It seems that after the whole Cambridge Analytica situation Facebook is starting to be more transparent in regards to how their algorithm works. Which is good for both the users of the platform and all of us marketers. The better we understand how the algorithm works the better we can create ads that resonate with our intended audience.
Facebook’s goal is to make ads as relevant as possible to their users. As much as some users don’t like seeing ads, they would rather see ads that are relevant to them than ones that aren’t. So let’s dig into the 3 big fundamentals that play into who sees what on Facebook.
There are several different optimization options for Facebook ads, you can do landing page views, engagement, conversions, etc. The one that I’ve consistently found to provide the best ROI is conversions. (Shocking, I know…) So this bidding info is specifically for Conversion Optimized campaigns.
Bidding options: You can do auto-bid (what FB calls Lowest Cost), Target Cost, or Max Bid (what they now call Lowest Cost w/bid cap).
a. Auto Bid/Lowest Cost Bidding: really allows you to leverage Facebook’s algorithm. This bidding style will come shooting out of the gate targeting those in your audience that the algo thinks will buy for the cheapest rate. This is why you may notice when you launch campaigns that they will often times perform really well in the beginning then fall off after a couple of days. This is because the audience exhausted itself of the low hanging fruit and is now focusing on people that aren’t as likely to buy. This is why duplicating an ad after a few days will often give you good results again after the original stopped working.
Summary – Auto Bid/Lowest Cost bidding is still the best option.
b. Target Cost Bidding: in this strategy, you can tell FB that you want to have a CPA of $20. What they do is take out all of the people that they think will be significantly higher than $20 and significantly lower than $20. This causes your impressions to be SUPER low and your ads won’t go after the lowing hanging fruit because you told the algo “No I don’t want those people.” I know, it sounds silly that it would do that, but the word on the street is that it does. After testing out this method on various campaigns I’ve noticed that indeed impressions are way lower than campaigns that are using Lowest Cost bidding. Conversions are also really hit or miss with Target Cost campaigns. I wouldn’t do them again until someone says they algo changed.
Summary – don’t use Target Cost bidding.
c. Max Bid/Lowest Cost with Bid Cap: this bid strategy is somewhat useful if you’re on a budget. It tells FB “Hey go after the low hanging fruit, but I don’t want to spend more than X to get a customer” which is good. What this does though, is it limits your impressions after a certain point because someone that is using Auto Bid/Lowest Cost bidding without a bid cap is outbidding you for impressions.
Summary – Max Bid/Lowest Cost with a bid cap is great for those on a budget. Your ads won’t scale as much as those without a bid cap but this gives you a good chance at being profitable.
Bidding Summary – Your best bet to create scalable campaigns is to just let Facebook’s algorithm work and use Auto Bid/Lowest Cost (the default bid). This allows you to continue to win the bidding auctions which makes your ads keep showing up. To extend the shelf life of your ads start using FB’s dynamic creative function. This will show ads to the people Facebook thinks are most likely to buy from you more often as the creative will keep switching dynamically.
2. Estimated Action Rate
The 2nd big part of the algo is the estimated action rate. Things that play into it:
- Recent ad activity
- What type of people clicked, engaged, purchased in the past
- Page activity – how healthy and active is the page? Does it benefit FB/IG users?
- Is the page actively posting
- Age of the page
- Does the page get a lot of engagement with their posts
- Does the page reply to comments quickly
- Has the page been hacked recently? (If so, you’ll have higher CPMs for a bit)
Your past ad activity plays a big role in who your ads show up too – the more purchases and webstie events the FB pixel sees the better. Your organic page itself also plays a big role, so the more active and healthy your page is the lower your advertising costs will be. Facebook is about giving users the best experience possible so if you’re adding to that experience they will reward you.
3. User Value
Facebook has recently said that they have an Ad Quality Panel. This is a 3rd party, outside of Facebook, that looks at and reviews ads giving them a score. These people aren’t digital marketers, they are actual users of the platform giving out the grades. Think of people in there 30’s – 50’s that aren’t too tech savvy. So it is really important that when you make an ad you look at it and ask yourself if you truly think the campaign is going to resonate, will your audience actually be interested in what you’re promoting? Make ads that resonate and you will get a higher grade which means more impressions at a cheaper rate, giving you better performance.
Another thing the algorithm looks at now is the post-click experience. The biggest factor I was told was the bounce rate, if someone clicks your ad, gets to your landing page and instantly leaves your website Facebook is going start docking you impressions (and most likely raise your CPM) because it thinks by users doing this the page you are sending them too isn’t relevant. This means, now more than ever, it’s time to have a good site experience that makes people want to stay, click around, and eventually make a purchase. As marketers, we often care so much about the creative, copy, and targeting we use in ads that we push our site experience off to the side. Our ads could be perfect (creative, targeting, copy) but if we’re sending them to a shit landing page we’re gonna be wasting money. This was true in the past but now we know Facebook is taking notice, so if your landing pages suck, fix them.
Optimize your ads for conversions (unless you don’t get many sales, then landing page views) and use the default Auto Bid/Lowest cost bidding without a bid cap. You can use a bid cap if you’re on a budget. Never use Target Cost bidding, unless you’re a fearless bastard that likes to gamble. Constantly be creating new ads and use the dynamic creative feature. Keep your organic pages active and engaging, respond to customer comments; give people a good experience and Facebook will reward you for it with better ad performance (lower CPM’s). After every ad you make ask yourself “Will this actually resonate with my intended audience? Is this something they’ll want to see?” If not, make a new ad. Also, make sure your landing pages are good and people don’t bounce/leave right away. The longer they stay on your site and the more they engage with it the better you’ll look to Facebook. That’s what I know about the algorithm from the horses mouth. If you know anything else that I should add let me know!