Facebook CPC vs. Facebook CPM
One of the great stumbling blocks for newbie Facebook advertisers continues to be the knee-jerk reaction to bid CPC, CPC and only CPC. I’ll get briefly technical for those who don’t understand the terminology. It’s gonna be pretty centric to this post.
CPC is cost-per-click. You’re paying for every click that Facebook sends your way. It’s advantageous in that you’re never going to blow your budget on zero clicks. If you raise your bid high enough, you’re going to walk away with some test data even if you don’t profit. Unless of course you’re an absolute clustertard who doesn’t know how to get Facebook users to click on banners and eats impressions like they’re going out of fashion.
CPM is cost-per-mille. You’re bidding $X.XX for every 1000 impressions. If you don’t know what impressions are, seriously, give up and go home. The great advantage of CPM bidding is that, in theory, a good CTR (clickthrough rate) will see you paying a fraction of the cost for a click as you would with CPC bidding. This is because Facebook likes guaranteed money in the bank. For every 1000 page views on Facebook, your shit is being shown at the expense of another ad. If Facebook is getting paid to show it, regardless of the clicks, they couldn’t honestly care less whether your CTR is a 0.05 or a 0.15. But rest assured, YOU will care when a low CTR burns a hole in your pocket.
The overwhelming majority of new affiliates are so bat shit scared of their own ineptitude that the idea of bidding CPM is like jumping off a cliff in to a sea of fail. They will bid CPC because they like to be in control of their expenses. It’s much easier to calculate the metrics of what you need to do to be profitable if you’re working with a fixed CPC.
Unfortunately, I don’t think I would have ever made it as a Facebook affiliate if I’d only ever stuck to the CPC model. Practically every campaign I create, my intention is always the same – raise the god damn CTR and undercut Facebook’s tendency to bloat the price of a click to ridiculous proportians. That means getting on to CPM and producing a stellar creative that gets the users clicking.
I’m not going to dismiss CPC bidding strategies off the cuff. There’s a time and a place for them. But I am going to preach the importance of understanding how both of these strategies work – and how they can affect the performance of your campaigns.
Bidding with CPC
Not so long ago, it was possible for affiliates to bid CPC and rack up a ton of cheap clicks for as little as a few cents each. With traffic that converted and the volume that the world’s largest social networking site offered – it made a lot of affiliates very rich in a very short space of time. Unfortunately, an increase in advertising competition and a tighter ruling of what Facebook will allow hasn’t so much changed the game – it’s a started a new one.
You can still find cheap clicks in some markets. But if you’re thinking of hitting the United States with a sweeping demographic, you can expect the marketing challenge of a lifetime. Those cheap clicks are no more. You can either bid for the kids, or take your ass international and start hiring translators to tap in to markets that haven’t yet folded in on themselves. CPC bidding is still important though.
Calculated Testing with CPC
If you’re launching a new campaign and you have no educated idea of how the offer should be converting, it’s natural to want to get clicks through in a way that doesn’t burn your wallet. Likewise, if you know that the payout is $15, you can set your maximum CPC at $0.50 and know that as long as 1 in 30 of those clicks converts, you’re breaking even. The metrics are simple.
I like to run these initial CPC tests to gauge the conversion rate for my selected demographic on Facebook. Search PPC is not a good marker. The conversion rate will vary dramatically between traffic sources – especially if you’re direct linking.
If I found, for example, that I was breaking even with the 1/30 conversion rate – my attention would immediately turn to calculating what kind of CTR I would need to take the campaign on to CPM and lift my margins.
So with an EPC of $0.50, and my own personal preference being at least a 100% ROI, I would need to be paying no more than $0.25 per click. That then becomes my marker for a successful CPM campaign. If I can move to CPM and bid $0.25, I know that I need to be producing a CTR of 0.1 to be getting my 100% ROI.
It just so happens that a “suggested bid” CPC of $0.50 will usually translate to about $0.30 if you flick the CPM switch. This is why I generally suggest that you need to be hitting at least 0.1% with your CTRs to have much in the way of flexibility.
