~Davor Debrecin~

The SECRET to bidding CPC or CPM on Facebook

Hi guys, how's it going?

A lot of my subscribers and probably all Facebook advertisers have a hard time with choosing between bidding on CPC or bidding on CPM.

In this short post I'll try and demistify this and give you guys a solid plan to proper bidding for your ads so you can:

• Pay the least per click
• Get the most impressions possible
• Get the highest possible CTR

First – understand Facebook's goals


Facebook has three goals they want to acheive with their advertising platform:

1. Ensure that their user experience is not devalued with ads
Meaning that they don't want people to be annoyed with ads so that they stop using Facebook as a result.
2. Ensure that the ads are as relevant as possible so that they enchance their users' experience.
Meaning they want their users to have a positive experience when they click on ads because that will make them click on ads even more. And do the opposite if they have a bad experience.

These two things bring us to the ultimate Facebook's goal – make the most money possible. Surprising, isn't it?

If they show ads that are relevant and their users have a great experience, then people will click on the ads more. When people click on the ads more, their advertisers will get more traffic and Facebook will earn more money.

Facebook users will be happy and they will use Facebook even more, and so on.

So why is this important to know when deciding how to bid for your ads?
Now I won't talk about your ads' quality, but focus on your decision on bidding per click or per impression.

So, Facebook wants to make the most money possible, but offers its advertisers to pay for their ads per impression and per click.

Does it makes sense for Facebook to price the CPC and CPM bid in such a way that they earn the same amount of money no matter which model advertiser chooses?

Yes.
And that's the key to the whole bidding game and something that enables savvy advertisers to lower their cost per click.

The only way for Facebook to decide how to price CPC and CPM bids so that they make the same amount of money is to look at the average CTR for all the ads currently showing for a perticular target group!

For example, let's say that all advertisers who are showing their ads to people from the US have an average CTR of 0,1%.

This means that on average all ads showed to people from US get clicked once in every 1000 impression.

Now, Facebook knows that on average each advertiser is willing to pay $0.5 per click.

If they want to know how much they will charge an advertiser who wants to pay per impression so that they earn the same money, they just use the information about average CTR to find that out.

Here's how their system „thinks“:

Ok, so we would charge this advertiser $0,5 if he wanted to bid per click. But he wants to be charged per 1000 impressions. Based on our data, most advertisers like this one has a CTR of 0,1%. So we will assume that this advertiser will also have a CTR of 0,1% as this is the average for all advertisers. Ok, so if an advertiser is paying $0,5 per click and has a 0,1% CTR, then his CPM is $0,5x0,1%x1000 = $0.5 we will charge this advertiser $0,5 per 1000 impressions and make the same amount of money.

In other words if an advertiser has an ad that get's clicked once in 1000 impressions and pays for that click $0,5 – it's the same if the advertiser paid $0,5 for thousand impressions!

What if the advertiser pays $0,5 per click and gets 2 clicks out of 1000 impressions, then this is the same as if the advertiser paid $0,4x0,2%x1000 = $1 per thousand impressions! Twice as much.

Finally – how can we use this to our advantage and pay less per click?

So if all advertisers are having a CTR of 0,1%, Facebook will use that to determine the CPM bid.

If your ad has a CTR of 0,2% meaning it's 2x times better than the average, Facebook will STIL offer you to bid as if your ad was like the rest!

This means that by switching to CPM you will pay 2x less per click!
Let's go back to our example.

The average CTR is 0,1% and CPC is $0,5 – based on that Facebook decided it will charge ALL advertisers targeting that group $0,5 CPM! This means you as well!

But your ad has 0,2% CTR, right? If there wasn't an option to pay per CPM, then your CPM would be $1.

But since Facebook has the above mentioned method of determining the CPM bid to charge, by switching to CPM you would pay $0,5 per 1000 impressions – meaning that your average CPC would be $0,25 – 2 times less than if you paid per click!

Is this a way for cheating Facebook?

No!

As I said, if you're ad is twice as better as the average, you're probably in top 1% of the best advertisers. 99% of others will have less performing ads, and they will pay more.

Plus, there are far less savvy advertisers who don't know this and aren't taking advantage of it.

So if Facebook „looses“ money from you it gets more money from the less performing ads and from ads that are paying per click.

Ok, now here's the step-by-step method on how you should bid your ads:

How to bid for your ads - step-by-step

1. Start with CPC and bid your maximum.
2. Make 3-4 ad variations - especially make different images.
3. Then after you get around 20 clicks per ad variation, switch fully to the one that has the highest CTR.
4. To determine if you should switch to CPM, go to Socialbakers.com and then in the top navigation click on "Advertising"
5. It will show you what is the average CPM and CPC bid for each country.
6. Then use the next formula to determine the avg. CTR: avg. CPM / avg. CPC * 0,001% = avg. CTR
7. If your best performing ad is below that avg. CTR then you stick with bidding CPC. If it's above that, then bid on CPM and pay less per click.

