confusin-choices

Facebook’s Optimized CPM vs. CPM vs. or CPC – What’s best?

confusin-choices

 

Sometimes there are good choices, and some other times, we have TOO many choices.

Facebook ads is NO different.

They used to have ALL kinds of ad products .. sponsored stories.. questions.. offers…

If you’re advertising online for your product or service, where do you even BEGIN?

Seriously, Facebook… why do you make things so confusing?

It’s like they’re TRYING to confuse their customers.

 

Ok, so I will break it down for you. Here are the three types

 

1) CPC

Pay per click.

You pay $X (whatever you bid) is for 1 click.

This is the most commonly used in search engine marketing (i.e. search PPC).

This is by far the least risky to the advertiser because if the ad network doesn’t generate the ad click, then you don’t pay. Whatever ads that are shown and not clicked, you do not pay.

Great,.. free ad impressions, right?

Wrong.

1) If your ads don’t get clicked, then they will cut your ad out. That’s why the ad networks emphasize CTR (click through rate) so much because if your ads don’t make money for them, then off you go!

2) There are literally millions, if not billions of ad impressions, going around the web daily. Don’t think these “free” ad impressions are going to have much on our brand awareness, unless you’re spending thousands per day..

 

 

2) CPM

You pay per 1000 impressions. This is how you USUALLY pay for non-search display ads.

If you bid $5 CPM, that means you’re willing to pay $5 for THOUSAND impressions of your ad.

If no one clicks on your ad, you STILL pay $5.

Unfair, right?

If you get one click, that’s 1 click in 1000 impressions at $5… so you’re paying $5 eCPC (effective cost per click).

So why on earth would anybody with a 1/2 a brain bid CPM? They should ALL bid CPC.

Au contraire …

What if I told you that you do some crazy CTR tricks to get 2 clicks, instead of 1.

Now, you get 2 clicks for $5… and now you’re eCPC is $2.50 ( $5 / 2 ).

You just cut your CPC by 50%.

 

So if you have killer banner ad skills, then you can probably less for traffic then, say, someone who’s too lazy.

On the average, banner ads have a CTR of .1%.

Meaning, if you have a 1000 impressions, on the average you get 1 click.

So for most of the cases, bidding on CPM and CPC is comparable… ASSUMING that you have comparably clickable ads.

 

NOTE: CPM does NOT mean 1000 people will see your ad once. Or that 1 person will see your ad 1000 times. In fact, you have no idea what they do. In certain display networks like Google Display network, RTBs, and traditional banner ad networks, you can set you frequency cap on how many times you want your ad to show to people. But with Facebook, you have pretty much NO say in how this gets allocated.

 

3) Optimized CPM

Let me translate what this means.

“Let us spend whatever the HELL we want for you because you don’t know diddly squat.”

 

confused-dog-playing-game

 

OK, I’m not being fair b/c I just ended a campaign that had insane CPM ( > $30) and I let them do that  (by mistake.. i was 1/2 asleep when I kicked that campaign off).

Now, this method is telling you that Facebook will put your ad wherever the HELL it feels like so that you can get the best “bang” for your buck (whatever the best bang is depends on your advertising objective).

I personally never bid on this because

  1. you have NO or little control over the pricing
  2. you have NO or little idea where the ads are getting placed
  3. you have NO or little control over how much traffic this will eventually generate for your target

This is equivalent to giving Facebook a blank check.

So don’t do it.

 

OK WHAT DOES THIS ALL MEAN?

Simple. There are really two types of advertisers

1) direct response – you’re driving traffic somewhere else, get them to do something, etc.

2) brand / awareness – you just wanna be seen

 

I can’t speak for #2 but for #1, the answer is.. YOU HAVE TO TEST!

In fact, if you do it well enough, you can even get up to 10% CTR on your Facebook ads.

Because you have NO idea how it’ll work out for YOU, your company, or your product. Every product/service has a different level of awareness, affinity, ease of actionability (i.e. buy, download, form filled out , etc.). In another words, NO advertiser or marketer can tell you that ONE ad product works for everyone.

In fact, I launched two campaigns to do solar lead generation for Solar One Media. They had

1. IDENTICAL offer ($0 down solar, get free home solar analysis)

2. IDENTICAL landing page

3. IDENTICAL bid

4. IDENTICAL targeting

5. IDENTICAL creatives (headline, image, copy)

 

Even then, the results (conversion rates) were nowhere near each other

Why? there are OTHER factors you have to include

1) Facebook will NEVER give you “equal” traffic

2) Some companies are running brand awareness campaign that helps with conversion

 

General Rule of Thumb

Remember, Facebook advertising isn’t your friend.

It’s job is to make you part ways with as much cash from as many people as possible.

Algorithmic-ally, it’s going to place traffic that’s going to MAXIMIZE it’s earnings.

So there are couple of things that it needs to consider

 

a) your BID  - Bid more, you get more but be careful, your ultimate goal is to have the lowest possible cost per acquisition/sale while maximizing the number of acquisitions. This is a fine art only you can master.

b) your BUDGET – if your budget is low, they have to “pause” yours and let someone else run. If your budget is high, then they don’t need to worry about you so they give you more, so to speak

c) your competitors for that traffic space – Remember, in display/interruption advertising, you’re bidding against EVERY advertiser of EVERY industry that’s going for that market. This isn’t search marketing, it’s demographics & interest targeting. (By the way, if you DO search marketing, please bid on your own company’s name.)

d) your account history – Think about it. If you’ve have or had an account that spent a lot, of course they’re going to favor you. Simple. It’s all about relationships, as they say.

e) Facebook’s magic sauce – who knows what that is

 

But there are general guidelines for direct response advertising

A) If you bid CPM (normal or optimized), you’re telling them that you’re willing to pay for impressions. Any impressions.

