After Google, Facebook is the most popular digital advertising network in the world. Around 22% of all online advertising dollars are spent on Facebook. Russ Ruffino has said that advertising is vital to any business and that Facebook remains one of the best advertising platforms.
Although Facebook remains a popular advertising network, marketers have expressed some frustrations with it in recent years. Their biggest complaint is that the average ROI has slipped. The Cambridge Analytics scandal played a role, but increased bids due to higher competition was also a factor.
Some advertisers have become skittish about the rising CPM on Facebook. They may want to keep their bids low so they can have a high ROI. I understand the temptation.
However, this is usually a poor strategy. Marketing expert Russ Ruffino points out that it is important to find the right clients, rather than getting as many as possible. We agree with this assessment and our analysis suggests it is easier to reach the right clients with a higher Facebook bidding strategy.
Don’t cripple your Facebook advertising strategy chasing low bids
We are fans of the strategy that Russ Ruffino developed. However, it seems to work better if you are more aggressive with your bids.
You might think that you should sacrifice visibility in exchange for a lower CPM, but this is usually counterproductive. Here are some reasons that bidding low is not an optimal strategy.
You might not get any traffic at all
There are three different factors that Facebook takes into consideration when showing ads:
- Your bid
- Your relevance score
- Your estimated action rates
If you are familiar with Google AdWords, then you know that it has a quality score. You might be able to get your ads to rank higher with a lower bid, as long as you have a good quality score. The same principle applies to Facebook advertising.
However, you can’t expect to get a massive amount of traffic with the $0.20 bid, regardless of the quality of your ads. If you don’t have an exceptional relevance score, then you might not get any traffic at all by bidding near the minimum.
You won’t be able to reach a targeted audience with low bids
As a general rule, you will have to pay higher bids for stricter targeting. You can only get away with low bids if you are using a very generic branding strategy that appeals to a broad range of customers.
There are plenty of other advertising networks to use if you want to cast a wide net. The beauty of Facebook is that you can target customers very specifically. You will have more profitable campaigns if you take advantage of its targeting capabilities, but that will mean you need to pay higher CPMs.
This is the most important reason to bid high on Facebook. He states that you shouldn’t just be focused on getting attention from any potential clients. Russ Ruffino says want to get attention from the right clients. You will need to pay a premium to reach them, especially on Facebook.
Your conversion rates might suffer
Even if you are able to get traffic with low bids, that does not mean that you will be happy with the quality of it. Advertisers that bid higher tend to receive higher conversion rates.
There are a couple of reasons for this:
- Users are going to see the ads of the highest bidding advertisers first. If those ads come from your competitors, they might convert with them before seeing your ad. The problem they were seeking a solution to might has been solved by the time your ad is shown. This problem is likely to be even more common for advertisers using Facebook‘s new search bidding product because they will be bidding directly against their competitors for users with a high level of purchase intent.
- Users may suffer from “banner blindness” after they have been using the site for a couple of hours. Even if they haven’t been exposed to any competitor ads, they might be more likely to tune your ads out then if you had shown them earlier.
Smartly has a handy chart that helps illustrate this. It shows a scenario of an advertiser bidding for conversions with a $50 average profit. As the chart illustrates, your CPA will be under $50 if you use the maximum bid. This means that all of your conversions would be profitable. On the other hand, if you use the average bid, some of your conversions would cost more than $50.
Russ Ruffino makes a good point about using Facebook ads to push higher payout offers. He points out that you can earn back your investment more quickly this way. We find his lesson is true even more today, when Facebook bids are higher than ever. Fortunately, you can still earn a great ROI from Facebook ads if you get a great conversion rate on a high payout offer, even if your bids are high.
Your brand reach might stagnate
You might think that any visibility is going to help. As long as you get some impressions, you will have a stronger brand image. Right?
Unfortunately, that is not the case. You can’t just consider the amount of exposure your brand is receiving. You must also consider your brand reach relative to your competitors. You will be losing a lot of ground if you are only getting attention from 10% of your target visitors on Facebook, while your top competitor is getting visibility with 80%.