Roulette is different from Russian Roulette
The Logic of Risk Taking
If you do not have time for Taleb's Incerto, read this post. It is the foundation of his thinking and a key insight between what he classifies as an ensemble risk, time-based risk, and ergodicity.
"We saw with the earlier comment by Warren Buffett that, literally, anyone who survived in the risk-taking business has a version of “in order to succeed, you must first survive.” My own version has been: “never cross a river if it is on average four feet deep.” I effectively organized all my life around the point that sequence matters..."
Why does Taleb focus on sequence and average? Because he understands the importance of fat tails. Our brains do a poor job of understanding systems with extremes. Taleb, who popularized the term Black Swan, has made a career in betting on extremes. Understanding that repeatability of exposure means a movement away from a normal curve into a system of fat tail risks is important when considering your options.
Remember 4 weeks ago where everyone could predict the market?
"Now, when you read material by finance professors, finance gurus or your local bank making investment recommendations based on the long term returns of the market, beware. Even if their forecast were true (it isn’t), no person can get the returns of the market unless he has infinite pockets and no uncle points"
Gamble on a Group, Not Yourself
This leads to one of his most famous examples ever given, one of Russian Roulette. It provides a visceral understanding between two types of risk Ensemble and Time-Based risk. Think of Ensemble Risk as the risk on the group of individuals. The second type of risk is Time-Based which is the risk from the view of an individual within the group.
Russian Roulette, much like life, is not ergodic as the individual dies at the end after 1 failure. Most predictions made by theorists you see in the world pretend that ensemble and time-based risk are equal...which is incorrect.
"The central problem is that if there is a possibility of ruin, cost-benefit analyses are no longer possible.
Consider a more extreme example than the Casino experiment. Assume a collection of people play Russian Roulette a single time for a million dollars –this is the central story in Fooled by Randomness. About five out of six will make money. If someone used a standard cost-benefit analysis, he would have claimed that one has 83.33% chance of gains, for an “expected” average return per shot of $833,333. But if you played Russian roulette more than once, you are deemed to end up in the cemetery. Your expected return is … not computable."
What Does This Mean For Advertising
We admit this article is heady. We believe that having a fundamental understanding of how to value the true risk in a situation is paramount for success in life, investing, and even in advertising. With 7MM advertisers on Facebook all vying for roughly the same audience, you have to take some risks to stand out from the herd.
Does your brand need a refresh to stand out? Should you expand your attribution window or include view based conversions? Are you running ROI for profit or for growth? Should you invest in non-standard digital channels that have weaker tracking but potentially stronger virality or EMV potential?
All these decisions have an associated risk and the market winners (those Disruptor companies we all know and love) are the companies that can take on the right kind of risk, survive, and thrive. Our previous write up on Asymmetric Risk, Issue 002, was highly inspired by Taleb's view of the world and is a good double-click if you find this topic compelling.
At the end of the day, we all have to take risks. The key to success is judging what risks to take in life...just be careful of rivers that are on average 4 feet deep.
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This write up is part 2 in the series we call Adventures in Significance. After running 257 lift studies across 30+ different clients in our past, we thought it would be helpful to write a series on common mistakes and how to avoid them. This is a dreaded subject by many but is core to the direct response advertising world. We thought we could do our part with a round-up of our favorite opinions on the subject and how this applies to your business.
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Thanks to Macau Photo Agency 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.
