Are you getting the best return possible on your Facebook ad spend? Are you using the correct Facebook campaign bid type?
In this article, you’ll learn about the four different Facebook ads bidding types and how to choose the right one for your campaign objectives.
How Does Bidding for Facebook Ads Work?
When it comes to spending your ad budget, you have more control than you think. You can choose how Facebook Ads Manager bids for ad placements. There’s a whole range of options, from set-it-and-forget-it lowest-cost bidding to advanced strategies like minimum return on ad spend (ROAS).
Even if you’ve spent years writing taglines and tracking UTMs, you might still feel a bit confused about how exactly Facebook ads work. How does the social network decide which ads to show, where, and when? Why do some campaigns seem to burn through ad spend so quickly? Why do some campaigns never use their whole budget?
It all comes down to bid strategy. At any given moment, there’s a set number of ad spots available on Facebook (and its various properties, from Instagram to the Audience Network). When you have an ad campaign running, Facebook will automatically bid on your behalf to take up some of those spots.
If your bid wins, you get the ad spot. If someone else wins, the money stays in your ad budget until another opportunity comes along.
But it’s not always about being willing to spend the most money. Facebook takes ad quality, relevance, and the probability of conversions into account when comparing different bids. So if your ad seems more relevant for a spot, then you could beat out a competitor even though you offered a lower bid. Facebook actively subsidizes ads that are high-quality or more likely to engage users.
On your side, you can control how much you’re prepared to bid. Instead of letting Facebook do its automatic thing, you have the option to set your budget and priorities for maximum effect. You decide whether to focus on high-cost, high-value bids, or on a cheaper strategy. And of course, you can supplement your ad spend by creating attractive, relevant, and engaging ads.
There are four different ways to bid for ad space on Facebook. Each will affect your budget, results, and rate of spend in different ways.
- Lowest-cost bidding
- Cost cap bidding
- Bid cap bidding
- Minimum ROAS
You’re about to learn how to use these options including where to find them in the maze of settings and drop-down menus that we call Facebook Ads Manager. And I’ll give you some tips to decide which Facebook ad bidding strategy is the best value for your business.
#1: What Is Lowest-Cost Bidding?
Whenever you create an ad campaign on Facebook, lowest-cost bidding is the default option. It’s available for every type of ad campaign, whatever your campaign objective is.
Facebook will try to win ad spots for you at the lowest cost available. The goal is to get as many ad spots as possible for your budget. The platform will aim to spend all the way up to your budget limit as fast as possible.
Here’s how to use lowest-cost bidding. When you create a new ad, right below where you name your campaign and declare any special categories, you’ll see a section labeled Campaign Budget Optimization. If you switch this on, it’ll default to the lowest-cost campaign bidding strategy. You can select either a daily budget for ad spend or a lifetime budget for the whole campaign. Facebook will aim to use the full amount to buy ad space as cheaply as possible.
When to Use Lowest-Cost Bidding for Facebook Ads
Lowest-cost bidding is great for campaigns where you want a high volume of results in a short period of time. If you’re focusing on brand awareness, reach, or video views, then lowest-cost bidding will help you get a lot of eyeballs on your ads. It’s also a good choice if you’re testing a new ad strategy or still finding your feet with the Facebook Ads platform.
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However, “lowest cost” is a little bit of a misnomer… because a low cost isn’t guaranteed. To win an ad spot, that “lowest cost” might be higher than you ideally wanted to pay. You could end up paying a lot for conversions and burning through your budget quickly. Alternatively, you might find that you’re getting a lot of cheap views but not as much engagement or conversion as you’d hoped for.
Pro Tip: Use lowest-cost bidding for top-of-funnel campaigns, then switch to other bidding strategies to lock in sales prospects.
#2: What Is Cost Cap Bidding?
If you don’t want to use lowest-cost bidding, your next option is a cost cap strategy.
To use cost cap, scroll down to the Campaign Budget Optimization section of the first page where you set up your ad. Hover over Campaign Bid Strategy to reveal the Edit button.
Once you’ve clicked Edit, you’ll be able to select cost cap from a drop-down menu.
Facebook limits cost cap bidding to a few specific campaign types. You can’t use it for brand awareness or reach campaigns, for example. You can only use cost cap bidding for the following campaign objectives:
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- App installs
- Video views
- Lead generation
- Catalog sales
Cost cap bidding works by setting a limit on the average cost per action (CPA). Facebook will bid higher for some ad spots and lower for others, but the overall average cost will stay at or below your cost cap.
