Facebook Bidding – A Comprehensive Guide for Marketers

Designing an eye-catching ad and using strong language are key components in the sales process. However, Facebook ad competition requires more than this to be victorious. In addition, you’ll need to become an expert in social media marketing. Ad targeting and ad bidding optimization are also critical skills you should have.

Over several years, Facebook bidding has served as the cornerstone for Facebook campaigns. The bidding process used by Facebook to sell ad space is a novel concept in online advertising.

You’ve landed at the right place if you’re still in the learning phase of the advertising world. This article will discuss Facebook bidding, strategy, bidding types, campaign budgets, and much more.

 

The image introduces the topic Facebook bidding

How Does Facebook Bidding Work?

 

Essentially, the way Facebook’s ad bidding works is like an auction, with advertisers bidding to have their ads appear in various places on Facebook. While the maximum bid usually gets the most ad placements, the size of your bid isn’t the only determining factor for ad delivery.

 

This is what makes the Facebook bidding system different from other auction advertising models. Even though Facebook bidding goes well beyond our expectations, consider the following situation to gain a better understanding:

 

A Facebook bidding example

 

Assume there are 3 ad slots left on Facebook, and there are 4 bidders for them. The above graphic shows that there are 4 advertisers and advertiser A will likely be left out and will receive low to zero views.

 

For a bid of between INR 8 and INR 12 per thousand impressions, advertisers B and C will gain a lot of eyeballs on their ads. While Advertiser D’s prices are slightly more than those of Advertisers B & C, Advertiser D is likely to acquire the most hits. Now, the reason why advertiser D is the winner is that the advertiser isn’t paying INR 20 but somewhere price just slightly above those of B & C around INR 8-12.

 

According to Facebook’s bidding auction system, the highest bidder is the winning bidder. This is the manner in which the system operates. You only pay the amount that is closer to the second-highest bid than what you actually bid.

 

As a result, advertiser D will not pay INR 20 but will pay between INR 12 and INR 20. Winner. The auction mechanism aims to strike a balance between advertisers’ and Facebook users’ requirements by allowing advertisers to make money while still presenting relevant content to consumers.

 

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Considerations to Make Before Placing an Offer:

 

 There are usually three elements that determine whether or not your ad will be published :

 

  1. The Value of the Bid

 

Every advertiser wishes to win. As a result, you will be willing to pay a premium in order to win the auction. On the other hand, Facebook recommends its own set of rules. You may win the auction but end up paying less than you bid.

 

The above example demonstrates this. There are numerous ways to manage your Facebook bidding in an ad auction. Bidding tactics will help to clarify this.

 

  1. The Relevancy Score

 

Ads = Users (Clicks, Likes, and Comments)

 

Facebook places a high premium on your ad’s relevance. A high score equates to additional time spent on Facebook. The quality of your ad will decide how interested Facebook thinks a person will be in seeing your ad. It is calculated by comparing all positive interactions, such as liking, commenting, or clicking on it.

 

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  1. The Projected Action Rates

 

Commonly known as estimated action rates. This section is concerned with the estimating algorithm. If Facebook believes your ad will receive a high amount of clicks, it will prioritize it over other ads.

 

What Factors Influence the Cost of Facebook Advertising?

 

There is a multitude of factors that influence your Facebook advertising costs. If you want to create a budget that is reasonable for you, you must first understand how these factors affect the average cost of Facebook advertisements. Let’s have a look at the factors that influence the cost of your Facebook ads:

 

Audience

 

Choosing your target audience is one of the major factors involved that will influence the cost of Facebook Ads. While targeting a particular age, gender, or interest group, a shift in your advertising expenses is anticipated. Who you target and how many people you target affects the cost, as well as how many other advertisers are going after the same audience?

 

For instance, if you target green moms with your eco-friendly appliance, they may also be targeted by your competitors, who may sell organic juice for children. Hence, it is always deemed better to target a smaller group of people with specific interests rather than a large group of people with no filters.

 

When it comes to reaching a specific target group, there can be a high level of competition. Your target audience may be popular enough, which can raise the ad’s price. It’s important to know that your audience may be treated by other advertisers who don’t work in your industry.

