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Optimizing your ads

This is the second part of the Facebook Ads Guide.
In this part, we will talk about optimizing your campaigns to success.

Structure


  1. Short intro on the Facebook Campaign Objectives
  1. What metrics to look at and where
  1. ABO vs CBO vs Single Ads Optimization
  1. Notes

1. Short intro on Campaign Objectives

Before talking about the essential metrics that we look at, there is another thing we need to consider:
What is the objective we optimize for? Different campaign objectives will require us to look at different metrics to evaluate performance.
As of January 2022, on Facebook and Instagram, we can run campaigns with the following objectives:
Toggle the triangle for details
Awareness
Show your ads to people most likely to remember them.
Good For:
  • reach
  • brand awareness
Traffic
Send people to a destination: website, Facebook event or app.
Good For:
  • link clicks
  • landing page views
Engagement
Get more messages, post comments, page likes.
Good For:
  • connect and engage with an audience
  • brand awareness
Leads
Collect leads for your business.
Good For:
  • instant forms
  • calls
  • sign-ups
App Promotion
Find new people to install your app and use it regularly.
Good For:
  • app installs
Sales
Find new people likely to purchase your product or service.
Good For:
  • conversions
  • sales
In the first part of the guide, we focused on structuring our campaigns for Conversions. From our own experience, unless you are looking for a specific outcome (forms, app installs, etc.), the objectives that matter the most are:
  • Conversions
  • Engagement
  • Traffic
Ultimately, both traffic and engagement work towards gaining more conversions. Therefore, we will cover Brand Awareness and Engagement in a different Growth Marketing Guide.
For now, let's follow up on metrics.

2. What metrics to look at and where?

To understand how to optimize our ads for cheaper conversions, we need to have a look at the following metrics:
  • Amount Spent
  • Results (purchases)
  • Cost per result (also called cost per action - CPA)
  • Impressions
  • Reach
  • Frequency
  • CTR
  • CPM
  • CPC
If you don't know what these metrics mean, please read our Acronym guide.
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The first and most important metric here is the actual Cost per Result or Cost per Purchase, in this case - directly related to the LTV of your customers.
Technically, if you have a higher LTV, you can afford to pay more to acquire a customer.
However, we cannot provide a good CPA or good LTV. Each business is different; therefore, each business owner or advertiser will need to determine what is a good CPA for them, one they are willing to pay for acquiring a customer.
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So, considering the CPA, let's look at other metrics involved in the process. As I am a firm believer in the power of example, let's work with a practical case study πŸ‘¨β€πŸ« Product β†’ Black leather wallet for men. I am looking to target men in London, aged between 25 and 35.

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Before we dive into an actual optimization, the above is one way of structuring your ads.
Campaign β†’ Targeting just the UK β†’ the product is a wallet for men β†’ objective is Conversions.
Ad Set β†’ In this ad set, I want to advertise the black version of my wallet to men, based in London only, aged 25 to 35.
Ad β†’ With this ad, I am testing version 1 of my creative in stories.
Please pay attention to the structure, as it is essential when you scale. Of course, there are countless things to A/B test, so it's up to you to figure out which tests are worth pursuing or not and how to structure your campaigns. Why do I insist on structuring campaigns the proper way? To scale, you need to A/B test a lot to see what works and not. You need an excellent structure to avoid losing track of what you are testing, where, age group, audience, placement, etc.
TIPπŸ’‘
Start a campaign with a budget of $1 (1Β£)(1€) and get familiar with the Facebook Ads Manager and the whole process behind it. I promise it will be fun and it will be worth your time.
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Now, let's look at the other metrics for our ad:
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We spent $145.91 and got 6 purchases; each purchase costs $24.32.
Is this a good CPA? Should I give this ad more budget?
It depends on the cost of goods, the product's final price, the LTV and more. As mentioned before, each business is different, so I can't predict a good CPA here.
As a business owner or social media advertiser, you should get the idea by this point. If you got to this point, where you are actively looking to set up an ad campaign, you probably know what is a good CPA for you, no matter what your business model is: e-commerce, services, SaaS, etc.
Impressions - in general - I would personally say that an ad needs around 1.000 - 30.000 impressions to see if it's worth investing more budget in it. This depends on your budget. For example, if you run ads with $5/day, you won't wait for an ad to reach 25.000; instead, you will decide early by looking at other metrics.
Reach - correlated with Impressions - Reach is generally smaller with 5%-10% than Impressions, so they go hand in hand.
Frequency - a pretty big one, related to Ad Fatigue. If Facebook serves your ad to the same people repeatedly, the Frequency will go up, and the ads will slowly start to convert at a higher CPA or even stop converting.
There is a lot of debate in the social media advertising sphere of the cap for Frequency. Personally, whatever goes above 2.0, I consider it high.
Other marketers think it's still okay.
2.0 means your ad is showing to the same people in your audience twice. Of course, it still shows to new people, but not that much. This leaves a lot of room for testing. If your ads are still converting at a good CPA, but the Frequency is high, leave them ON until they slowly become unprofitable. If they gradually stop converting and CPA starts to go up, shut them down.
Outbound CTR - an important one. It often shows how good is your creative and your copy. If the CTR is somewhere between 0.5 and 1.0, it's decent. If it converts at a good CPA, then that's it.
Above 1.0 means your creative and copy are excellent because people click to see them.
Toggle to see what happens if the CTR is above 2.0
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CPM is an important metric to look at when you want to know more about your audience. The CPM will vary if you advertise your product to interest-based audiences or segment the interests or even lookalikes. Same with ad placements. Different placements will have a different CPM.
If ads are converting at a good CPA for you, never mind the CPM.
Clicks - simple metric - how many clicks did your ads get. Again, this is not a crucial metric at all; if you want to know if your ads are good or not, look at the CTR.
CPC - how much does it cost you per click. Interesting metric to look at when you want to compare different audiences, placements, products or more. This, alongside CPM, can provide a good idea of how expensive an audience is.
If ads convert at a reasonable and stable CPA, never mind the CPC.

