Facebook introduced a new bidding strategy that offers a happy medium between generating results and keeping costs down.
Previously, the platform only offered bid strategies that either was focused on maximizing conversion value or cost predictability, but there wasn’t a space for a “middle ground” that ensured both.
Based on feedback that users wanted to set strategies that offered a combination of these features, Facebook launched cost cap bidding.
Facebook explains cost cap bidding as:
“Cost cap simplifies campaign management and helps you focus on scaling volume of results while controlling costs. Unlike other bid strategies that help optimize for cost, cost cap enables you to set the max CPA/CPI you're willing to pay for results, reducing complexities in managing bids while maximizing your campaign results.”
In other words, this helps advertisers get the most out of their budget without requiring them to pick between cost-efficiency and business results from your ad campaigns.
How Cost-Cap Bidding Works
The main difference between cost-cap bidding and the other bidding types available is that advertisers can select the maximum Cost Per Action or Cost Per Impression they’re willing to pay for results.
For example, if you’re looking to grow your business by driving as many app installs, subscriptions, or purchases possible, but need to stay within a specified cost per action, you can use this feature to set a “cap” on these actions, so you’re not wasting your budget on just a few high-priced conversations.
Instead, you can drive more actions under a set price and gain more customers in the process.
Once your campaign is live, Facebook will look at opportunities at or below your set max cost per optimization event.
This is a key differentiator between the current cost-focused option, Target Cost, which looks to keep your budget consistent for the entire campaign lifespan, regardless of if there are lower-cost opportunities available.
Facebook states that cost-cap bidding will be rolling out to advertisers throughout the year, so check your campaign manager regularly to see if you’re account is eligible.
When Should You Choose Cost-Cap Bidding?
As Facebook builds out more options for bidding, it can be difficult for less-seasoned advertisers to choose which is truly the right option for them.
Cost-cap bidding can be a great feature for those looking to truly maximize their ad budgets, but it is heavily dependent on submitting an accurate max CPA/CPI in the initial setup stage.
“Cost-cap bidding will be helpful for advertisers who are looking for a more automated process while controlling how much they’re willing to pay for their conversions, leads, etc.
The key thing to remember with this though is that you have to know what your benchmark Cost per Result/Acquisition is so that you can make an educated decision on the cap. Otherwise, you’re just guessing. I would recommend having data from at least 6-8 weeks in place to truly understand what you are willing to pay per result.”
- Ali Parmelee, Facebook Ads Specialist, IMPACT
In other words, make sure your cost-cap is based on real data and not just a gut instinct.
This bidding strategy can allow you to reach these high-value opportunities while staying in your budget window - but advertisers need to consider that costs may rise up to the max CPA value as you run out of the cheapest opportunities.
Fortunately, when your max CPA is data-driven, advertisers can expand their opportunities without the manual adjustments needed if you were to do this in a different bid strategy.
If you’re still not sure what works for you, Facebook has a helpful guide to bid strategies available that shows you all types advertisers can choose from, what cases they should be used and other important considerations about them.