What Is Facebook Cost Cap Bidding

With millions of business pages on Facebook, of which more than 70% use Facebook ads to promote their products or services, it’s really not that surprising that the social media giant constantly brings new ways to optimise its services.

Our job as digital marketers is to remain updated with these changes and put them into practice as soon as they come out. So, are you out of the loop regarding with Facebook introducing a new bid strategy called the cost cap bidding? Not to worry, Australian Internet Advertising’s got you covered!

What is it, exactly?

The new Facebook cost cap bidding is the platform’s newest bid strategy that aims to help us managing bids while maximizing the results we get.

Up until now, it was either you could opt for more conversions (bid cap), or to better control the cost of the ads (target costs). But, Facebook realised that to achieve certain business goals, it needed an extra option that would allow businesses to control the costs, and drive up volume.

Here are the three new bidding types next to each other:

  • Bid Cap – a manual bid best for controlling costs in the auction;
  • Target cost – best for getting consistent costs;
  • Cost cap – best for getting the most volume.

Facebook says the new cost cap simplifies campaign management and focuses on scaling the volume of results while controlling the costs. You set the maximum CPA (cost per action) or CPI (cost per impression) you are willing to pay for results and forgo the complicated process of managing bids.

The new feature is gradually rolling out this year, so we don’t exactly know a lot about its effectiveness. But in any case, it’s worth all of our time to understand more about the new bidding strategy Facebook is introducing.

If you want to grow your business by increasing the number of purchases of your product, but can’t afford to spend whatever on each purchase, this feature is ideal for you. Facebook will try to maximise the volume (number of purchases), but keep within the ‘cap’ you establish (the maximum amount you are willing to pay for each action).

This way, your money is spent in a more controlled manner, and Facebook will look for opportunities equal or below your established cap. And if you’ve spent some time with Facebook advertising, you’re probably thinking it sounds very similar to the Target cost option.

But is it?

The difference between the cost cap and the target cost

The target cost looks to keep your spending consistent for the entire campaign, not taking into account if lower-cost opportunities are even available. If you had a target cost of $5, Facebook would actively seek those results that would get you closer with $5, even if there may have been cheaper opportunities around.

This bidding option aimed for within 10% of the target you established, and it was the best (and only) way for advertisers to control the cost per action. If you wanted more efficient spending of the budget, you could have opted for the lowest cost bidding strategy (or automatic bidding), where you let Facebook decide how to spend your money.

But, with Facebook cap cost, the system will try to stay under the maximum cost, not near to it. This could mean getting better results while paying less.

Should you use it?

The new cost cap sounds very good on paper, but we should discuss when you should use it, because you may still be better off with the other two options in certain conditions. From what we know so far about it, there are two possible instances when the cost cap is a smart move:

1. When you know your cost per optimization event or action.

Since the cost cap enables you to directly provide your CPA (cost per action) or cost per optimization event, you first have to know what this cost actually is, and then let Facebook optimise the spending for that maximum provided cost.

If you don’t know what is your CPA, you can use your lowest cost to try and determine it. You can run ads without any cost control options, and look for the CPA in the results.

2. When the cost, or the average cost per conversion, is a metric important for evaluating the performance of the ads.

If you want to increase the number of purchases from your website, then this would mean you want to track how much you pay for each purchase, so the cost cap option makes sense here. Essentially, you want to know how much you spend for each purchase, to see if the campaign is paying off or if something needs to be changed.

Choosing the right strategy for your business

There could very well be new Facebook ads bidding strategies every day, but unless they’re the perfect fit for your business, they won’t do much good as far as you’re concerned.

But for less experienced Facebook advertisers, it may be difficult to know which ad bidding strategy would work best for their business. Here’s our short guide that could help you understand better:

The bid cap

When you set a bid cap, you are the one telling Facebook how much to spend per action. With it, you can set the max CPA across auctions to control the costs and reach as many people as possible.

Use it for any of these objectives: increasing reach, traffic, engagements, app installs, video views, lead gen, messages, conversions, even sales.

You should know: the bid cap may require you to spend more time managing bids in order to control the cost.

Target cost

The best option for predictable costs if you need to control your budget tightly, but you may lose out on cheaper results because Facebook will always try to go as close to your target as it can.

Use it for any of these objectives: more website traffic, app installs, catalog sales.

Cost cap

When you want to maximise cost efficiency, while also remaining within a certain bidding limit, the cost cap seems like the ideal solution. However, it’s possible for the cost to increase once Facebook goes through the cheap spending options, so you do need to have some budget flexibility.

Plus, since it’s new (with only 50% availability so far), there is a definite learning phase you need to prepare for.

Use it for any of these objectives: increasing traffic, app installs, event responses, lead gen, offsite conversions, landing page views, link clicks, page likes, post engagement.

Want to be prepared?

If you want to tackle this new Facebook advertising bidding strategy head on, but don’t know where to start, we can be your very helpful guide. It’s our job to know these things, so contact Australian Internet Advertising right now and we can help you single out the best bidding strategy for your business!