 

As a result, you must bear in mind that Facebook bidding is significantly influenced by your market segmentation, which includes the following:

 

–           Age

–           Geographical place

–           Language

–           Interests and behaviors

–           Advanced links (fanpage, app, etc.)

 

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Ad Budget

 

When you create a Facebook ad campaign, you establish an advertising budget. Now, one of the smartest things to do is to establish an appropriate advertising budget.

 

While a high advertising budget gives your business more options, you can still make a small budget work for you. However, you as a decision-maker must understand that a low ad budget results in fewer conversions due to its performance constraints.

 

Ad Quality & Relevance

 

The quality and relevancy of your advertisement are determined by how interested Facebook believes a person will be in seeing it. Facebook assigns your advertisement a score between one and ten based on its relevance to your target demographic. The smaller the cost, the higher the relevancy score.

 

If you want to get the most out of your Facebook advertising budget, you need to produce ads with a high level of relevancy and engagement. Monitor your relevancy and engagement score regularly for the greatest results.

 

Ad Objective

 

When creating a Facebook ad, you must select one of the following primary ad objectives:

 

–           Awareness

–           Consideration

–           Conversions

 

After deciding on your primary purpose, you must choose a specific goal. Facebook offers a variety of in-built goals. Generally, more valuable ad goals result in high ad costs.

 

When planning your ad campaign, keep in mind the importance of brand recognition and consideration. Users’ interest in your brand grows as they move down the sales pipeline, ultimately leading to a purchase.

 

Ad Placement

 

Ad placement influences Facebook ad costs. Advertisements on Facebook can appear in six locations.

 

–           Instagram

–           Instagram Stories

–           Facebook desktop newsfeed

–           Facebook right column

–           Facebook Messenger

–           Audience Network

 

Each of these placement options results in a unique cost-per-click. However, keep in mind that just because a placement has a lower cost-per-click does not indicate it will convert.  Facebook’s ownership of Instagram gives a competitive advantage in social media advertising.

 

Bidding Strategies

 

The right bid strategy can assist you in achieving measurable business objectives. For example, better sales, more customers, or increased brand awareness are all possible outcomes.

 

Before settling on a bid strategy, it is vital to define how you will measure the performance of your organization. This will assist you in selecting the choice that best matches your company’s advertisement aims and objectives.

 

Facebook Offers 3 Types of Bidding:

 

  • Spend-based
  • Goal-based
  • Manual

 

  1. Spend-based Facebook Bidding

 

Concentrate on spending your entire budget and obtaining the greatest amount of results or value possible.

 

Lowest Cost :

 

This strategy gives Facebook complete control over the bidding process. This is considered to be the simplest bidding strategy. It eliminates the need to fully know the complexities of bidding processes and options.

 

It uses your funds to find the most cost-effective options. It maximizes the number of deliveries and conversions you can obtain for your money.

 

Compatible for: New entrants, fresh advertisers who want to create their brand name.

 

Highest Value :

 

This is highly beneficial for those advertisers who are uncertain about their minimum ROAS (Returns on ad spend) amount. This section focuses on maximizing the return on your advertising spend.

 

This is compatible if specific and precise conversion values are specified. This bidding technique tends to consume the whole of your budget. In simplest words, spend your funds and prioritize the highest-value products.

           

Compatible for: Advertisers who want to maximize value

 

  1. Goal-based Bidding

 

Decide on a cost or a value that you wish to achieve.

 

Cost Cap :

 

Regardless of market conditions, this technique tries to keep costs at or below the average. Rather than having to manually adjust your bids, Facebook will do so for you to maximize volume while staying within your target CPA. Cost per action (CPA) advertising allows you to only pay for actions that consumers do as a result of seeing your advertisement.

 

Minimum ROAS (Return on Ad Spend):

 

Before we begin, let us understand ROAS. ROAS (Return on Ad Spend) measures how much revenue is generated for every penny spent. When analyzing Facebook ad outcomes, advertisers tend to concentrate on metrics such as landing page views, sales, downloads, and so on.

 

Very important yes, but you also need to know if the sales you are generating are producing good results relative to your spending. Here, in this technique, for each bid, you will have to set a minimum return on ad spend as a goal.

