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Optimized Budgeting: Justify Your Facebook Ad Spend

Written by: Kanna Shimizu, Director of Product, Optimization and Strategy at Nanigans

Many marketers are reluctant to spend on ads until they’re sure that they’re investing in top-performing creatives and audiences. Optimized Budgeting automatically allocates budget to better-performing ads, and reduces budget to ads that are not performing well, therefore ensuring high ROI. It also evens the playing field so that ads get an equal chance out of the gate on Facebook. This increase in budget for individual ads requires sufficient data, so it won’t necessarily happen the hour after ads are deployed – but it will happen throughout their campaign.

A Typical Campaign with Optimized Budgeting

The campaign has a Strategy Group with a daily spend limit of $600 and four ads. The marketer uses the default setting of $200 for each ad’s initial Facebook Ad Set budget and $600 for the final Ad Set budget.  (By default, Ad Engine allocates one ad per Facebook Ad Set.)

Nanigans Optimized Budget

Day 1

At the beginning of the campaign, Ad Engine tells Facebook that the daily budget is $200 for each of the four ads. Not many clicks or conversions happen, so Ad Engine does not change this value for the entire day. As long as the bid is set to meet the market and the market has capacity, Facebook will try to evenly spend $200 for each ad over the day.

Day 2

On the second day, one ad is getting a lot more clicks. For this ad only, Ad Engine will tell Facebook to increase the daily budget to $400. The other ads are still at the daily budget of $200. As long as the bid is set to meet the market and the market has capacity, Facebook will try to evenly spend $400 for the ad with the higher CTR, and $200 for the others.

Day 3

On the third day, two of the ads are seeing more clicks. The one that was increased to $400 on Day 2 is now bumped to the maximum daily budget of $600. The other ad getting more clicks is increased to a daily budget of $300. The ads that have seen very few clicks or conversions are still using the initial budget of $200.

Insider Tip:

Facebook is known to only pace down based on the Ad Set budget, and will never pace up to catch up to a high Ad Set budget.

How “Optimized Budgeting” is Different Than “Budget as Needed”

  1. “Optimized Budgeting” is more dynamic and reactive than “Budget as Needed.” With the latter, marketers have to specify, before the fact, the number of clicks needed before increasing the budget. With this new feature, the Nanigans algorithm reacts to an observed conversion rate. If the conversion rate is higher than expected, the budget can open up faster so a campaign manager does not miss out on opportunities.
  2. “Budget as Needed” resets daily, and does not work across multiple days.

Dynamically Growing the Facebook Ad Set Budget

The Facebook platform lets marketers specify a daily budget per Ad Set (a group of ads), and the Facebook pacing algorithm attempts to evenly spend the budget over a day. With this feature, Ad Engine will at first set the Facebook budget to a scaled down value so that spend for an ad is kept low until more data is accumulated. When Ad Engine has enough data to identify high-performing creatives and targeting segments, and to reflect this in the ads’ bid prices, Ad Engine will gradually increase the Facebook Ad Set budget.

Dynamically grow Facebook Ad Set budget

The curve pictured above is how the Ad Set budget will be adjusted based on the number of clicks and conversions for an Ad Set. This is how the curve will look if the conversion rate (action rate) is 2%. When the Ad Set has received 1000 clicks, the Ad Set’s budget is set to 25% of the final value. When 4000 clicks have happened, then the Ad Set’s budget is set to 75% of the final value. By default, the final value is the daily spend limit for the Strategy Group.

 

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