AMA #1: Bid Caps transcript

I talk a lot about bidc caps and why I like them so much for media buying and today on the show I am going to answer your bidc cap questions in a special bonus episode AMA suggested by somebody to me on Twitter who said hey why don't you do I mean people have all these questions about how to run your Media budget with bidc caps should should you just help us out by answering all of our questions on Twitter and I said well I don't have time for Twitter but I'll put together uh a question tweet people can submit their questions there and I'll record a podcast about it and that is what this bonus episode is right now bidc caps ama if you've been wondering about how to run your meta ads account on bidc caps I'm going to try to answer all of the most detailed questions that I possibly can let's dive in all right I'm going to quickly remind you what bidc caps are so you know bidc caps are a method of buying your media on meta ads where you tell meta here's the maximum amount of money I would like to pay for a conversion and So Meta then bids in the auction to try to get you your conversions your customer acquisition cost or under that cost okay it's that simple so you give let's say your max amount you'd like to pay for a new customer is 100 bucks according to the optimization method you've chosen then you tell you tell meta here's my bidc cap $100 and meta will try to get you at $100 or less try to get you your conversions at $100 or less that's what a b cap is and the idea is that you can scale as much as you possibly can as long as you're hitting that Target right so typically way I would set this up is to be have a very big budget and tell meta go get me as spend as much of that budget as you can as long as you are getting me my conversions at or under my price okay that's a distinguished from cost caps cost caps give you an average outcome so if you say $100 as a cost cap meta May bit above that at times and below that at times and ultimately get you an average of $100 you're likely to spend more money also now called a cost per result goal in your meta ads a manager but that's the distinction between those met cost caps give you an average bid caps give you a maximum okay so those are the two different tools there's some advantages to cost caps that some people could point to I prefer bid caps significantly not even going to get into that right now unless somebody asks a question I actually don't know we'll go from there so okay let's dive in to the questions question number one from my good friend Jess Bachman whose episode on my podcast actually is an episode that people really loved so go check that out link is in the show notes on his creative testing and creative strategy approach to learning from the data being offered him or being given to him in an ad account and developing new creative based on that data I think it's the best considered version of that approach to meta ads I've ever heard so go check out Jess's episode okay all right links in the show notes there like I said Jess's question do you have multiple ad sets at different Caps or just one cap okay just one cap and this is a reference to my account structure when I'm running bid caps I try as much as possible to keep as few campaigns as possible I have one account that's going to spend in November the time of recording this it's going to spend I don't know a million and a half bucks or something like that for the month and for most of the month it has been one campaign I guess actually for Black Friday there's some separate Black Friday time limited campaigns but otherwise the vast majority of that's there you know it's possible to to build your account structure to have very very few campaigns it's not what I always do but it's what I do here so what do I do in terms of C bids per at different adset levels I think what Jess is really asking is would you put multiple ad sets in the same campaign at different bid numbers and my answer is yes I do it all the time including the account I just referenced and the reason is that I'm setting my bid cap relative to my aov this is a really important thing to get right when you're running bidc caps when you're running bidc caps your CAC is going to be relative to your aov simp simp simple way to think about this would be if you have a $100 aov on one set of products in your skew set and a $200 aov on another set of products and you're running ads for your $100 $100 aov product over here and $200 product over here a $50 CAC on a $100 aov is a two to1 row a $100 C on a on a $200 aov is a two to1 row and therefore it's very likely that those two different products have very different CA targets and so I am structuring my ad sets so that my products are hopefully my aov is across the ads in a given ad set are going to come in about the same number close enough anyway and then I'm setting my ads my bid cap the ad set level relative to that aov and relative to the unit economics with that aov right so if I have uh you know 70 points of margin on a product and my bid cap is going to reflect that 70 points of margin and so let's say it's a $100 aov and we'll just make this easy if it's going to be a break even break even let's say my goal is break even on first purchase I'm gonna set my bid cap so that I try to get a $70 CAC on a $100 aov let's say I have the exact same margin on my $200 aov uh then as a percentage then in that case I'd set it to $140 