00:04We learned earlier that Facebook uses a competitive auction based on Advertiser Bid, an estimated
00:09auction rate in the aid quality, to determine the best aid to show to a person at any given
00:15point in time.
00:16Let's now take a closer look at the Advertiser Bid part of the equation.
00:21And this is the amount an advertiser willing to pay for someone in their target audience
00:26to achieve a specific result, like a customer visiting their website, downloading their
00:31apps or sign up for their newsletters.
00:34Your Advertiser Bid is determined by how much you are willing to spend in your campaign budget.
00:40Let's talk about how to optimize your bid.
00:43Your campaign's long-term success relies on not spending more than advertising than you
00:48make in profit, which we learned in previous lesson.
00:50So, it's important to never bid more than the action you're trying to get a customer
00:55to take is worth to you.
00:58And that's why it's a good idea to only bid up to the true value of an action.
01:03Let's think about the flower business, Kala in Ivy.
01:07Imagine that Imra, the owner, planned a campaign to generate sales for new flowers craft kit
01:13she just added to the website.
01:15Imra knows that she make $20 in profit on every flower kit sale.
01:20And she also knows that people who buy a flower kit often become repeat customer of her.
01:26And the basis of this information, Imra decided that every flower kit purchase is worth a bit
01:32over $20 to her accounting for those potential future sales.
01:36She decides she bid $15 in the action for conversion focus campaign.
01:42It's under $20 and it leaves a bit of potential profit for her.
01:47In addition to choosing what your bid should be, you also have to let Facebook know how
01:53you want them to bid for you in the aid auction.
01:56And to do that, you have to choose a bid strategy.
02:00Sound complicated?
02:01Well, don't worry, Facebook has a tool to help.
02:04When setting up your budget and selecting campaign budget optimization, you can choose
02:10one of multiple campaign bid strategies.
02:13If you are just starting out and want to get a sense of how much it will cost you to
02:19get
02:19a specific result, like an app download, we recommend you go with the default bid strategy
02:24called lowest cost.
02:26The lowest cost bid strategy tells Facebook to bid with the goal of getting you the lowest
02:32possible cost per desired action, while also spending your entire budget by the end of
02:38the campaign.
02:40It means you won't have to set a bid as Facebook will use its machine learning tools to spend
02:46your whole budget as effectively as possible.
02:49Let me show you how you can think of this.
02:52So every time you set up a campaign, you determine a time for which your campaign will be running.
02:58You also specify who you want to target with your aids.
03:02Over the time of your campaign, there will be many opportunities to put an aid in front of
03:07your target audience.
03:08And let's represent those opportunities with dots.
03:11These opportunities will have a different price depending on how many advertisers are competing
03:18for this opportunity.
03:20In other words, it will be more expensive to put an aid in front of your target audience.
03:25If more advertisers are bidding for the opportunity to put an aid in front of that same target
03:31audience.
03:33The lowest cost bid strategy is by identifying the cheapest opportunities to place your aid while
03:39still achieving your result in the time frame you set.
03:42While the lowest cost bid strategy can produce cost that fluctuate more.
03:47Facebook still aims to get you the lowest cost result available.
03:51If over the time of your campaign, auction competition decreases, cost may go down.
03:57If auction competition increases, cost may go up.
04:00The lowest cost bid strategy takes all the data into account when placing your aid and it helps
04:07you get the most result for your budget.
04:10It also means by the end of your campaign, you will have a better idea of the lowest likely
04:15amount that you can spend to get a specific action.
04:19And it will make it easier to plan your campaign budget moving forward.
04:24The lowest cost bid strategy can be a very good choice if you have a limited budget and want
04:30to achieve as many results as possible for their budget.
04:33Let's go back to Caroline Ivy.
04:35When Emra opened up a new pop-up store in Amsterdam and set up an aid campaign to reach people
04:41locally
04:41to generate awareness of the new location.
04:44The lowest cost bid strategy was the strategy she used.
04:49She had a limited budget to market the new store.
04:53And she wanted to reach as many people as possible for their budget.
04:57The lowest cost bid strategy achieved that for her.
