In a competitive marketplace like Facebook, similar to most online marketing mediums, the highest bidder gets to showcase it’s ad to the end user. In a market this competitive, you have to not only put in a sizable amount of money but you also need to know who you want your target audience to be.

Advertisers have to compete with other advertisers to show their target audience their ads by specifying how much they’re willing to pay up for that particular ad space. The higher you bid, the higher the chances of you outbidding everyone else.

Bid strategies are a way to choose your spending budget and get to showcase your ad to your desired target audience. The bid strategy you choose tells Facebook how to bid for your ad space in ad auctions.

If you fall short to place the correct bids, there are two outcomes:

1) You might end up paying more than required for your ad.
2) You might not be able to showcase your ads due to low ad bids.

Choosing the correct bid strategy:

The following are the types of bidding strategies available to us as an advertiser.

1) Lowest cost without bid cap
2) Lowest cost with bid
3) Target cost
4) Cost cap
5) Lowest cost with minimum ROAS

Lowest Cost without Bid Cap:

The name is somewhat deceitful as the “lowest cost” method can still lead to a sizable bill. This bid strategy is targeted for advertisers who need help from Facebook themselves. The bid here is set by Facebook. Hence, it’s also called “Lowest cost (auto bid)” at times.

The way lowest cost works is very straightforward. The advertiser has to specify how many people they want their ad to reach. Facebook will then start automatically bidding for those ads and make sure that your ads are reaching the specified number of target audiences. It’s major benefit is that it reaches all lowest cost opportunities when your budget is being spent.

This strategy is mainly used when you are ready to commit to getting that ad space for “n” number of users. You have no control over the costing. Facebook does the bidding for you and hence costs can rise as the least expensive options start to get exhausted. As this does not have a fixed monthly budget, your monthly costs can shift a lot due to this which might not be appealing to most advertisers.

Lowest Cost with Bid Cap:

If the advertiser wants to keep his budget in check, this is the way to do it. Lowest cost with a bid cap helps you target the audience in a way similar to Lowest Cost but with the added benefit of being able to set a budget restriction. 

This mainly is used as a way to ensure we do not run out of money while running the ad campaigns. Advertisers who want to stick to a monthly budget usually choose to opt for lowest cost with a bid cap. The objective is to maximize volume at their specified maximum bid amount.

You can set how much you’re willing to bid for each “cost per action” and keep your budget in a specified limit. This strategy is advisable to the advertisers who are able to assess how much each conversion is worth. Example: Advertisers wouldn’t want spending $5 for a customer who’s generating only $3.

Target Cost:

Target cost is the most practical of these bidding strategies. This is used when advertisers want to keep a consistent cost every month. However, target cost requires you to have utmost understanding of your objectives. 

Target cost requires you choose something that Facebook can measure quite easily. This can be app downloads, lead generation, conversions or catalogues. Then the advertiser needs to set an average cost  per result. These results can be anything of the 4 mentioned above (i.e  downloads, lead generation, conversions or catalogues).

Choosing an average cost per result is different from setting a bid cap. Here, in certain situations, Facebook is permitted to offer a little more than the set average cost on behalf of the advertiser. It can also choose to offer less than the set average amount if it feels the need to do so.

The purpose of this strategy is to give the advertiser more control over how their money is being spent. Of course this needs the advertiser to have a lot more information about their objectives. The major benefit of target cost is it gets the most conversions possible at the targeted cost. A major con of this however is that it causes you to lose out on the cheaper results and sometimes it does not spend the entire amount you put in into your campaign.

Cost Cap:

Cost cap is used when the advertiser wants to maximise conversion volume within their accepted CPA( cost per action). It aims to provide the most conversions at the advertiser’s maximum cap or below it. Cost cap provides more flexibility over Bid cap. Advertisers can set the cost cap bids to the maximum amount they might want to pay per impression.

However, the cost cap requires a lot more understanding of how much each action is worth. It can cause the costs to rise as the cheaper options start to fizzle out and it might not end up under spending your budget once it hits the cap.

Lowest cost with minimum ROAS:
ROAS stands for “return on advertiser spending”. This bidding option is only available with the optimization goal set as “value” and the ad account needs to have access to “value optimisation” option.It maximizes the returns on Ad spend which is based on your conversion events. The higher the ROAS target you set, the higher the expected returns and therefore lower the delivery. So advertisers should be beware that setting the benchmark too high will lead to under-delivery. When a lower ROAS is set, it gives Facebook more room to scale the delivery up.

To set the bid strategy when creating an ad set:

 curl \
-F ‘name=My Ad Set Name’ \

  -F ‘optimization_goal=<Optimisation_Goal>’ \
 -F ‘billing_event=<Event_Type>’ 
 -F ‘bid_strategy=<Strategy>’
 -F ‘bid_amount=<int>’ \
 -F ‘daily_budget=<int>’ \
 -F ‘campaign_id=<int_Campaign_ID>’ \
 -F ‘targeting={“geo_locations”:{<Enter country, state, city or pincode>}’ \
 -F ‘status=PAUSED’ \
 -F ‘access_token=<ACCESS_TOKEN>’ \
  https://graph.facebook.com/<VERSION>/act_<AD_ACCOUNT_ID>/adsets

To read the bid strategy of an existing adset:

  -d 'fields=bid_strategy' \
  -d 'access_token=<ACCESS_TOKEN>' \
  https://graph.facebook.com/<VERSION>/<AD_SET_ID>

To update an adset’s bid strategy along with it’s bid amount:

curl
  -F ‘bid_strategy=<new_stratergy_name>’ \
  -F ‘bid_amount=<int>’ \
  -F ‘access_token=<ACCESS_TOKEN>’ \
  https://graph.facebook.com/<VERSION>/<AD_SET_ID>

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