 

It is recommended that your minimum ROAS bid on Facebook be approximately 10-20 percent lower than your real ROAS target. For example, if your business is profitable with a return on investment (ROI) greater than 2X ($2 in revenue for $1 in ad expenditure), set a target of 1.8-1.9X.

 

  1. Manual Bidding

 

You have complete control over how much you can bid across all ad auctions.

 

Bid Cap:

 

Rather than allowing Facebook to bid dynamically based on your cost or value goals, you may set a maximum price across all of your auctions. This Facebook bidding technique requires a more hands-on approach.

 

As a general rule of thumb, you should set a bid cap that is less than the greatest amount you are willing to pay on the conversion you desire. Consider the following scenario: if you are unable to spend more than $75 on a lead, your bid cap should be less than $74.

 

Ad Delivery

 

The delivery strategy you select has less to do with bidding and more to do with scheduling, but the two are closely linked. After all, if you choose to run your advertising during a period of high competition, your ads will appear to be more prominent.

 

Facebook bidding provides two types of ad delivery options: standard and accelerated.

 

Standard Ad Delivery Option :

 

This is the default ad delivery option set by Facebook. This option keeps your ad campaign running evenly. Facebook ensures that your campaigns run as smoothly as possible, either until the specified date or for as long as they think fit based on your ad spend.

 

Accelerated Ad Delivery Option :

 

Accelerated delivery strives to spend your ad budget as quickly as possible to obtain the best results. When you’re in an urgent need to get your ads in front of people, this delivery might be a good option.

 

However, it may end up costing you more because you may have to pay a bit extra to get some of the more competitive positions if you’re short on time. To mitigate this, Facebook allows you to choose rapid delivery only if you’ve set a bid cap, assuring that they’ll never exceed the maximum offer you’re ready to pay.

 

Along with these delivery options, it is critical to determine which categories of people you want to see your advertisement. As a result, it is critical to understand the ad optimization objectives.

 

Ad Optimization

 

Facebook allows you to specify an aim for optimizing ad delivery:

 

  • Conversions: This attempt targets people who are most likely to convert to your ads.
  • Link Clicks: This option will optimize your adverts to generate as many clicks as possible from users.
  • Impressions: This will aim to portray your ad to the maximum number of users.
  • Daily Unique Reach: This option allows you to deliver your advertisements to each member of your audience once daily.
  • Post Engagement: It targets individuals who are most likely to engage with your ads through likes, shares, and comments.
  • Brand Awareness: Ads are targeted at individuals who are most likely to pay attention to them.
  • Leads: It allows you to target audiences who are most inclined to share their information with your advertisements (e.g. their email address).
  • Landing Page Views: Designed to display your adverts to the most likely viewers of your landing page.

 

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Frequently Asked Questions

 

Is there a performance impact when switching between automatic and manual bidding?

Consistent bidding shouldn’t hinder performance. Poor performance is more often due to low bidding than moving between automatic and manual bidding.

 

Where can I view the results of my bidding and optimization efforts?

You may refer to bidding and optimization reporting for clarification.

 

What demographics can I target on Facebook?

There are 3 types of audiences:

–           Saved Audience (based on location, interest, behaviors)

–           Custom Audience (based on your Facebook/Instagram account’s behavior)

–           Lookalike Audience (similar to a particular custom crowd of your choice)

 

Is a website required to conduct Facebook ads?

No. While most campaigns necessitate the use of a URL, there are a few choices available for people who do not yet have a website of their own. All initiatives, however, will necessitate the creation of a Facebook profile.

 

Conclusion

 

The Facebook bidding mechanism is essentially an auction in which advertisers bid for their ads to be displayed across social networks. While the highest bidder often receives the most ad slots, the amount of the bid isn’t the major factor.

 

Hence, bidding strategies play a vital role. Facebook’s bid tactics assist you in achieving quantifiable business outcomes. This can include growing total sales, acquiring new customers, or broadening brand awareness.

 

Whichever option you select, Facebook will optimize ad delivery to maximize your results within your budget constraints. Consider the above factors when reviewing your next Facebook ad campaign to maximize your return on investment.

 

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