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Using the Bid Cap Effectively and What It Means
Posted by on July 2, 2021 at 7:17 pmSo I’ve heard multiple explanations on what bid cap is. I understand it’s telling Facebook to spend no more than my bid but for what? For the actual conversion? For the interaction? I’m also being told a higher bid means you’re going to appear sooner in the FB feed or IG feed, so imagine having your ad appear in the top 3 ads someone sees while on FB. Is this true?
Does anyone have a super clear understanding of what the bid cap is? Also, can you export the average bid from the FB Marketing API?
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1 Reply
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With bid cap, you are bidding the MAX you want to pay for a conversion (whatever conversion goal you have, usually it’s purchase). If you bid $20, you might get some conversions at $20, some at $16, a couple at $12. Your average CPA might be $15. So typically it’s safe to bid a little higher than what you really want to end up paying because it’ll average out lower than your bid.
Facebook puts a value on each user and each placement. Some users are more valuable because they spend more and convert easily. Placements high up are more valuable because people convert more easily when they are “fresh” and haven’t seen a ton of ads, so those placements are priced higher. Your ad is also ranked on its quality and your entire ad account is ranked on the user experience you provide, which can raise or lower the cost for the same user & impression vs. other advertisers. All of these variables combined with your conversion rate determine the bid (CPA) you’ll pay for a conversion.
Bid cap was originally designed to control spend for advertisers who absolutely do not want to pay above a certain amount for a conversion no matter what, and don’t care of they don’t even spend anything at all on some days if conversions aren’t available at that bid.
People figured out that you can use bid cap to manipulate the market and bully everyone away from the premium customers. You can do that with higher budgets above $1k/day where you bid high (like 3x your target CPA) and in doing so you buy up all the premium ad space and outbid everyone who is using automatic lowest cost bidding. For the first few days you will drive up the cost of all the ads in your audience, and then after a few days the other advertisers on auto bidding will pull out and look for other cheaper conversions, leaving the premium audience exclusively to you. You then scale your budgets to a few thousand dollars per day to keep a stranglehold on the premium users and prevent other people from entering the market unless they are willing to outbid you and have a bigger bankroll.
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