as the bid cap there and I would have no problem running those in the same campaign I may separate them out for the ease of management or something but yeah I I wouldn't have any problem running those in the same campaign because optimization happens at the adset level they'll both spend fine so there's that that's I think that's relatively on the margins whether or not you have to whether or not that makes a big difference like separating those different campaigns or or anything like that I think it's it's probably going to be okay to keep those things together because again optimization happens at the adset level so it's not a huge deal whether or not you're doing that way all right there's that Greg KY my great friend from more Staffing actually uh who runs his own e-commerce business in the US actually the Genesis of more Staffing my sponsor for this episode and for every episode of my podcast right now the Genesis is that Greg built up his very successful e-commerce business section 119 with a team almost entirely built in the Philippines and saw how revolutionary it was to find incredible Professionals in the Philippines building his business and said why don't we do this for other businesses there's these are great employees it cost me less money I get to pay them well everybody wins so so Greg ask the question our coac always ends up being 2x other campaigns presumably in bidc caps he's referring to how do we troubleshoot no idea what we are doing wrong all right this is a kind of question I get a lot what about what about my specific setup how come my CAC is not coming in where I want it to come in with my bidc caps Etc and of course it's impossible for me to answer this question without looking at your account so I'll say that first but there are a couple things he he asked the question how do we troubleshoot there are a couple things that I would want to look at here really specifically the first is I find bidc caps um don't work very well when mixed with auto budgets and the reason for that I think is fairly simple if you're running a bunch of Auto spend in your ad account Auto budgets and then you're running bidc caps as well what you're basically telling meta is let's say you've got $5,000 a day in Auto Budget and then you've got bid caps on top of that what you're telling meta is you must spend $5,000 okay and meta's gonna go try and spend that money as efficiently as possible that's what the way your Auto Budget works it's going to try and distribute that money as efficiently as possible okay and then you're telling the bid capap now go get me any extras from there and this sometimes let's say you're sort of the amount of money you could spend on a given day at or under your target um theoretically given the creative you have and all those things is $5,500 you're you're telling meta at that point only use my bidc caps on that L 500 bucks and now now imagine that your aov is $250 that means meta is going to have two potential purchases per day in your bid capap campaign and it's never really going to get the learning piled up that it needs to feed the metrics the machine learning that are going to um make bidc caps work effectively bidc caps need data um and I think Facebook is very fast to getting this data I actually think it would probably be okay in that situation but it may also have some daily variability so what may actually look like 2x CAC on a given day is actually just because you're running it to a very small sample and when you have that small of samples it's going to some days are going to look really good some days are going to look really bad right so you might get one purchase on one of those days and three the next day and you need two per day right uh at your $250 aov or whatever I might have done that math wrong but you get the idea when you're piling up that few of purchases one day it's going to look like a $500 CAC and the next day it's going to look like you know a $100 CAC or whatever and it may net out to be the exact same but but ultimately it's going to be some variation there so that's the first thing I just think that in general the tool doesn't work that well when you do that if you do want to dip your toes in the water of bit caps my recommendation without like fully committing my recommendation would be to drop your auto budgets quite a bit below what they were at before but not completely to zero this can work fine I think eventually hopefully it'll move all the way over I think it's a more effective plan in general but let's say you're spending $5,000 a day it would be reasonable to spend $22,000 a day on your Auto Budget and then put the rest into your bid capap you know assume bid caps will spend the rest that's still going to give it plenty of spend to kind of get moving uh my accounts wherever possible are 100% cost controlled usually with bidc caps occasionally I'll run some other tools um when it's helpful but there you go so the first thing is there I would think about how you're allocating the spend in each portion the second thing that I would uh think about here is your optimization and your um measurement and your attribution one of the ways people get really confused about this is that they don't understand clearly the relationship between one day click optimization 7-Day click optimization and 28 day attribution in meta ads you can only optimize for one day click or 7day click uh in terms of and uh you know you can show