When to Use Cost Cap Bidding for Facebook Ads
Facebook prefers lowest-cost bidding for campaigns in the awareness stage of the buyer’s journey. When your audience reaches the consideration or conversion phase, then cost cap bidding works better because it focuses on meaningful engagement.
Cost cap bidding is a good way to balance lower costs with a high volume of ad views and responses. If you have a target CPA or cost per mille (cost per thousand impressions), you can use cost cap to keep your average ad price down.
However, cost cap bidding can slow your ad campaigns. Campaigns with lowest-cost bidding run quickly—Facebook aims to spend your full budget by bidding whenever possible. But because cost cap bidding is more strategic, it can take longer for the platform to find ad spots that work for you.
Pro Tip: Use cost cap bidding for ads aimed at potential customers who already know your brand. It’ll take longer to place ads, but you’re more likely to get conversions at a low cost.
#3: What Is Bid Cap Bidding?
To use bid cap, scroll down to the Campaign Budget Optimization section of the first page where you set up your ad. Hover over Campaign Bid Strategy to reveal the Edit button. Once you’ve clicked Edit, you’ll be able to select Bid Cap from the drop-down menu.
Note that this option is only available for some ad types. If your campaign objective is brand awareness, you must use lowest-cost bidding; you don’t have access to bid cap.
When you choose bid cap, it means that you set a limit on how much Facebook can bid for an ad spot. This is an advanced option. Unlike cost cap (where Facebook keeps the average bid below your limit), it acts as a hard limit on every single bid. Instead of setting a general goal, you’re in charge of each individual ad spot.
If you want to use it, you’ll need to have an accurate estimate of what your ad spots might cost so you don’t accidentally set your bid cap too low and miss out on spots. You’ll also have to keep an eye on the campaign so that you can update the bid cap as necessary.
Pro Tip: If you want to use bid cap, run test campaigns first with other bidding strategies. This will help you calculate the ideal cap more accurately.
When to Use Bid Cap for Facebook Ads
Bid cap is the strategy that gives you the most control over your Facebook ad budget. You make direct decisions about the cost of every single bid.
This is a good option when you have strict cost targets or want to focus on high-quality conversions. It might be harder to spend your budget but you can track all of your costs and aim for the best ad placements.
According to Facebook, if your ad is underperforming or your budget gets used up quickly, your bid cap may be too low. You can reach more people by raising the bid cap or experimenting with different versions of the ad such as new copy or a broader target audience.
Pro Tip: Remember that Facebook gives preferential treatment to ads that are high-quality or especially relevant to your target audience. A few quick adjustments to your ad creative could make a big difference to your bidding power.
#4: What Is Minimum ROAS?
There is a fourth option for Facebook ads bidding strategy: minimum ROAS.
Like bid cap, this is an advanced option and it’s only available for some campaigns. Your business account must either be verified or have a history of running ads with Facebook for some time, and you’ll need an active Facebook pixel or SDK. Even then, you can only use minimum ROAS for three types of campaign:
- App installs
- Catalog sales
In other words, you can only use minimum ROAS for campaigns where Facebook can directly measure the revenue from an app, website, or in Facebook Messenger.
Minimum ROAS is different from the other bid strategies because you don’t set a budget limit for your bids. Instead, you tell Facebook the minimum revenue you want to get from your ad.
When you publish the ad, Facebook Ads will spend some time in a learning phase, while it figures out how to meet the minimum revenue. Your ROAS might dip below the minimum at this point, but once the learning phase is over, you should meet your ROAS goals.
Of course, this raises an obvious question: What if Facebook can’t get that target revenue for you? Well… it just won’t spend your ad budget. If you use minimum ROAS, be aware that the campaign could take some time and there’s no guarantee that all of your budget will be spent.
The right Facebook ads bid strategy for you depends on your budget, timeframe, campaign objectives, confidence, and how you measure performance. You can—and should—use different bid strategies for different campaigns, or even for different ads and ad sets within a campaign.
It’s worth getting comfortable with simpler strategies, such as lowest cost and cost cap, before you experiment with advanced options like bid cap and minimum ROAS. Then you’ll have the skills you need to make your ad strategy a success.
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