What are Meta Cost Cap and Bid Cap Bidding? And Should You Be Using Them in Your Ecommerce Campaigns?
Firstly - some background. Bid strategy selection tells the platform how to bid for you in the ad auction. Each option sits on a spectrum of advertiser control vs. platform automation. By default Meta opts you in to least control - the bid option they call ‘highest volume’. Below are the options you have:
Least control: Highest volume (lowest cost)
Mid-point: Cost per result goal
Max control: Bid cap
BID CAPS AND COST CAPS EXPLAINED:
Bid caps are actual ‘hard caps’ and cost caps are ‘average’ caps. With Bid Caps, your CPA will very likely not go over and Meta will not spend if it doesn’t think it will achieve your cap. Bid caps fail to start or stop very aggressively for this reason. It’s not flexible.
Bid cap is a limit applied to the bid per estimated conversion (the event selected as the optimization goal), rather than realized conversion. It won't allow you to enter ad auctions that it predicts will exceed your set bid. Predictions aren't perfect.
Generally, if there aren’t other variables at play (bid, ads, audience), expect Bid Cap campaigns to generate fewer conversions, but provide the highest confidence in staying under a target cost.
COST CAPS or COST PER RESULT GOAL
CPRG/Cost Cap bidding treats the target as a goal, rather than a hard cap. Cost caps are based on averages over time, so you will see some fluctuations in smaller windows (hourly or day-to-day) but over larger windows (7+ days) you will generally have the CPA at your cap, if the system works. Obligatory disclaimer: Target costs are not guaranteed - and earlier in the year Meta had an outage that spent Cost Cap Campaigns with very poor performance.
Cost caps aim to keep costs at or below the goal. However, it allows the system to exceed the cap to maintain consistent ad delivery, increase conversions, and ultimately return to the target cost goal over time.
Your ads are able to enter more auctions since the system is dynamically bidding as high as needed to maximize results around a target cost. This generally leads to more conversion volume and a faster exit from the learning phase vs. bid caps.
It is not about prioritizing conversions above your target cost, but about increasing the volume of signal that can be used to find more profitable customers. Feed the machine more signal about what a customer looks like, and it gets smarter at finding more customers. So, CPRG aims to automate some of the manual aspects of bid cap bidding.
Using a bid constraint, you want to maximize results at an acceptable cost. You have two elements to control - the bid, and the maximum budget. An inflated budget (2-3x what you would actually spend) combined with an informed bid or cost per result goal helps keep your campaign 'bid constrained'. Bid-constrained means the campaign is limited by the number of results you can drive within the acceptable cost, as opposed to being limited by the available budget.
HOW TO SET BIDS AND BUDGET FOR COST CAPS
The idea with cost and bid caps is to inflate both the budget and cap, with the ideal scenario that you get close to full spend but the actual CPA comes in lower than the cap.
Things to bear in mind when considering this strategy
Caps don’t typically last long though and can burn out pretty quickly, so use them sparingly.
Can be a good strategy coming into BFCM though for picking up cheap conversions during a short time period.
The spend can fluctuate a huge amount throughout the days - it kind of like stock market trading with AI. It will only spend when it feels it can make money. And it won't spend if it feels it can't make money.
Eg you could have your budget set for $500. And one day it might spend $500 and the next day it might spend $5.
Don't mix with lowest cost/high volume bidding as they cannibalize cost control bidding
Easier with higher budgets and lots of signal for the algorithm to adjust (100+ conversion events per day). Which also means consolidation (ie. less adsets and campaigns to consolidate the budget) helps significantly.
This is just a bidding strategy, and main focus should still be creatives, landing pages, and all that other good stuff.
Some media-buyers advise using cost caps for ad testing - which requires a tonne of creative as only the immediate winners will ‘make it out the gate’. Our current point of view is that we would use well-tested creatives in the cost-cap campaign.
There is a chance that your cost-cap campaigns will cannibalize other campaigns in your account - so we recommend when testing this that you monitor your overall account ROAS as the metric for success and don’t move all budget to Cost Cap as the spend may not be sustainable.
TYPICAL STRATEGY
Although some media-buyers suggest having an ‘all cost-cap’ account - this is not something we advocate at Webtopia. We suggest this can fit in with your other campaigns and would only take over as your entire strategy if you saw very strong evidence that this could work long-term. Again - it’s another element to test.
Separate campaign - with around 20% of your budget.
Broad ad sets or proven/stable top-performing audiences, with winning creative (at least 3 ads per ad-set)
ABO campaign
Each ad set has a different cost cap
Start with slightly above your average CPA and then do 1 cost cap above and 1 cost cap below.
EG. if the target CPA is £60 - launch with:
1 ad set with cost cap of £60
1 ad set with cost cap of £55
1 ad set with cost cap of £65
Once launched, the data will tell you what to do next:
If the ad set doesn't spend the daily budget, the cost cap is too low and FB won't spend because it doesn't believe it can deliver the CPA. Pause this ad set, duplicate it and increase the cost cap
If the ad set does spend daily budget but the CPA is too high: pause this ad set, duplicate it and decrease the cost cap.
When testing this, we’ve found that really random cost caps would work, and we continued to test this. At first we would increase/decrease cost caps by £10 to find the sweet spot. Then we would increase/decrease cost caps by £5 for the next sweet spot. Eventually we were changing the cost caps in increments of £1. Anything that delivered to the target CPA we scaled, as using that as our new 'base point' for increasing or decreasing cost caps.
How to set the budget:
Two different ways :
Preferred method - start with the ad sets at a low spend (constrained by budget) and a high bid amount, then walk down the bid until each ad set is constrained by the bid amount. Then, increase the budget once you're at desired efficiency, and control for volume/efficiency by walking the bid up or down, not the budget
Alternative - start with high budget and a super low bid amount (spend restricted by bid) and slowly walk up the bid until you reach the volume/efficiency you're going for
If your budget is being spent but your CPA is too high, then your Cost Cap is too high.
If your budget isn't spending then your Cost Cap is too low - walk it up slowly.
Find that sweet spot where you are happy with CPA, and you are spending the budget.
Don't make budget and bid changes at the same time.
CREATIVE TESTING
For net new concept testing, we very strongly recommend that you either use very high cost-caps or you use the default setting ‘lowest cost’ now that will allow the system to actually go after.
USING BID CAPS TO SPEED SPEND
At Webtopia, we often use Bid Caps for accelerated spend when we have a very popular offer running and it is time-sensitive. To do this make sure you have a very realistic and achievable bid cap, with a high (flexible) budget so that the system has room to expand spend when it knows it will hit the cap.
Got Questions about Bid Caps and Cost Caps? Post your comments below!
