost
  • Cost Cap
  • Bid Cap

Let’s touch down on each of these strategies and their differences one at a time.

Lowest Cap – Default

Up until now, if you have been running Facebook Ads yet weren’t aware of the different bidding strategies, this might have been the default option set for you. The primary aim of this Facebook bidding strategy is to get the maximum best possible results for your Facebook advertising campaign at the expense of your advertising dollars.

So, if you set your daily budget as $100, then setting this Facebook bidding strategy will ensure that you are able to drive maximum results. But at the same time, you’ll be giving Facebook complete control to spend your full advertising budget.

Formerly known as Automatic Bidding, this Facebook bidding strategy will help you get your ad in the maximum number of ad placements at the lowest possible cost. However, one of the big drawbacks of this bidding strategy is that you won’t have any kind of control over your actual ad costs. Some days you may find extremely cheap conversions. On others, you may be spending way high.

Let’s say that you run a video marketing agency in Boise and are running Facebook ads targeting businesses based in Boise. So, if there’s a high number of video marketing agencies trying to target the same audience – just like you – then your bid costs will go way up. And you won’t have any sort of control over it. But if the competition isn’t fierce, then Facebook will deliver the maximum best possible results at the expense of your set advertising budget.

Pros

Cons

High volume with no CPA in mind

No control over CPC, CPA & CPM

Perfect for advertisers with no goals or KPIs in mind

Not a good option for long-term use

It helps businesses get engagement, CPC, reach, and impressions at a cheaper cost.

Not a good option for advertisers subject to fierce competition

A great option for reach, engagement, website traffic, and video view objectives

High CPA

Cost Cap

With this Facebook bidding strategy, you’ll have enhanced control over your bidding. By setting a cost cap, you’ll be telling Facebook that this right here is an average amount I intend to pay to drive the maximum best possible results. So, if you set your cost cap as $5, then Facebook will consider it as an average amount and will be focused on pursuing both cheapest and expensive conversions – below and above your cost cap.

So, if you set the cost cap as $5, that doesn’t mean that you are restricting Facebook to strictly bid under $5 per event. Instead, it’s just an average amount you intend to pay. Sometimes Facebook may bid $4 per action and may even bid $6 per action. But at the end of the day, the platform will help you stay true to your cost cap.

Pros

Cons

Enhanced Control

Budget may not be spent fully

Helps you stay aligned with your business goals and KPIs

Steep learning phase

It gives you the ability to set your average CPA threshold

Cost may increase if you run out of cheap opportunities – but not by more than 10%

A great option for lead generation, conversion, and install objective ads.

Bid Cap

Another outstanding Facebook Ads bid strategy – it tells Facebook what’s the maximum amount you intend to spend on a particular action. For example, let’s again assume that you run a video marketing agency in Boise and would like to reach out to businesses based in Boise. So if you set the $10 bid cap, Facebook will not cross the $10 mark per action – no matter what.

Not a penny more!

So, you do not have to worry about your advertising budget getting all messed up. Bid cap bidding strategy gives advertisers complete control over their marketing budget and is one of the most preferred strategies used by marketers and businesses.

Pros

Cons

Gives you even more control

You will have to spend extensive time managing your bids. 

Won’t spend above the bid cap threshold

If the bid is too low, then you may face a hard time reaching out to your audience

It helps businesses smartly utilize their advertising budget

Requires marketers and businesses to conduct extensive research

Conclusion

Depending on your marketing budget and how much you intend to spend on each action, you can choose either one of the three bidding strategies. But it’s not a piece of cake. Choosing the wrong strategy may seriously harm your business and your marketing dollars. So, if you aren’t familiar with how much you should spend on your target audience and don’t have the time to manage your costs, my advice would be to go with the “Lowest Cap” bidding strategy. But, if you want more control, you may go with the other two strategies we’ve mentioned above.

And if you are a Boise-based business owner and would like to skyrocket your Facebook ad conversions, our experts would love nothing more than helping you out.

Hire the #1 Facebook advertising agency in Boise.

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