That's it!

These are the steps you should follow each time you start a new campaign.

Also, if you see immediately that your ad is performing 5-6 times above average, immediately switch to CPM.

*********************************
Few other tips and tricks

1. Facebook ad's burnout

Facebook ads get burn out quickly. When you see your CTR is starting to drop, change it! Change the image or even better test 4 different new images.

This depends on what's the number of people in your target. If there's 100.000 you're targeting and your ad has been shown 1.000.000 times – it's time to change the ad.

2. Images are the most responsible for how well your ad will perform

I have a free wso (no optin) about facebook ad images that work, so you can check it out to find out what I do to always get above average CTR.

*********************************

Take care guys, hope this will help you!

~Davor

PS: If you have any questions, don't hesitate to ask.

Ti

Facebook does not charge half a dollar per click. I've seen many people be charged $0.05 - $0.08 CPC for $thousands+/mo facebook budgets by simply setting that CPC as the limit.

~Davor Debrecin~

I made those figures up, these are not actual CPCs, CPMs or CTRs.

There are a lot of factors that determine the average CPC, mostly the competition among advertisers.

I forgot to mention that your ACTUAL CPC or CPM will be lower than what you bid if your ad is performing well.

It is possible, but I'm sure they would get much more traffic if they chose CPM (considering their CTR is high) because Facebook would reward them with higher ad exposure.

Also, one very important note - if your ad is below average CTR - keep on CPC!

Take care guys,

~Davor

jsmith2482

I've been advertising online for a year or so now so I'm not a newbie. I've started at CPM as stated in our email. Do you think it's helpful to switch to CPC from CPM at all? What would be the reason why I'd switch to CPC? I have ads on facebook where I paid 7 cents per click on CPM.

Are we assuming that if I switch to CPC that i'll still pay 7 cents per click so my CTR would be higher because I'm not paying per 1000 impressions?

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~Davor Debrecin~

Hey Jimmy!

Stick with CPM - as I said in the email I sent you: if your ads drop in CTR less than average of 0,045% - 0,050% than switch to CPC. If your ads are above that then stick with CPC.

7 cents per click is a very good CPC if you're targeting US, UK and other more competitive countries.

If you want, you can send me your stats and I'll have a look.

Take care,

~Davor

jeffrey73

Oh yes they do, especially in the US you could easily pay that much or MORE. And getting .05 to .08 cent clicks is not easy to do unless you get a VERY HIGH CTR, or advertise where there is no traffic.

They aren't as bad as Google, but they'll get there in time!

kierang

Is there a list of ads that Facebook do not allow. I setup a campaign about penny auctions and they rejected it. Stuffy lot!

mtmjohn

acai/bizopp Rebills, penny auctions

~Davor Debrecin~

That's true.

For example, if you target people who like "ClickBank" you will be suggested a $1,22 CPC and $0,66 CPM.

You'd need a CTR of nearly 1% (20x times better than average) to be paying $0,07 per click by bidding $0,66 CPM. Of course, once your ad is performing better than most others, Facebook will reward you with a smaller CPM so you don't need that kind of CTR, but still - you need to be the best from the rest.

Take care guys,

~Davor

Mike Morgan.

Hi Davor ,

As lots of people are using facebook Ads to promote their CPA offers, I am sure this post would help lots of affiliates.

It is really a nice post …

Now, let me put my comments.

The whole point of this post can be summarized:

Whenever you promote any CPA offers with facebook ads …

1. First you need to use performance based or CPC bidding.
2. Then you optimize your ads until you get high CTR ads.
3. Once you get high CTR ads, you switch is to CPM.

Now, the point that come here is ...

How do you determine whether to shift to CPM? It is simple ...

Let’s Me Show with an Example ...

Let's say that you are paying $0.5 CPC and let's also assume that your CTR is 0.2%. If facebook suggested CPM is 0.3 Cents, Which one would you choose? CPM or CPC.

Here is how you calculate …

If your CTR is 0.2% and CPC is $0.5. Then, for 1000 Impressions, the Projected number of clicks would be 1000 X CTR = 1000 X 0.2% = 2 clicks (from thousand impressions), which means, you are practically paying 2 X $0.5 = 1 $ for thousand impressions (CPM).

Therefore, any suggested CPM price which is less than 1 $ would be acceptable.

