Markus Ojala

Insights to Predictive Budget Allocation

By Markus Ojala on June 10, 2015
early results 2

Our new Predictive Budget Allocation minimizes the campaign CPA (cost per action) level. The feature continuously reallocates the campaign budget between the ad sets such that the expected number of future conversions is maximized and the CPA level is minimized.

How Does It Work

The intelligence behind the feature is based on the Bayesian multi-armed bandit method. If all ad sets have plenty of conversions, most of the budget will be allocated to the ad set having the lowest CPA. The predicted changes in CPA level are also taken into account. If some ad sets have so far only few conversions and impressions, we cannot yet be confident about their true conversion rates (CVR). In this case, those ad sets can get more budget even though their current CPA is higher. The exact proportion is calculated by using Bayesian posterior estimation.

how it works

The feature in our campaign creation wizard.

The predictive budget allocation makes the decisions based on the previous day’s data. In case there is not enough data, also data from a longer time period is used, giving priority to more recent data. To guarantee continuous exploration, a small proportion of the campaign budget is allocated evenly between the ad sets. In the future we will include the predicted lifetime value (LTV) and revenue estimates to maximize the return on investment (ROI) for the predictive budget allocation.

Early Results

Below is a real example of a daily predictive budget allocation run. The campaign consists of five ad sets for which yesterday's data is shown. The new budget column contains the ad set budgets after the predictive budget allocation run.

blog post early results

The predictive budget allocation has estimated the CPA distributions for each ad set as shown below. Each distribution presents the predicted range in which the ad set's CPA varies. The more conversions an ad set has, the more certain the predicted CPA level is. As expected, in this case most of the budget is allocated to the best performing ad sets.

cpa levels

Below is an example when the budget allocation has been running for ten days in the same campaign. The total campaign budget has not changed. The predictive budget allocation has modified the individual ad set budgets to maximize the total number of conversions and to minimize the CPA level.

daily budgets

Below are the daily conversions and CPA levels of the same campaign over the ten days. As seen, the number of conversions has more than tripled with the same campaign budget.

early results 2

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