One element of Facebook ads that can come across as monolithic or opaque is bidding – at the outset, it can appear simplistic – you either increase bids or drop them, and that is what it is. However the way Facebook’s(and any other ad tech platform’s) algorithm works is that the bid isn’t the only thing that matters – relevance does just as much. In this episode, I’ll walk you through some of the math behind bidding for ad auctions – and how to impact its different components.

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KEY HIGHLIGHTS

👊🏽Bidding is not the sole determinant of success.

🔄No matter what you bid for, what Facebook ultimately translates your bid to.

⛓The levers other than bids that impact your CPMs.

⚡️How to improve your CTRs and CVRs

FULL TRANSCRIPT BELOW:

With the multiple bidding options available on Facebook, it isn’t always easy to understand or discern what strategy is best for you. 

It’s worth noting that bidding isn’t the sole determinant of your success – and today I’d like to show you the math behind this.

First up, it’s helpful to understand how Facebook’s bidding works – and what that means for your bidding strategy.

Facebook is in the business of selling ad impressions. Yes, you might bid for purchases, clicks, add-to-carts or any of the myriad other KPIs that you can optimize for – but eventually, you are bidding for impressions.

Your bid for purchases, value, or any other event you’re optimizing for eventually is translated by Facebook into an impression level bid. Each impression for every user is available for advertisers to bid on by means of a second price auction – and your eCPM in this auction determines how many impressions you win in the auction.

What is important to note is that your bid isn’t the sole determinant of whether you win an auction for an impression or not.

While the specifics of the underlying auction mechanics of Facebook are complex, a simple way of looking at an eCPM is as below.

You’ll see from the below that the eCPM is a product of your CTR, CVR and your CPI/CPP/CPS. What’s worth noting is that your bid for your target CPI/CPP/CPS is *one* of the factors that impact your eCPM -> and oftentimes if you want more volumes, bidding higher is only of your options, and not by any means your only option(Note that your bid for your target CPI/CPP/CPS isnt what you actually pay in a second price auction, but that is a topic for a different blogpost.).

You could improve your CTRs by introducing different ads, or your CVR by improving your app store conversion rate(or improve both by simply choosing to target a different audience that is more receptive to your app). You could also absolutely bid higher – but that is not the only weapon in your arsenal. 

A REQUEST BEFORE YOU GO

I have a very important favor to ask, which as those of you who know me know I don’t do often. If you get any pleasure or inspiration from this episode, could you PLEASE leave a review on your favorite podcasting platform – be it iTunes, Overcast, Spotify or wherever you get your podcast fix. This podcast is very much a labor of love – and each episode takes many many hours to put together. When you write a review, it will not only be a great deal of encouragement to us, but it will also support getting the word out about the Mobile User Acquisition Show.

Constructive criticism and suggestions for improvement are welcome, whether on podcasting platforms – or by email to shamanth at rocketshiphq.com. We read all reviews & I want to make this podcast better.

Thank you – and I look forward to seeing you with the next episode!