more than that but your optimization for bidc caps is going to happen at that level one day click or 7-Day click level and most people are defaulted and do a 7-Day click one- day view attribution setting I believe the optimiz the true optimization there actually only optimizes against your conversions I don't really know because I have not had view attribution in my dashboard for years like probably for seven years I have not had maybe longer maybe since the entire time I've run ad I have no idea why you would put view attribution in your dashboard at this point it makes no sense to me it is clearly mostly not incremental and clearly is not going to be that helpful to you to figure out what's going on in your ad account you should really work on a click basis even if you recognize that click attribution may be a little bit narrower than the truth but anyway that's a side discussion the point is start by looking at that if you set your bid cap to let's say $100 because that's what you think your target is but you're at a one-day click optimization what's actually going to happen there is that your true C is should come in actually quite a bit lower than you think because if you set it for 100 day a $100 bid cap on day one then over time you will get delayed purchases off of those clicks and your actual CAC will go down over that time because you'll get more purchases without any more spend okay and that's the way that and some so sometimes there's just like a measurement problem here and and this is like this is a thing I would go check if you need a hund let's say a $100 C let's say that's the the ca that you're willing to pay if you need that that probably actually means that you don't need a $100 CAC on day one you probably need like $130 CAC on day one and can assume that from day one to day 28 you'll add purchases and that there'll be that delayed purchase Behavior sometimes previously called delayed attribution multiplier you'll get delayed purchase Behavior over time and it will net out at the end now that's the opposite problem actually of what Greg is asking Greg is saying how come my CAC is higher in this case than it should be and in this case I don't really know I mean I think it's possible that you you're running those bid caps against the wrong products and that maybe it's coming in I don't know it shouldn't I mean there shouldn't be a situation where your bid caps are spending consistently getting out of small sample size land and ultimately getting you to a point where where it's consistently coming in over your target I've almost never seen bidc caps really consistently outspend a ton of money over the target I've seen it in one case recently there was like an overspend of about 10 grand in an account that I was working on maybe five it's kind of hard to say on an account that I was working on but it was really isolated to one sort of weird ad where the clickthrough rate was super high but it really didn't convert at all kind of out of nowhere so um so yeah I don't know why that would be the case but that's what I'd start looking at optimization settings attribution settings understanding that relationship between 1 s and 20 at day click in your optimization and in your measurement um the simple thing you can look at here by the way would be to um go into your meta ads manager look at your compare attribution settings drop down on the on your column drop down look at compare attribution settings and just put those in your column set so look at you know check the one day click 7day click and 28 day click buttons eliminate the view attribution from there and and go from there okay there's that all right AR Berry hot the great berry hot aren't bidc caps this is this is a a more forceful argument against my position that you should be using bidc caps here very hot aren't bidc caps in caps just allowing you to spend more when there's already more sales due to external forces like email pushes organic social or press so basically what Barry's suggesting is that perhaps and this is an argument I've heard elsewhere in against cost controls that sort of cost controls scoop up bottom funnel traffic but they don't actually generally spend more they don't spend more unless unless there's some kind of external Source warming your traffic in advance and therefore spending more money and my short answer to various questions aren't bid caps and cost caps is allowing you to spend more when there's already more sales due to external forces that's the question my answer is no it's really simple and there's a couple ways that I know that the first is I have multiple ad accounts that I have scaled like massively on entirely on bidc caps that really don't have any external traffic sources and so it's just sort of impossible that's the mechanism at play in this case but more to the point I don't really understand how this would uniquely apply to bidc caps and not to Auto budgets so if it's the case that you're Auto budgets um the thing to remember here is that a bid cap or a cost cap are both actually running on the same optimization as an auto budget they're just putting a governor on it sometimes people will say don't use bidc caps use lowest cost and strictly speaking that distinction is actually wrong big caps are lowest cost advertising or the new language highest volume optimization as opposed to highest value optimization which is you know you're optimizing not for the lowest cost