Traction and Scale - Bidding Strategy & Budgets

How to Scale Your Facebook Ads Using Automatic Bidding

1. 20% Rules.

2. Don’t change stuff while you’re scaling (disrupting the variables).

3. Ultimately, this is better for finding traction and won’t scale well.

 

Automatic Bidding Strategy

All right in this video, we are going to explore automatic bidding as a bid strategy for scale. Now I know we've already mentioned that we believe manual bidding to be the ideal, or the optimal way to scale. That said, if you're dead set on automatic bidding, we wanna show you how to do it right and how to get as far as you possibly can. And to be fair, people have had a lot of success with automatic bidding. Right? It's not the ... There's not one way to skin a cat. I know our team has had a lot of success with this as well, kind of in the earlier days. We did scale campaigns to seven figures of revenue over the course of maybe six to eight months using automatic bidding. It was a lot more work. It was a lot more heartache along the way, but I still wanna give you some guidelines here of how to use it if you're trying to scale your budgets, in particular. But to do that, let's dive back into some of the mechanics around automatic bidding and how that's again, understanding the why behind what's happening here, is gonna help us get a better handle on what to do and what actions to take.

Automatic Bidding Concepts

Okay. So by way of review, automatic bidding is really Facebook's way to try to optimize to get you the most efficient spend throughout the course of a day. So if you set your budget to 20 dollars, it's gonna spend the 20 dollars, and Facebook is gonna go out and try to find the people that it can for those 20 dollars. It's not obeying these strict rules about how much it should spend to acquire those people. And it is very, very sensitive to the auction, if there's a lot of competition, it's automatically gonna raise kind of your bids to try to win those auctions and spend the money that day.

Budget Rules

That said, here's what's happening. So maybe for a 20 dollar a day budget, Facebook goes out and finds these conversions, these kind of green dots. You can see, there's two at two dollars, there's four or so at four dollars, and everything kind of gathers together here at a 20 dollar spend. You can see that there were people up here who maybe would've converted, Facebook didn't go after them because it was trying to obey that budget rule that had, the daily budget rule.

Increasing Budget

So but let's say that we raise our budget to 40 dollars a day and we kind of kept things on a similar time series. So we're still kind of looking at a day or two of actual spend. Well, Facebook now is gonna jump up and get these opportunity, which you can see that they're at a higher cost. You're trying to spend a more focused amount of money in the same amount of time. In order to spend the money ... They will. They will go and grab these other conversions and your average CPA will go up, because you're now kind of going after people that are a little bit more expensive.

So we have automatic bidding. Again, kind of have reviewed the concepts there. But I wanna review another model for you too. And maybe just visualize this another way, too. Remember kind of of circle model of when Facebook is trying to find a target audience for you. Or they're trying to find the most optimal people within your audience. You remember that we used kind of an example of maybe dog owners or pet owners, and this was representing the total potential audience they could reach on Facebook. But in the beginning of running your campaigns with automatic biding, or really with any type of bidding, Facebook dials in and finds that optimal group of people, that optimal segment who's gonna convert at a low rate. And thanks to the optimization algorithm, going after the objective that you tell it to go after ... In this case, conversions. They'll seek out those people and you'll be rewarded with kind of a great CPA.

Budget Cadence Matters

Now, in particular with automatic bidding, when you raise your budget very quickly in a short amount of time ... Say maybe you double your budget or you triple your budget, you got really excited that something was working and you're like, "Jack it up!" What happens is that Facebook needs to now go outside of that optimal circle, and you reach a new segment of people who, in the near term, will be more expensive to reach because they've had to go outside of the people that they've kind of already honed in on, spend your budget, and reach people that may not be converting at the highest rate. In other words, they're less likely to purchase. So because this is the case, and again, it's kind of illustrated here in another visual just about having to go up to the different levels of CPAs, or you can visualize it this way if it's more helpful. Because this is the case, when you are running automatic bids, you need to have a kind of a cadence to your budget increases.

Budget Increase Recommendations

And so we recommend as you may have seen in other places, about a 20% to 30% increase, usually over the course of two days, or maybe every other day. Now, why this, and why wait? So why kind of this incremental change of 20% to 30%, and why wait over time? Well if you remember to one of our other videos, we were talking about the learning phase. And we're talking about how you cannot disrupt one or more of the variables that Facebook is holding constant to try to find people who will convert to your ads, and budget is one of those variables. So when you are actually going out and raising your budget, you're kind of changing the playing field for Facebook. No longer are you saying, "Okay, find these types of people that are gonna take this action at this budget." You're saying actually, "Raise the budget, spend more money, get higher volume." That changes the game. And so when you're going to change one of those variables, when you're under automatic bidding, you want to do it incrementally. You want to do it in a smaller chunk so that you're not throwing the variable off too far. And, you want to give Facebook time to kind of catch up.

Raise Budget Incrementally

So, another way to visualize this is that when you raise the budget, if you raise it incrementally, Facebook doesn't have to go out as far from that kind of center optimal circle. Instead, maybe they're making a jump right here. And so it's still very close and tight to that center point of where they found optimal people to buy from you. So now this is just ... You'd be at for a 20% increase. And then you wanna do it again. You wait a couple days, things have stabilized. The variables have become more constant again. Now you give it another incremental change. Right? Now in the circle ... So in other words, instead of trying to jump really quick, and these arrows kind of represent the budget increases, jumping out really quick and spreading the net too wide, you can do it incrementally, stay as close to that kind of optimal group of people as possible and let Facebook continue to learn at a more comfortable pace for them to deliver your stuff.

Now, you can see that no matter what, the farther out you get from that audience, you're still going to have a lower CPA. That's one thing that we just need to hammer home, is when you're scaling something-

About the Instructor

Josh Sturgeon, Co-Founder

Clean & Elegant
Fully Responsive