Notes

The optimization framework above works for Conversion Campaigns. But, of course - we strongly advise you to A/B test on small budgets and see what works best for your business.
Social Media Advertising is different for each type of business, and most of the time, there is no silver bullet for each business itself, and what is working today might not work the following week.
On top of this, tech giants like Facebook, Snapchat or TikTok change the rules of the game and the algorithm itself often, which affects everyone.
That's why we emphasize one more time:
A/B testing is the bread and butter of Social Media Advertising.
Not just Social Media Advertising, but Growth Marketing in general.
Growth Marketing = Growing your start-up or business.

3. ABO vs CBO vs Single Ads Optimization

ABO - Ad Budget Optimization
What this means is when you set your budget at the ad set level, Facebook will spend the budget across the different ads in your ad set and allocate the budget to which ad is performing the best.
The same example - advertising the black leather wallet for men.

Campaign [UK] [Men Wallet] Conversions
Ad set
[Black] [Men London 25_35]
Ad (Ads)
creative_1_stories
creative_2_feed
creative_3_reels

Pretty straightforward.
In this ABO example, we set the budget, say $30/day, at the ad set level, which means Facebook will start running these three ads to the audience we picked.
In the following days, Facebook will work out which ad gets you the best results according to your campaign goals (Conversions, in this case). That ad will have more budget allocated, and the other two, obviously, less.
Remember - for ABO - we set the daily budget at the ad set level
ABO Advantages
  • More control over your budget
  • Suitable for lower spending accounts
  • Easier to manage
ABO Disadvantages
  • Hard to scale
  • Audience Saturation - with ABO, you force your budget into one audience, which might lead to saturation.
The bottom line - ABO is a good way to start your advertising account and start testing audiences, creative, and so on. However, if you are looking to scale, ABO might require a lot of work, and it's hard to prevent audience saturation.

CBO - Campaign Budget Optimization
CBO entered into the equation a few years ago, and basically, it means that Facebook is finding the best opportunities across your ad sets and distributes your budget to them.
In this scenario, you don't have that much control over your creative or audiences, but instead, you mix them all in one campaign, and you let Facebook pick the winner.
Same product example.

Campaign [UK] [Men Wallet] Conversions
Ad set
[Black] [Men London 25_35]
Ad set
[Black] [Men London 35_45]
Ad set
[Black] [Men London 45_55]

Each of these ad sets above has one but more than one ad inside most of the time. So the whole point of CBO is scaling. Distributing the budget to the best performing ad sets.
TipπŸ’‘
Duplicate the whole ad set that performs to get even more conversions.
Remember - for CBO - we set the daily budget at the Campaign level, right at the start.
CBO Advantages
  • Scalable - with a big audience and with the possibility to duplicate the performing ad sets, in theory, CBO is the way-to-go for scaling
  • Easy to manage
  • Protects against audience saturation - with CBO, you can test multiple audiences in one campaign and prevent saturation.
CBO Disadvantages
  • costly - CBO only really works for bigger budgets

Single Ads Optimization
The last optimization on the list is single ads optimizations.
Practically, this means you run only one ad in each ad set. When running only one ad per ad set, you have complete control over the spending and settings. This is because your budget goes into one ad only.
From running many campaigns, we found out that periodically, some of the ads running by themselves perform, and when running the same ads into an ABO or CBO, they won't perform most of the time.
Same example.

Campaign [UK] [Men Wallet] Conversions
Ad set - 1
creative_1_stories
Ad set - 2
creative_2_feed
Ad set - 3
creative_3_reels

As you can see - each ad set has only one ad. This gives it a lot of granularity and control over the budget. However, having this type of optimization generates an additional challenge - you need a lot of creative and copy to run ads if you are looking to scale.
ABO Advantages
  • Complete control on your spending
  • Some ads might perform better by themselves instead of having them in ABO or CBO.
  • Suitable for lower spending accounts, where you want to pay attention to how much you spend
ABO Disadvantages
  • Hard to manage depending on the no. of ads you want to run
  • Hard to scale due to manual labour

Notes

The bottom line is pretty simple when picking which way to go.
As a brand starting in advertising, we advise going for the Single Ad Optimization
or the ABO.
Both options offer more control over your spending and what you A/B test. Also, if you are starting, probably you will run up to twenty ads maximum at the same time. So this won't generate a lot of work to manage. This is the best time to learn, A/B test and see what works best for your brand.
We recommend going either for the ABO or ultimately for the CBO if you want to scale.
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