What Is Cost Cap Bidding In Facebook Advertising?

January 26, 2024

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As digital marketers, we’re obsessed with keeping control of our advertising budget. We spend hours optimizing everything we do so that the results justify the money we put into our campaigns, including our Facebook ads.

When it was announced that Facebook is introducing a new bidding option for its Facebook advertising services, it’s fair to say a lot of us were pretty excited to see if we could finally get that level of control on our ad sets here like we do for other types of PPC ads. Well, the Facebook Cost Cap Bidding has now been around for a while, and it looks to be just what we needed.

You might also be interested in WHAT IS FACEBOOK MARKETING?

What Is Cost Cap Bidding?

The way Facebook advertising works can generally be summed up like this: you have a particular goal (usually one that reflects your business goal,) and you want to use these ads to reach it. You create campaigns, tell Facebook who to target and what your goal is, and then get to the budget.

The problem up until recently was that certain business goals were not exactly compatible with Facebook’s previous bidding types. They could either focus on getting you the most conversions (bid cap) or the most predictable, controllable cost (target cost.) But there wasn’t a way for businesses both to maximize their conversion potential and control the cost of their ad spending.

That is until the Facebook cost cap bidding was introduced. With it, you can get better conversions, and stay under or at your maximum cost per optimization events. This is incredibly useful for those businesses who don’t necessarily have the luxury of being flexible with how much money they can put into Facebook advertising, yet still, want to use these tools at their full potential.

The cost cap enables you to set the maximum CPA and CPI you are willing to pay per event and skips the bid management process. In a way, the cost cap simplifies the campaign and aims at cost efficiency.

What are the other Bidding Types

The two other Facebook bidding types are still available, and there’s no word yet if Facebook will make any changes to them. So, apart from the cost cap, you also have:

1. Target Cost

Here, you tell Facebook you will only pay a certain amount for an event, whichever it may be. Facebook will then do its best to always stay below or at that amount you told it to, never going over. So, in the end, you have a better chance of meeting your target cost.

So, if you say you’ll pay $2 per link click, Facebook will look for events to match. In the end, you know exactly what you get to pay based on how successful the ad was. The problem is, there may be cheaper events out there, which could mean you pay less per event, but because of the target cost bidding, Facebook will always take you back to that $2.

It looks for cheaper opportunities at first, and when those are gone, it follows the more expensive ones. You do have control over how much you spend, but the spending is not optimized to only find the best opportunities.

2. Bid Cap

The bid cap allows you to manually bid for an ad, letting Facebook know how much it can spend in an auction. It’s the less flexible of the bidding options, and as a result, may affect delivery. If other advertisers will pay more, then you miss out on getting the ad shown.

So if you set a bid cap at $2, you say that’s how much you want Facebook to bid per event. Of the available events, Facebook will only look at those with a bid cost lower than $2. If you have a lot of competitors willing to go beyond the $2, their ads will be shown instead.

Bid cap is a good option, though, if you’re on a tight budget, and really need to be in control of each optimization event cost, either because of your budget or for tracking purposes.

Which Facebook Bidding Strategy is Best for You?

Just because the cost cap bidding is the new thing around doesn’t necessarily mean you should embrace it with open arms. Facebook pretty much said that the new bidding option came because it realised certain campaign goals could not be met with the previous Facebook ad bid systems.

Certain goals, again. If you want to know which of the three best suit your needs, let’s look at each bidding systems’ strong points:

  • Set a target cost if – you need to get consistent costs, regardless of how much your budget is. With a target cost bid, even if you add more money to the budget, your cost will remain the same. Use it if your goal is to increase website traffic, the number of app installs, sales from a product catalogue, etc.
  • Set a bid cap if – you need to control the cost of the bid in the auction. But bear in mind, the bid in the action might differ from the actual cost per event. Use it for increasing reach, traffic, post engagement, likes, messages.
  • Set a cost cap if – you need to drive volume to achieve your campaign goals. Use it for increasing traffic, even responses, offsite conversions, product sales.

Each of these bidding systems has its fair share of cons, but it’s impossible to create a system that would please everyone. The trick here is to single out the type of bidding option that will help your business achieve its goals. Once you figure that out and choose the bidding system, you’ll see a big improvement in your results.

Facebook Advertising Strategies That Work

The whole picture of Facebook Advertising is huge, and the deeper you look into the subject, the more complicated it can get. But it’s vital to pay close attention to all these different tools Facebook gives us, and use them at their full potential. Otherwise, we could always just opt for the automatic bidding and placement option, and call it a day.

Luckily for you, you don’t have to figure out all the hidden layers of Facebook advertisements by yourself. We’re experts when it comes to it! Contact Australian Internet Advertising for our premium Facebook Managements services, and let us help you make the most from your campaign.

Billy P.

About The Author

William Polson founded Australian Internet Advertising in 2013 and has over 12 years of experience immersed in Digital Marketing.

With an in-depth level of digital marketing knowledge, William has been sort after by and worked for, many large national brands including Subaru, Blooms The Chemist, and Nova 96.9.

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