Facebook advertising bid types explained
CPC, CPM, oCPM or CPA? Which one do you choose? When do you choose it? And how do you set it up? Although I am in no position of telling you exactly which one is right for you, I’d like to offer a breakdown on how they work - which hopefully can help you make better decisions for your next Facebook campaign.
Did you know that the bid you set in the ad auction can be configured in more than 50 ways - not taking the actual bid amount into regard?
The reason behind this is the way Facebook’s oCPM and CPA bidding is constructed. I’m going to discuss them in detail in this post, but I’d first like to quickly run through how CPC and CPM works.
CPC & CPM: The “classic” bid types
As you most likely know, CPC is short for cost per click. It means you bid how much you’re willing to pay for a click, and you’re charged on a per click basis.
CPM is short for cost per mille, which translates to cost per thousand impressions. Your bid indicates how much you’re willing to pay to have your ad delivered 1,000 times, and you’re charged for the amount of times your ad has been delivered.
CPM is the most straightforward bid type Facebook has to offer. It’s the only type where Facebook doesn’t skew the delivery of your ads towards a certain group within your target audience.
What I mean by this is easiest explained by going through how CPC works. When bidding CPC, you’ve effectively told Facebook you’re looking for clicks on your ads. The ad delivery mechanism will therefore look at your target audience and deliver your ads to those people that are more likely to click it than others.
For CPM on the other hand, all you’ve told Facebook is that you’re willing to have your ad delivered to the target audience, so Facebook will do exactly that.
oCPM & CPA: Objective based bidding
Unlike CPM bidding, you are always telling Facebook what you’re after when bidding oCPM or CPA. This can be certain actions you’re interested in (such as Offer claims or Page likes) or other values (such as Reach).
Let's start by taking a look at oCPM:
oCPM is short for Optimized CPM, and the name reflects how it works. Just like in the case of CPM you pay for the amount of times your ad has been delivered (its impressions), but the delivery is optimised by Facebook to meet an objective set by you.
For example, say you choose bid type oCPM and set your objective to Reach. Facebook will then charge you based on how many times your ad is displayed to people in your target audience, and will distribute the delivery of the ad to reach as many people within your audience as possible.
If you on the other hand choose to optimise for clicks, Facebook will deliver your ad to people likely to click on your ad, but still charge you based on how many times it was delivered.
Then there is the option to optimise for certain actions, and this is where it gets complicated. This is due to the nature of an action, which has quite a broad definition.
An action can be, for example:
- Page like
- Offer claim
- Post like
- Event RSVP
- Video play
- Post comment
- App install
- Mobile app install
- Post share
And it goes on. In order for Facebook to know what kind of action you’re interested in it looks at something called the ad’s conversion spec. I’m not going to discuss that in detail, but think of it as a piece of information that lets Facebook’s ad delivery mechanism know what to optimise your ad’s delivery for.
When bidding oCPM and optimising for actions the conversion spec will therefore differ depending on what kind of ad you’re running. If you’re running ads for a Facebook Page for example, your conversion spec will tell Facebook to optimise for likes of that Page, and if you're running ads for an Event it will tell Facebook to optimise for RSVPs.
The default conversion spec varies quite a lot with the ad, and to learn more about the details I recommend looking at the Facebook Ads API documentation.
What’s good to know however is that depending on your ad type, optimising for actions will mean different things.
Moving on to CPA:
CPA is short for cost per action and with this bid type you pay for the actual actions your ad results in. You also place a bid indicating how much you’re willing to pay (at max) for the given action.
You can think of CPA bidding as affiliate marketing where you pay the affiliate each time they deliver a conversion, but in this case you pay Facebook each time they deliver an action of the type that you are bidding for.
Just like with oCPM, ads with CPA bidding have a conversion spec. Conversion specs for CPA is more restricted than for oCPM however, meaning that you only have a limited amount of actions to bid and optimise for.
At the time of this writing, Facebook offers four different types of actions for CPA bidding:
- Page Likes
- Offer Claims
- Offsite Link Clicks
- Mobile App Installs
Furthermore this means that CPA bidding is only available for certain ad types - namely ads that are designed to drive these kinds of actions.
Breaking down your possibilities
It seems most of my Qwaya blog posts of late end up in some form of matrix, and so does this one. In an attempt to provide an overview of what the different bid types mean I’ve put together this:
So when to use which?
Provided that you want assistance from Facebook in reaching your objective, oCPM provides the by far greatest flexibility.
If you’re concerned with controlling your costs, CPC or CPA is probably the way forward.
Lastly, if you’re a hardcore Facebook ad optimiser that want full control over every aspect of your ads, CPM is really the only option. If this sounds counterintuitive I strongly recommend this article (although it’s a few years old): Finch Sells: Facebook CPC vs. Facebook CPM.
I hope this overview has been of some use. Please let me know in the comments if you think I've missed something or have any questions!
To learn more details about oCPM bidding for Facebook pixel conversions, see our blog post on the topic.
Connect with Sven on Twitter: @svenhamberg