Beyond CPM and CPC: Unlocking the Power of Facebook Ads

10+ Million Advertisers Use Facebook Ads

Most of them don't understand how the platform optimizes.

I've been doing it since 2008, here's what they're missing:

I've been saying things like "CPMs don't matter" for a while. 

On an unoptimized ad platform where you bid for CPM or CPC, the auction is purely based on bids and inventory, increasing your CTR or decreasing your CPM  typically improves everything: CPC, CVR, and CPA.

On an optimized platform, it doesn't work that way.

Meta (and other optimized platforms) doesn't deliver evenly across placements, ages, genders, devices, locations, or other attributes.

They deliver based on relevance,(estimated) ability to achieve the desired action, auction competition, and bid.

If you have a variety of ads, you can see that some ads will deliver more to older users, others to younger.

Some ads will deliver more in feeds, others in stories.

This variance is at the ad level, not the ad set, account, or page.

You'll also notice that each variable will also have its quirks and intricacies.

• Older users might click more than younger ones.
• Women might watch videos longer than men.
• Desktop feed users might be more likely to convert than mobile.

Some placements naturally have higher CTRs, while others naturally have lower ones.

Some locations have more available inventory while others are more competitive.

The algorithm is optimizing around supply and demand. 

The more users (inventory) available, the cheaper that variable can be, but the more competition for that variable, the more expensive it will cost.

Desktop feed users might be more likely to convert.

So then why not spend more there?

The inventory is limited and there's more competition, so it's more expensive to get those more valuable clicks.

The algorithm optimizes for this automatically. The more you spend, the more your costs will increase. Spending more means competing in more auctions.

Facebook wants to show users better and more relevant content. You get a discount for that. More relevant ads can win ad auctions at lower costs.

This relevance isn't a static metric.  Relevance is a dynamic concept.  Each ad can be more or less relevant to different swaths of users in your audience.

This is why people say "target with your creative"

To make things more complicated, each variable is overlapping with the others. It's impossible to isolate and interpret their individual performance.

For example:

Older men in California watching IG Reels on iPhones VS Younger women in Nebraska on FB on desktop computers

You couldn't accurately assess which one of those would have better performance because you can't break down the data that granularly. 

You can't know how the users act, how relevant the ads are, or what the competition is like for each, but the algo can.

Reminder: you're competing with local, city, state, national, and global advertisers for every impression.

Same goes for placements and other attributes.

You're competing for attention with other types of advertisers who aren't optimizing for the same objective as you.

Every ad can deliver more or less to a different portion of a targeted audience based on relevance, action rate, auction competition, and more factors. 

CPC, CPM, CTR, CVR, hook rates, etc are all dependent on those variables and relevance to the audience. The algorithm is trying to get you the most efficient conversions regardless of these secondary metrics.

Ad A might hit the goal CPA by going after a larger and cheaper less relevant audience.

Ad B might hit the same goal CPA by going after a smaller and more expensive but more relevant audience.

The CPM/CPC/etc metrics will be different for each (and you shouldn't dwell on them).

As an example, let's compare women 45-54 vs men 25-34:

• Are there even numbers of those users on the ad platform? No.
• Are the same number of other advertisers targeting those users? No.
• Are your ads similarly relevant to the same amount of those users? No!
• Will you see identical CPCs or CPMs for those users? No.
• Will you see identical CTRs or Hook Rates for those users? No.
• Will you see identical CVRs and AOVs for those users? No.
• Can you expect to have a similar CPA for those users? YES!

         (but maybe not at the same scale)

The algorithm will distribute the budget according to how it can hit the lowest CPA.

Sure, you can "target with your creative" but you can't control who it resonates with or which audiences are more  

Maybe you made an ad for men 25-40 in cities, but it might resonate better with women 65+ in suburbs or that's where it can be delivered most effectively.

If your ads are more relevant to men 25-34, but the women 45-54 audience has less competition, the algorithm might deliver more of your budget to the women 45-54 audience because it can get an overall better CPA.

If you're trying to get a $25 CPA and your CPC is $8, that's a bad sign that you're getting a lot of things wrong. 

Also, if you're using 7dc1dv attribution and see a $8 CPC and ~$25 CPA, there's a good chance FB is delivering to users already in the funnel and those are non-incremental view conversions.

If you believe that cheaper CPMs and cheaper CPCs lead to cheaper CPAs on FB, then you'll optimize accordingly and you'll spend more on ads with lower CPCs. At scale, your data will support your own stance.

Each swath of users act differently, have different auction competition, and we relate differently to your content.

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