No Guarantee of Results with CPC
Everything I said above about calculated testing and CPC? Yeah, it doesn’t mean shit if your CTR stoops too low. I’ll say it again. Facebook likes money in the bank. If they give your ad 10,000 impressions and not a single user clicks – why would they continue to show it? Assuming there’s a CPM affiliate willing to pay $X.XX for the impressions whether anybody clicks or not?
So essentially, your CTR is still important. Bidding CPC to get a feel for your margins is all well and good, but you need to deliver a good creative. Or you’ll spend the rest of your life submitting ads to interns that take 6 days to get approved and run for about 7 minutes.
The way to conquer this common stumbling block is to leave absolutely no stone unturned with your split testing. Submit at least 10 ad variations, all significantly different, and this should be enough to force a decent ammount of impressions – and clicks – from Facebook to carve out some test data. No matter how retarded you are with your creatives, the law of numbers says that so much shit being thrown is going to leave something sticking on the wall.
What Scares Affiliates About CPM?
It took a little convincing for me to wade in to CPM advertising. I remember my fear being that an unsuccessful CPC campaign would waste my time – but rarely rinse my budget. An unsuccessful CPM campaign, however, would lose me money fast. I was worried that I’d spend money and nobody would even click my ad. Too many factors, too much weight on the creative…too much to worry about.
Are you serious about marketing though? The reality is that the large majority of networks and advertising agencies will require a CPM based media buy before they work with you – simply because it qualifies the affiliate. Why should they care that their traffic doesn’t back out for you? CPC is a gamble on their inventory, and I’m afraid to say, it’s nearly always the affiliate who’s left to roll the dice.
Facebook is probably the friendliest environment to get your feet wet with CPM. It’s self serve, which means that you can easily go in and switch off the campaigns that are leaking a loss. Remember this before you shit bricks when somebody tells you to break from your CPC patterns. Most affiliates are forced to adapt to CPM eventually, and they’re all the more diversified when they do.
CPM Bidding Delivers Value To Good Advertisers
Most people who fail through CPM bidding are victims of their own laziness and bad work. Cheap clicks for all are a thing of the past, but CPM makes it possible to cut the costs of your clicks quite dramatically. Remember that if you become chained to CPC bidding, you will always be restricted by the artificial ceiling of what Facebook decides to charge for that click.
If you take the CPM route, you’re still going to be somewhat exposed to Facebook’s charging variations – but a good CTR will ultimately decide the fate of your campaign. You can undercut Facebook’s valuation of a click and score cheap traffic by producing targeted advertisements. Good work from good affiliates will produce profit. That’s the difference maker.
Bidding CPM is the only way I’ve come close to replicating the cheap traffic that existed during the first months of Facebook Ads. Target your markets like a laser and there’s still big money to be made.
The Biggest Problem With CPM Bidding
And this is a big fucking problem, let me tell you. Facebook is inept when it comes to allowing the advertiser to implement day parting. That’s the ability to have your ad displayed only during specific intervals in the day.
There are tools and scripts to implement manual day-parting, and that’s the only reason I still use Facebook Ads because day parting is absolutely critical for any CPM campaign.
I’m not going to expose specific market trends, but needless to say, some offers convert a lot better and draw a lot more clicks during the night. If you’re bidding CPM, your exposure to slow periods in the day are that much more damaging. If you’re running CPC, you at least have the safety net of only paying for clicks. For some of my campaigns, however, the only way to stay profitable is to manually pause them during the hours that I’ve analyzed to be impression burners.
You want your traffic primed. CPM plus a lack of day parting is an ugly spanner in the works.
My word count is exploding so I’ve clearly gone off-track somewhere. This is a brief, but not too brief, look at the challenges of CPM and CPC. Hit me up with any questions. I’ve got a backlog of emails to reply to which were on this subject so I thought I’d summarize in to one ugly post. Will reply individually when I’m less busy playing with my balls.
