Facebook’s Secret To Making Your Life Easy: Optimized CPM

In the past six to 10 weeks, we’ve found choosing optimized CPM (cost per thousand impressions) to be magical in our Facebook ads. It improves click-through rate, decreases cost per click, increases fan conversion rates, generates a lower cost per action, and removes stubborn ring around the collar (just kidding on that last one). It shows that Facebook is trying to make success in Facebook advertising possible for the common person, as opposed to a freak result of random ad combinations submitted on a full moon.

Optimized CPM is the default option for your ads, since Facebook knows that asking advertisers to decide the correct CPC or CPM bids for a particular type of traffic is like speaking Greek. Even us pros don’t know the proper price for a page post ad targeting mobile placements for 35-year-old females in the U.K.

The optimized CPM bid not only bids on your behalf, but also helps you with targeting, choosing the subset within the target audience you selected that is most likely to click, become a fan, or perform whatever action you feel is important.

 

In this example, we’re running page post ads against desktop placements, targeting people interested in genetic research. It’s a specific but large audience of 926,000 people. Normally, we recommend narrowing down targets to between 10,000 and 20,000 users, or however many you have time to manage. But we can select relatively large audiences with optimized CPM, since this setting does a lot of the work for us. The CTR is 0.126 percent, which is not bad. That works out to 31 cents per click.

Speaking of, have you tried optimized CPM bids in conjunction with conversion spec? It’s like Oreo ice cream with extra fudge and a cherry on top. You can choose which type of action (getting more fans, for example), that you’d like to get. Facebook will choose users within that group for you based on what’s working.

No more need for bid optimization, unless you have an ecommerce conversion or action outside of Facebook.

But one major caveat: You don’t know what price you’ll pay on the traffic. Sure, you can cap your daily or lifetime budget, as well as impressions. But the actual CPM you pay can vary wildly.

Now here’s another ad. It’s at $18.72 CPM, which is almost two cents per impression, not two cents per click. If you trust Facebook’s latest advice from London, clicks don’t matter, it’s about reach and impressions. Granted, this is for newsfeed impressions, which are far more valuable than right-side ads. The 5 percent CTR reflects this.

Other big ad firms report their own average CTRs as a proxy for all of Facebook. They show about 0.050 percent, which is 1/100th of this particular ad.

This ad works out to 42 cents per click — which can be good or bad, depending on what your goal is.

Sometimes optimized CPM doesn’t work. For example, if you aren’t able to spend your budget, one option is to force bid at $10 per click on CPC, knowing that you’ll likely not pay that amount. If you do this, by the way, do place these ads in their own test campaign, in case something goes wrong. Budgeting is at the campaign level in Facebook, so you’ll need to create a lot more campaigns than you might be used to if you were doing this in Google.

Incidentally, if you run promoted posts, which are also basically optimized CPM (you don’t get to bid CPC or CPM), that’s why the system annoyingly creates a new campaign for every promoted post you run. That’s the only way to set budget limits.

So go ahead and test your ads on both traditional bids and optimized CPM bids. Sometimes you’ll see crazy stuff like the $170 CPM on optimized CPM bids, but that’s because you’ve just launched the ad or it’s statistically significant. Let us know what you see. We’ll typically see a healthy improvement across most types of campaigns (except where you are already micro-targeting super small audiences or sending off-site).

You might run slightly larger audiences, to give Facebook’s algorithm more room to select who to serve ads to.

Here’s an example of a quick and dirty test we ran using the exact same ad on the exact same audience. Only the bid type was different.

  • Optimized CPM won in terms of producing more actions, clicks, and fans at a lower cost.
  • For the conversion spec ad, we chose the page like as our conversion– we got a higher CTR and proportionately more fans.
  • Our traditional ad was traditional CPC. It served less, as the other two ads had a higher CTR, hogging the inventory within this campaign. There is no “serve ads evenly” option in Facebook yet.

Readers: Try it yourself and let us know how it goes!

Dennis Yu has helped brands grow and measure their Facebook presences. He has spoken at Search Marketing Expo, Search Engine Strategies, Web 2.0, The American Marketing Association, PubCon, Conversational Commerce Conference, Pacific Conferences, HostingCon, Affiliate Summit, Affiliate Convention, UltraLight Startups, MIVA Merchant, and other venues. Yu has also counseled the Federal Trade Commission on privacy issues for social networks. Yu has held leadership positions at Yahoo and American Airlines. His educational background is finance and economics from Southern Methodist University and London School of Economics.

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