This means they can put you anywhere really.

The risk on YOU the advertiser to generate the clicks with eye catching ads, creatives, what not.

 

B) If you bid CPC, you’re telling them that you ONLY want clicks.

Now the risk is on Facebook because if you don’t get clicks, then your banners ads are lost opportunity that could’ve been monetized with CPM ads.

So they’ll try and place you on the MOST eye catching part as to get the MOST clicks. If you don’t get clicks, you don’t pay. Safe investing.

 

So your conclusion… bid CPC, RIGHT?

First of all, ALL banner ads burn out. CPC or CPM.. banner ads are banner ads. CTR over time WILL degrade no matter where they’re placed, how you’re bidding, etc.

Second, if you don’t get clicks on CPC model, Facebook will kill it automatically. Why should they right?  You’re losing them, not making them, money.

Third, you can make eCPC (effective cost per click, i.e. $ spent / click) on CPM ads if you REALLY REALLY optimize your ads, and bid ultra low.

IN fact, you can even make eCPC on optimized CPM ads REALLY low because with optimized CPM, they place you in PRIME locations like the feed.

 

So the answer is.. I DON’T KNOW what’s right for you.

You HAVE to test. I mean LOTS of ad rotation test and of course, A/B tests (probably more important)

Start 3 identical if not same campaigns but set a fixed budget and see how the effective CPC is after the budget has been depleted.

But if you are completely new, I would HIGHLY recommend you start with CPC ads first.

 

If you are still confused and need help, feel free to contact me.

 

Key Takeaway

  1. CPC/CPM/optimized CPM – There is not bullet magic answer. You need to test but for beginners, start with CPC first as that’s the safest
  2. Optimize for CPA, everything else is secondary.
  3. Advertise for maximum direct response, never for brand awareness… unless you’re really rich.. then let me help you. ;)
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Facebook's Optimized CPM vs. CPM vs. or CPC - What's best? by

taewoo

Ex-code monkey turned entrepreneur, marketer, blogger, and speaker. TaeWoo writes about online marketing and growth hacking. You can read more about him here.

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10 Comments

  • Akshay Jain January 16, 2014 at 2:27 pm

    Hello,

    I am trying Facebook PPC on Movie Star Niche. But don’t know which model I should use to promote it?

    Either CPM / CPC or Page Likes?

    I am promoting Paul Walker Fanpage.

    Thanks

    • taewoo January 20, 2014 at 11:38 am

      Your question is too vague. All depends on your target objective…. that determines which path to take

  • Soumya June 15, 2014 at 9:15 am

    Nice and really very informative article on Facebook ads. I read and learnt a lot but would like to know your opinions. I am about to launch a campaign for my training business in India and thinking of going for CPC because CPM with .1 percent CTR is not going to be beneficial for me. Ultimately I need to bring people to my website and until & unless they click on my website how come they would know about my courses. So what do you think, is it ok or should I think again from the start? By the way thanks a lot for sharing this article.

    • taewoo June 16, 2014 at 11:51 am

      you should try both. effective CPC to your website is ultimately what matters. I’ve been able to get CPCs down to pennies w/effective targeting & creatives

  • Gemma July 13, 2014 at 2:06 pm

    I have taken your advice and run two identical promoted post ads to friends of fans with a particular interest in the same subject, same age range and gender…everything the same except one ad is optimized CPM with £3.20 on ‘actions’ and the other is CPC with a bid of £0.11 (as suggested by Facebook).

    My aims:

    To gain new fan page likes from people with a particular interest To get as many engagements (likes/shares and comments) as possible

    For the purpose of this page post I am not interested in directing any traffic to my website – it’s purely about engaging a specific audience on Facebook.

    Three questions:

    1. Is this a good A/B test?

    2. Do I need to run tests like this every time I run promoted posts so that I can work out what the most cost effective way of running ads is for my content?

    3. This has now been running for 9 hours and the Optimized CPM post has taken off and done well for impressions and engagement, where as the CPC post literally hasn’t gone anywhere – no impressions, no engagement etc. Any thoughts on why?

    Thanks, great article!

    • taewoo July 14, 2014 at 10:32 pm

      1) Absolutely 2) Well, no. Once you get a hang of when/what/how.. you won’t need to know. It depends on your objective but I tend to test everything but most people get lazy. Also depends on your marketing budget: the more budget you have, the longer you can test. But after you get a hang of things, you probably won’t need to as much. 3) Optimized CPM = giving facebook free check. Of course, you’ll get traffic because they are bidding FOR you. With CPC, im guessing you’re not bidding high enough

  • Gemma July 15, 2014 at 8:40 am

    Thanks Taewoo.

  • Gemma July 29, 2014 at 7:14 am

    Ok, so another random question…I have Googled and Googled but can’t seem to find benchmarks for promoted post engagement anywhere. I’m looking at my promoted post engagement rates and thinking they’re pretty good – but there’s no way to put this in context. Obviously the benchmarks would depend on your business type – media/sports/publishing/automotive/airline.

    Do you know of any such benchmarks, in general or by industry? Thanks :-)

    • taewoo July 30, 2014 at 1:10 pm

      Hey Gemma. Haven’t seen any really good report on that either. I’ve personally had the highest engagement at 15%.. but that was about animal abuse, so i wouldn’t expect the same from all verticals per se.

      • Gemma August 8, 2014 at 4:42 am

        Thanks very much

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