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20 CommentsLeave a comment
This is an excellent answer to a very common question. Thanks Finch! When I first started advertising on Facebook, I was petrified of CPM. Now, it’s the only way to go with a decent campaign. Facebook has changed so much recently. We’ve got to continually adjust our strategies to stay profitable.
Great post man. Totally agree with you. I had a lot of success with CPM. My problem is that I got CTRs higher than 0.1 only for dating ads. I can’t manage to go above 0.07 in any other niche.
cpm = cost per mile?
are you daft, mate?
everyone knows it’s cost per mars bar.
some niches perform late at night? *cough dating, fleshlight*. i wonder what those might be…
I thought those niches only performed well when Andrew Wee was online trolling the beautiful 110x80s?
FB has day parting on the proverbial “to-do” list but is def not a priority.
Stop stealing my blog posts: http://deeboo.com/internet-marketing/how-bidding-cpm-in-facebook-could-save-you-thousands/
Just kidding, bro. Excellent read for those inexperienced marketers.
Great write up.
My most successful campaign only works CPC. I have others that only work CPM. It all depends and that’s what I’ve learned after about 8 months of facebook advertising.
Also one thing I’ve noticed, when doing a bunch of CPM ads, facebook will randomly give one of them 4x-8x the number of impressions, even if it has a shit CTR. Which, if I don’t watch and managed, will eventually fuck me.
CPM in general requires more active “monitoring” since imps won’t stop if ctr drops, and I’ve managed to lose a lot of money when not watching as closely as I should be. One minor point that new advertisers should take to heart.
Nice one Finch. I’ve been looking for posts re: advertising on Facebook. It’s nice to find one that’s recent!
Been doing PPC for a month now but it’s time to expand. Facebook is the next logical step. Thanks for the primer.
This post is actually bloody EPIC. I’m off to get this wisdom tattooed on my chest in reverse so I can see it when i look in the mirror.
(seriously, cracking post!)
I have a CPC FB ad with great CTR. I cloned it with the only diff being the billing=CPM.
Interestingly enough, the CPC ad has a high CTR (and therefore lots of clicks and revenue for FB). While the CPM ad has a CTR ~1/7th of the CPC ad, and therefore a REAL high effective CPC.
Whats the deal? If I didn’t know better, I’d suspect FB is taking bogus click money from the CPC ad, since when I pay by CPM I get very few clicks.
thanks bro for such useful information especially for newbies like me.
Best CPC for Facebook campaign i got was : $.07 per click.
what is urs?
I’ve never run ads on Facebook, but do they really call it cost per mile? CPM is standard terminology for Cost per thousand. M being the roman numeral for thousand. When reading you had good stuff, but once I saw that I was turned off.
They call it CPM, so… yes they do? CPM stands for Cost Per Mille.
I figured most people already knew what a mille is. And for those who didn’t, I explained it in the next sentence.
I have a CTR of 0.23 for my facebook ad which was initially on CPC but after changing it to CPM. it dropped dramatically.
Awesome~! Thanks a bunch for posting this.
And fyi, CPM is Cost Per Mille, and Mille is the Latin for 1000 🙂
I, too, have been frustrated with the inability to detail ads to run certain hours of the day.
I started out using Facebook CPC but I got so many clicks that my budget was being used up, sometimes, within the same hour I’d activate an ad!
I’m pretty good with photoshop and am a technical writer by trade, so I can design my own ads, but I’m almost certain that the high amount of clicks is click fraud. I watched my web stats and there was a high absence of IP addresses AND there was a really high bounce rate.
Anyway, so I switched to CPM so people can click away. If you’re getting too many clicks and have a low budget, like I do, CPM is still better than CPC.
[…] Lastly, if you’re a hardcore Facebook ad optimiser that want full control over every aspect of your ads, CPM is really the only option. If this sounds counterintuitive I strongly recommend this article (although it’s a few years old): Finch Sells: Facebook CPC vs. Facebook CPM. […]