For the above case …

If facebook suggested CPM is 0.3 Cents, you would choose CPM

If facebook suggested CPM is 0.8 Cents, you would choose CPM

If facebook suggested CPM is 0.8 Cents, you would choose CPM

If facebook suggested CPM is $1, you would choose CPC (Because CPC is more safe)

If facebook suggested CPM is $1.2, you would choose CPC

Hope it helps.
Mike

jsmith2482

Thanks. Email sent.

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jsmith2482

Davor-
Want to make sure you've received my email.

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jonbennett

Davor, Great Post!

I am a little slow.

I am getting .231 % ctr and paying avg $0.45 cpc for a USA based Campaign

Socialbakers says..

7 United States avg. cpc =$0.68 avg cpm=$0.29

How would I calculate this?

Sorry. I just want to make sure I am figuring this correctly.

Thank You!!!

Wayne OS

Hey Jon i was a bit confused at first but now I understand (I think )

Take the cpm and divide by cpc then multiply by 0.001% then multiply that again by 100 and you have your average ctr

eg. 0.29 / 0.68 = 0.42 x 0.001 x 100 = 0.042 average ctr

Your ctr is way above that so stick with cpm.

MoneyMonster

How can i get about 2000 to 3000 clicks for my facebook ad with just $64..how can i acheive this with cpc or cpm or both & how much i should probably use for my daily budget to acheive this goal...all contributions will be most appreciated as i am a young upcoming internet enterpreneur

WalkerWarrior

You put a lot of effort into that post, Davor. Thank you! And, thank you, Mike, for summarizing. Both posts are great.

Karlos mafias

Hi - Newbie here, thanks for the info its great!
I'm a little stuck as to what to do, my stats are:

197,914 Impressions
83 Clicks
0.042% CTR
CPC $1.11
CPM $0.47

Question is, when I do the calculations within the post, the average NZ CTR is 0.04285 (CPC:$1.47, CPM: $0.63) and my personal CTR is 0.04234.

Is this saying I'm sitting right bang on the average or am I doing something wrong? Also from the posts here it seems I'm paying way too much. Can anyone help clarify this for me
Thanks in advance
Karl

appie

really useful info in here!

msaqib301

you can earn more through it .

Karlos mafias

Hi again, anyone keen to shed some light on this? I'd be keen to hear your thoughts

Alexs2k

Hello everyone, sorry my bad English. :-)

I want to ask on what Davor deduced that by using the CPC, after passing the average CTR, would not get the same good results of the CPM.

thanks :-)

sith005

If I'm understanding correctly you want some clarification about when to move to CPM bidding instead of CPC. This is really a lot more nebulous these days than it was a year go.

First off, check out Mike Morgan's post above for the math, this will give you everything you need to determine the difference in cost on paper.

However, last year Facebook changed the way it served CPM-based ads. In the past, CPC and CPM ads were served in the same places. Thus, if you had a .5% CTR and were paying $.05 per click, you would be paying a total of $.25 for 5 clicks over 1000 impressions.

In this case you most certainly could change to CPM, bid a few cents CPM and get your 5 clicks now for $.05 or less.

However FB has since gone with the idea that CPM bidders' goal is largely to have their ad seen, where as CPC bidders' goal is largely to have their ad clicked at all costs.

CPM-based ads will often be put in worse positions than the same ad with a CPC-based bid (i.e. below the fold, within apps, etc). As a result you will almost always see a decline in your CTR.

That doesn't mean it's not worth it to test, far from it. In fact regardless of everything you read or are told, the only way to know for sure is to test. Just be wise with your budget. It's still possible to go CPM, especially if you're seeing a great CTR and come out ahead of CPC, very possible.

But the opposite is also true. I've personally seen both, where my ROI improved, but also seen my CTR go from ~.4% down to ~.025%, killing my ROI.

My advice would be to test by creating an identical ad and bidding CPM and going from there. CPM bidding will also get you even impressions, so that is another benefit.

Good luck!

Alexs2k

sith005 you are very very kind, thanks a lot :-)

I ask just because I know from my testing that the CPM kills the CTR, then the exact opposite of what Davor said.

Thank a lot, bye

Alex

sith005

No problem bud. This isn't always the case, it depends to be honest (i.e. directing to fan pages or facebook apps, etc) but again, testing both will give you data to make that judgement call.

EpicWin

I personally LOVE facebook and have had some time to really dive deep into the ad platform. I can't wait to get back into it and this guide specifically was very inspiring and gets me pumped up to get into it again!! Now to go make money so I have capital! haha thanks bro!

Travis

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jaiper

I am not an expert, far from it, but if I may offer a comment, I believe your CTR is on the low side, and could be improved. Most people would suggest you try different pictures, results can be amazing. Targeting is another way, but entire WSOs have been written on this, it is far too complex a subject for a post, even if I was qualified to write it

Delarox

Bravo Davor & Mike morgan. Great info from you guys