Facebook Ads: How Objective Stacks Up Against Optimized CPM
Published: August 8, 2012
Author: Kushal Kadakia
This spring, Facebook rolled out a redesigned self-serve ad creation interface aimed at simplifying the process and jargon involved in building a marketing campaign on the platform. Aesthetics aside, the biggest change was the introduction of an “Objective” section:
The Objective asks advertisers to define goals for their ads or sponsored stories. When promoting a Page or installing an app, you must select whether you would like your advertising to be shown to users who are most likely to take an action (e.g. liking your Page or installing your app), or to users who are most likely to simply click on your ad unit. The underlying premise is Facebook’s claim to optimize delivery of your ads to users within your target audience who are most likely to take the action you’ve chosen, presumably based on its internal user data.
If you select clicks as your objective, you are required to bid the maximum amount you are willing to pay for each click, and you will be charged on a CPC basis. Business as usual. Should you opt for Page likes or app installs, though, there is no bid – you are simply charged on a CPM basis, and your ad is automatically shown to the people with the highest propensity to like or install. Since you haven’t entered a bid (in other words, a maximum willingness to pay per objective), you’re simply setting an overall budget for your campaign and trusting Facebook to spend it efficiently in the pursuit of likes or installs on your behalf.
While this concept of relying on Facebook to serve your ads to the ‘ideal’ audience for your goal may have seemed unprecedented, it had actually been introduced previously to Ads API partners as Optimized CPM. Initially released in beta as “Goal-based Optimization” or “Action-optimized CPM,” Optimized CPM (oCPM) is a more nuanced offering than Objectives.
oCPM provides for optimized ad delivery around:
- Actions (Page likes and app installs);
- Reach (#of individuals who saw the sponsored story or ad for the first time in a day);
- Clicks (# of clicks received); or
- Social Impressions (#of impressions shown with social context).
Billed as an alternative to the traditional CPC or CPM bidding model used on Facebook, oCPM permits Ads API partners to place a specific value (rather than a bid) on any or all of these four goals for a given campaign. Facebook’s ad delivery system will then bid on the advertiser’s behalf to capture the highest-value impressions for your goals, and charge on a CPM basis. In this case, though, advertisers don’t simply set a total campaign budget and trust Facebook to spend it efficiently – they also place an implicit constraint via the target values they have specified for their goals.
Let’s say we implement oCPM for a given campaign on an absolute basis (where we define specific values for each or all of the possible goals, as opposed to a relative basis, where we weight each of the goals up to a cumulative 100%) and simply choose to set the value for an Action at $2.50. Once the campaign launches, the dynamic auto-bidding process is expected to favor serving impressions to users who are considered most likely to take the desired Action, and we are charged per impression. Facebook tells us that we should ultimately expect to pay no more than the value ($2.50) we’ve defined for each action. Additionally, we “should expect the total ROI on the campaign to exceed that of either a CPC or a CPM campaign.”
In effect, Objectives and oCPM both allow advertisers to define goals and be charged on a CPM basis as Facebook optimizes delivery to the most suitable users on your behalf, while oCPM can only be accessed via the Ads API, covers a wider range of goals, and, most interestingly, allows advertisers to define specific values for each goal.
Given its claim to automatically prioritize ad deliver based upon the advertiser’s marketing goal, we were naturally eager to give Optimized CPM a spin upon its initial release. Here’s a look at the results of the first test we ran using this API-only feature:
Measure the impact (Likes volume and Cost Per Like) of Action-Optimized and Click-Optimized CPM on fan acquisition
Setup: Drive traffic to a business page using Page Like Sponsored Stories
Control: Page like sponsored stories with $1.00 CPC bids
Action Test: An identical set of sponsored stories, with the value of an Action defined as $1.00 using oCPM
Click Test: An identical set of sponsored stories, with the value of a Click defined as $1.00 using oCPM
Hypothesis: Cost Per Action will be lowest and Conversion Rate will be highest with Action-Optimized CPM.
As promised, total ROI using oCPM exceeded that of CPC bidding. Running page like sponsored stories with Action and Click-Optimized CPM produced significantly better results than CPC bidding.
The control group ($1.00 CPC bid) dramatically overpaid per click, with a $1.05 CPM that almost certainly would have declined with bid adjustments.
The Click-oCPM campaigns achieved the lowest effective cost per click, at a $0.32 eCPM, despite sporting a lower CTR than the Action-oCPM campaigns. Achieving the highest volume of clicks, as the oCPM system set out to do in this case, may not be correlated with CTR, but perhaps a (higher) frequency cap or target. In this regard, Click-oCPM succeeded, as it achieved 40% more clicks than the Action test.
The Action-oCPM campaigns delivered on their promise of acquiring Page Likes, though, as its conversion rate (48.6% higher than the control) achieved a CPA that was 73% lower than that of CPC bidding.
The values defined using oCPM (Clicks at $1.00 and Actions at $1.00) far exceeded the actual results. This indicates that Facebook optimized and delivered based upon the true cost, so an advertiser would not be penalized for ‘over-valuing’ the goal he/she selects while using oCPM.
The promising results of this early-stage testing encouraged us to proceed with further oCPM tests via the Ads API.
One particularly interesting finding from our experiments concerned the maximum allowable values. Using absolute oCPM, the maximum value you can define for any goal is $10.00. However, when using Objectives – recall that you cannot specify the value for your desired objective – you merely select, say, liking a Page or installing an app as opposed to clicks. When you opt for Page likes or app installs via Objectives, the Ads API reveals that the setting is equivalent to specifying a default value using absolute oCPM at the $10 maximum! In other words, using Objectives rather than the API-enabled oCPM can result in setting a much higher default target value for the action you’re seeking than you would have defined had you been provided the option.
– Kushal Kadakia, Ampush Social