How Facebook Prints Money
Performance marketing on social is foundational to Dysrupt. As such, it would be tone-deaf to not speak about the #StopHateForProfit campaign.
Currently, 313 companies are participating in the protest including some of the largest advertisers in the world: Unilever, Verizon, Walgreens, Patagonia, Diageo, etc. (Full list here). It is important to note that as we were finishing our write up Facebook posted an updated response addressing the nine recommendations outlined by the Stop Hate For Profit boycott organizers. It will be interesting to see how the boycotting advertisers respond to the Facebook updates.
If Facebook was a TV network, this type of boycott would work extremely well. Unfortunately for these brands Facebook is not a TV network. Facebook has entirely different economics than a TV network for multiple reasons, but the big two that matter in this discussion are that:
- Facebook has an extremely large advertiser demand coupled with self-serve ad buying that can be effective for anyone
- Facebook's auction has no fixed price for an impression and thus rates are dictated by the market
Because of these facts, this boycott by the top advertisers could mean Facebook makes more money - not less.
Huh?
With 8 million active advertisers and $17.74 Billion in revenue in Q1 2020, Facebook has a healthy business and a high level of demand. Furthermore, Facebook's business is driven almost entirely by a self-serve auction that allows the smallest business to compete and consistently win against the largest, most well funded creative agencies and corporations in the world.
This ability for a small business to compete with a large business is driven by an auction that actively subsidizes great ads and penalizes poor ones. This is a core component to Facebook's algorithm - if you make more relevant and engaging content then Facebook will let you win more impressions with lower bids - or if you make bad content then Facebook will require a higher bid in order to win impressions. It's why we feature a Creative Review each week in our newsletter. For anyone wondering why they aren't hitting daily spend limits, look at your creative & site flow.
And yes while all advertisers are welcome and can compete in the auction, in reality the larger advertisers still have more resources at their disposal. They have access to the best creative and strategic agencies in the world, platform teams dedicated to their business, and likely an internal team that knows every nuance and hack to extract the most value out of the auction. And Facebook's auction allows them to pay less for each impression because of this extra work.
Now what happens when that subsidized top tier advertiser leaves the auction?
Stratechery explains one aspect in a recent article, "The news about large CPG companies boycotting Facebook is, from a financial perspective, simply not a big deal. Unilever’s $11.8 million in U.S. ad spend, to take one example, is replaced with the same automated efficiency that Facebook’s timeline ensures you never run out of content. Moreover, while Facebook loses some top-line revenue — in an auction-based system, less demand corresponds to lower prices — the companies that are the most likely to take advantage of those lower prices are those that would not exist without Facebook, like the direct-to-consumer companies trying to steal customers from massive conglomerates like Unilever."
This goes to our first point -- Facebook has relatively unlimited advertiser demand.
Unilever pulling ad spend has no impact on Facebook as the impression share would simply be gobbled up by the next advertiser in-line. There is no upfront or roadblock so Facebook isn't scrambling to fill the inventory space. Essentially all impressions are bid/won dynamically in fractions of a second, every second, of every day.
*And now the bold statement and irony that #StopHateForProfit could actually make Facebook more money.
As we noted above, the impressions won by a top tier advertiser like Unilever mean they are likely paying less than the second-place finisher. The logic goes as follows.
- Unilever drops out of the auction
- There are 8MM other advertisers available to potentially purchase ads in the auction that Unilever was previously beating with stronger creative/tactics and thus having to bid less
- What would have been the second-place finisher in the ad auction will now instead win that impression. They were second because their ads were of lower quality/relevance to the user.
- This new winner will thus pay slightly more for that impression than Unilever would have (all else being equal)
Facebook only loses revenue when people stop using the platform. Fewer impressions to sell means less revenue for Facebook. Though we doubt that's going to happen as Facebook saw a 10% increase in MAU due to COVID. Our bet is that Facebook's next quarterly will once again show record revenue.
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* Article originally written on July 7th for Issue 30 of Weekly Dysrupt
Thanks to Mirza Babic for sharing their work on Unsplash.
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Facebook Ads Bidding Strategies can either make or break your advertising campaign. If you've been struggling with getting the best results, understanding the benefits and drawbacks of each strategy can save you both time and money. The right bidding strategy can help you reach your target audience more effectively and get the most out of your advertising budget.
Each bidding strategy has its unique benefits and challenges. Some are great for maximizing visibility, while others prioritize cost-efficiency. Choosing the right one depends on your specific goals, whether that's more clicks, better engagement, or higher sales. Knowing the pros and cons of each strategy will help you make informed choices that benefit your business.
This article will guide you through five key Facebook Ads Bidding Strategies. You’ll learn about their benefits, drawbacks, and how to pick the one that suits your campaign objectives. By the end, you’ll have a clear understanding of which strategy will help you achieve your advertising goals effectively.
Understanding Facebook Bidding Mechanics
Facebook bidding is essential for advertising success. It involves auctions where advertisers compete for ad placements. Understanding key elements like Auction Dynamics and Different Bidding Strategies is crucial.
