Would you like to do bid optimization to get higher return on investment in Facebook marketing? If you have a limited budget, there is actually no need to do any manual bid tuning as Facebook has solved that problem already. It is called pacing.
Editor's Note: We wrote about our approach to ad perfomance and bid optimization in a newer blog post here.
Pacing = Bid Optimization
Pacing is a core part of the Facebook automatic optimization which ensures that return on investment (ROI) is maximized for the advertisers. Every Facebook campaign is automatically using the pacing.
How Pacing Works
The bid value that you give for an ad set is actually your maximum bid, not the true bid. Pacing tunes the bid between zero and the maximum bid such that the ad set gets the best results, e.g., the most views, clicks, or conversions based on the goal, with the given budget every day.
Without pacing the ad set would spend the whole budget in the beginning of the day for more expensive ads and miss the better opportunities in the end of the day. Thus by adjusting the bid, pacing maximizes advertiser's profit for a given budget. Note that pacing optimizes the amount of conversions. In most cases that leads to higher ROI and profit. The adjusted bid is not visible to the user.
If your goal is to get the best results with the given budget, the maximum bid does not matter, as far as it is high enough not to limit the pacing. Combined with the Vickrey–Clarke–Groves (VCG) auction mechanism, pacing helps all advertisers to get fair access to their target audience.
The pacing algorithm learns the optimal bid over time. Any manual changes to bids and budgets affect the learning. Due to this, frequent manual changes should be avoided.
Note that also many other aspects affect the bid, such as bidding type, optimization goal selection, and quality score. When these are combined with pacing, the ad set gets the most valuable ads compared to the price.
There are two different cases based on your goals.
1. Limited Budget: Give Me the Best Results
In this case, pacing maximizes the profit of the campaign. Just make sure to use a high enough maximum bid such that it is not a limiting factor. With the oCPM, each ad set should also get enough daily conversions for the oCPM optimization goal, with an ultimate minimum of 25 conversions per day. Keep in mind that the optimization goal can also be something else than a checkout event, for example a product page visit.
This is also ideal case for our Predictive Budget Allocation that minimizes the total campaign CPA by reallocating the budget between the ad sets. Due to pacing, Predictive Budget Allocation is also optimizing the bid since budget affects the true bid via pacing.
2. Unlimited Budget: Give Me the Most Delivery with Given CPA/ROI Goal
In this case, you define your bid based on the true value. If the budget is not spent, your bid is the final bid without the effect of pacing.
The true value should be estimated as an average lifetime profit for the audience. Note that the average value should be calculated preferably over hundreds of historical checkouts. Tuning the bid based on few recent conversions is unstable and likely to perform poorly. Our data science team is working on providing reliable true value estimates based on historical profits.
As an example, if your average lifetime profit per registered user is $5, bid $5 for oCPM registrations to get the best results.
For both of the cases, make sure that you are getting enough daily conversions, especially if bidding for the oCPM actions. If not, consider using conversion point higher in the funnel or increasing the audience size.
Pacing is automatically optimizing the bid when the ad set budgets are limited. It is enabled for all Facebook campaigns by default. Use it together with our Predictive Budget Allocation to maximize the total profit of the campaign.