05:01Once you have more experience in advertising on Facebook and want tighter control of your
05:06bids and cost, you may want to have a look at other bidding strategies that you can choose
05:12from the drop-down menu.
05:14It is important to note that the more precisely you control your aid placements, the more constraints
05:21you place on Facebook delivery system to achieve the lowest costs.
05:25And this means that all of your budget may be spent and you may lose out less expensive
05:30action as a result.
05:33Let's now briefly go over the other bid strategies.
05:36They do give you more control.
05:37The three bid strategies Facebook offers are called Low Waste Cost, Cost Cap and Bid Cap.
05:43And we just talk about Low Waste Cost and we will not go over Cost Cap.
05:47The Cost Cap Bid strategy allows you to set an average amount you are willing to pay for
05:52a desired outcome.
05:54Like a conversion or your website.
05:56This amount is known as Cost Control.
05:59The Facebook delivery system will try to stay under this average amount while still getting
06:05you the lowest cost actions.
06:07Cost Control apply to your average cost per desired outcome.
06:11And this bid types go after the cheaper result first and then the expensive opportunities.
06:17And some of the opportunities cost more than your cost control.
06:20But Facebook may still go after them because others were sufficiently below.
06:26In other words, they will go after the cheapest result first but will go after more expensive
06:31opportunities once they have exhausted all the cheaper ones.
06:35And over the lifetime of your 8 set, your average cost should be at below your cost cap amount.
06:42This bid type is best when you want to maximize cost efficiency but also need to keep cost within
06:48a specific threshold.
06:50And given the cost control you have set, you also may not spend your entire budget with this
06:56bid type.
06:56And these are the main differentiator between Cost Cap and the lowest cost bid type.
07:02Here is an example for Kala in Ivy where the cost cap bid strategy is a good choice.
07:08Emra has a website where people can buy her hand-bound bucket, enroll in a subscription
07:14service and find the flower craft boxes.
07:17The website is relatively new and Emra is interested in attracting visitors to it.
07:23Emra knows that some of the advertisers will ultimately buy something but not all of them.
07:28She calculated that on average, a visit to her page is worth about $2 to her.
07:34So when setting up an ad campaign to generate more page visits, Emra decided to use the cost
07:40cap strategy with a $2 cost control.
07:43This allows her to maximize the number of page visits for her budget while keeping the average
07:49cost per page visit at $2.
07:50The final bid strategy is called bid cap and it works a bit differently.
07:56While the cost cap strategy control for the average cost per desired outcome over time,
08:01the bid cap strategy limit what Facebook can bid on every single option.
08:06For this bid type, you set what call a bid control and Facebook will aim to get the most result
08:12for you without bidding more than your bid control.
08:15This means that if you set a bid control of $5 and 100 optimization events become available
08:22for bid at $5.01, Facebook won't enter your bid into those options to try to get them.
08:30In comparison, we would likely to go after all of them if we had chosen the cost cap strategy
08:36and set of cost control of $5 and we recommend bid control over cost control only if you must
08:43tightly control the cost for every single optimization event you get.
08:47You can set your maximum bid under the bid control in the optimization and delivery section at the
08:53ad set level.
08:55And here is an example if when the bid cap bid strategy might be a good choice for Kala in
09:01the IV.
09:02Remember how Emrah knows what for every flower and craft boxes she sell online she make $20
09:09in profit.
09:10Well, Emrah decided that she really doesn't want to have a lose money on the sale of these
09:15boxes.
09:16She believes that at this point her business cannot really deal with the loss.
09:21So she decided to use a bid cap bid strategy for her campaign focus on sales for these boxes.
09:28She said her bid cap at $20 so Facebook will not pursue any conversion more costly than
09:35$20.
09:36And that way she knows that she won't be selling any of these boxes at loss.
09:41Alright, that was a lot to cover.
09:44For now we recommend sticking with the lowest cost.
09:47And that way Facebook will spend our whole budget as effectively as possible.
09:51And once we have better sense of how our brand and product are performing for a given audience
09:57and we increase budget we might want to consider switching to one of the other 2 bid strategies.
10:04Ok, see you in the next video.
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