Auction Dynamics and How Bids Work
In Facebook's auction, ads compete based on bids, estimated action rates, and ad quality. Bid represents how much you're willing to pay for a specific action (like clicks, views, or conversions). The Cost Per Result adjusts based on competition.
Bid Cap lets advertisers set a maximum bid. This ensures spending control but may limit campaign reach. Meta bidding strategies, like Lowest Cost and Target Cost, help optimize for specific goals, balancing cost and performance.
Factors influencing the auction include:
- Bid amount
- Ad relevance
- Estimated action rates
Exploring Different Bidding Strategies
Advertisers can choose from several Facebook bidding strategies. The Lowest Cost strategy aims to get the most results for the lowest price but may lack spending control. The Cost Cap strategy helps maintain an average cost while driving results.
The Bid Cap strategy is useful for high-control needs, letting you set the max bid per action but it might restrict delivery. Target Cost aims for a stable cost per action, ideal for steady budget planning.
Choosing the right strategy depends on your campaign goals, budget, and desired Cost Per Result. Evaluate each option to find the best fit for your needs.
Implementing Bidding Strategies for Campaign Success
Successful implementation of bidding strategies can drive better results and optimize ad spend. Key factors include setting appropriate bid caps, maximizing returns using ROAS goals, and balancing volume and value.
Setting the Right Bid Cap for Your Campaign
Setting the right bid cap involves determining the maximum amount you are willing to pay for a result. This ensures costs don't exceed the budget. Bid caps can help control spending and improve efficiency.
- Analyze past performance: Review historical data to identify the highest bid that achieved desired results.
- Adjust as needed: Be flexible to change bid caps based on real-time campaign performance.
- Consider the competition: Higher bid caps might be necessary in competitive markets.
Maximizing Returns with ROAS Goals
Use the Return on Ad Spend (ROAS) bid strategy to drive maximum returns. ROAS goals ensure that every dollar spent on ads generates a specific amount of revenue.
- Calculate target ROAS: Set a realistic ROAS based on past campaigns.
- Monitor and tweak: Regularly check ad performance and adjust your ROAS goals to meet revenue targets.
- Balance quality and cost: High ROAS might limit reach, so find a balance between cost and quality.
Balancing Volume and Value in Bidding
Balancing volume and value helps achieve the right mix of reach and profitability. Consider using both Highest Volume and Highest Value strategies.
- Highest Volume: Bids are set to get the most conversions, good for awareness and large-scale campaigns.
- Highest Value: Focuses on getting the highest-value conversions, suitable for targeting high-value customers.
By carefully implementing these strategies, advertisers can meet their campaign goals effectively.
5 Facebook Bidding Strategies: Benefits, Drawbacks, and Selection Guide
Static ads and dynamic ads serve different purposes in the world of marketing. Static ads are simple and stay the same at all times. They are easy to create and can be effective for straightforward messaging. But dynamic ads offer customization, changing their content to fit the audience's preferences and behaviors.
Dynamic ads might seem complicated, but they bring better results by targeting specific groups with personalized messages. This means higher engagement rates and more conversions. Static ads, on the other hand, are less effort to produce but may not capture attention as effectively.
Deciding between static and dynamic ads depends on the brand's goals and resources. Each has its strengths and can be powerful if used appropriately in a marketing strategy.
Understanding Static and Dynamic Ads
Static ads and dynamic ads serve different purposes in digital marketing. Each has unique features and benefits that cater to varied marketing needs.
Exploring Static Image Ads
Static image ads are straightforward. They are typically still images that do not change once created. These ads are ideal for conveying a clear, unchanging message or brand image.
A static image can include text, graphics, and logos, and is often used on websites and social media platforms.
Advantages of Static Images
- Consistency: The message remains the same, which can be useful for brand recognition.
- Simplicity: They are simple to create and often cost less than dynamic ads.
- Predictability: Once the ad goes live, what you see is what you get.
Unpacking Dynamic Advertising
Dynamic ads are more complex. They can change content in real-time based on user data and behavior. Unlike static ads, dynamic ads can alter images, text, and calls to action depending on who is viewing the ad.
Benefits of Dynamic Ads
- Personalization: Content can be tailored to each user, potentially increasing engagement.
- Flexibility: They can show different messages to different audiences without creating multiple ads.
- Efficiency: They adapt to user preferences, making the ad experience more relevant.
Comparative Analysis and Use Cases
Static and dynamic ads offer different benefits and limitations. This comparison will help you understand where and how to use each type effectively in your marketing strategy.
Static Images Vs. Videos
Static images are simple and quick to create. They load faster than videos, which is great for mobile users and slow internet connections. They allow for clear, focused messages without distractions.
Videos, on the other hand, capture attention better with motion and sound. They convey more information in a short time. Videos are more engaging and can demonstrate products or services in action.
Leveraging Opportunities for Static Ads
Static ads are useful in various scenarios. Billboards are a great example, as they need to be read quickly. Print ads in magazines and newspapers also benefit from static images. Online banners are often more effective when static, as they load quickly and are less intrusive.
Static ads are best when the message is straightforward. They work well for short calls to action like "Buy Now" or "Sign Up." Visually, they should be clean and uncluttered to convey the message quickly.