conversion but for the highest value conversion potentially with a minimum row ass Target on okay highest volume or lowest cost bidding in Facebook is one of two ways to optimize your bidding it's either go for the lowest CAC or go for the highest aov highest order value okay and so lowest cost ads whether you're running Auto bids or manual bids cost control bids are the same so ultimately if you are if you are auto bidding and let's say you have a whole bunch of warm traffic from let's say you got a giant piece of PR all right imagine your solo stove and you just had the Snoop Dog thing go viral you know Snoop going smokeless or whatever giving up smoke that whole thing right now suddenly there's all this traffic in the top of your funnel it's all a little bit warmed up to your brand it's likely that in some way that traffic is going to be warmer and more likely to purchase than if you had all of that traffic as cold traffic okay so maybe in that case your in platform click paste R Us will look uh will look uh better than usual and that's going to be true whether you Auto bid or whether you run cost Caps or whether you're on bid caps so the first thing I would say here maybe the second thing I would say here is that it may be the case that a bid cap or cost cap campaign will spend more because your CAC will drive down because of that external traffic Source that's probably true what I would say in that case is that that's a feature not a bug like if you've got a bunch of warm traffic you probably do want to spend on it now you may need to adjust your Target in that case you may need to adjust your target down because you don't want to double pay for something or whatever it is but it's also possible that you don't want to do that okay but actually in this case the other thing I would say is that bid caps here are uniquely useful even relative to cost caps where you've got a dynamic bid cost caps worry me a little more in this case because the way that cost caps work is again it gets you an average and this is going to get into the weeds a little bit but let's say again let's say you've got you're trying for an average CA of $100 which is what a cost cap would do okay uh is the way a cost cap would work if you set it at 100 bucks okay if you got an average C of $100 in that case uh let's say suddenly there's a bunch of warm traffic that goes into your traffic pool okay and that means all of a sudden there are a bunch of $30 conversions that now are dumped into your pool of traffic that did not previously exist what that means is meta now has the freedom to go bid well above $100 for your purchases Let's uh let's actually make the math easier um let's say there are suddenly hundreds of $50 purchases okay let's call them 100 $150 purchases that were in that are in your traffic pool that previously weren't there and you want a $100 cash suddenly all those $50 purchases start piling up in your adset okay let's say 100 of them like I said now in that case that means meta can could theoretically and actually may well do because meta is going to bid dynamically go get you 00 $150 CAC purchases in that same pool and that's going to net out now at a $100 cost cap at $100 average for your cost cap which is to say and let's say those $150 purchases are actually not profitable for you let's say your profit break you point is 120 or let's call 100 because that's the average that you set okay suddenly the way you get to 100 is by lumping a bunch of bad conversions in with the good ones and this is where Barry's concern is reasonable uh because uh because all of a sudden there's going to be all of those purchases in the mix bidc caps do not suffer from this problem bidc caps are trying to get you uh as many purchases as possible or under your target so in the case that you get a bunch of $50 purchases all of a sudden piled up in the midst of that while you're going for a $100 uh top end ultimately that didn't change your bidding structure for the for the other purchases that are just sort of out there right people who didn't see your Snoop Dog uh ad let's say or your Snoop Dog viral moment let's say all those people are just like regular cold traffic well if they can convert for 95 bucks according to meta's machine learning they're going to go in there and meta will just keep spending as long as they're as long as they're in that pile and so I think bid caps because they give you a Bend as long as you've set that correctly you're in good shape now you should certainly set your target relative to all the other things going on in your business if you have tons and tons of organic traffic it is very possible that you actually want to have a more conservative bid cap than somebody else whereas like if you know meta is really your only source of cold traffic your only source of prospecting traffic then sure like just sell it here's the price go get as many of those as possible I still think that tends to be the right way to do things especially on a click basis on meta Etc but yeah I don't I don't see this as being really a problem at all and ultimately I would suggest that if anything it is actually a value ad from this I also just think the notion that it's only spending more when there are those is just wrong like I said that there I've seen plenty of cases many many many times when bidc caps spend more for all kinds of other reasons the most notable of which is the weekend uh on Sundays there there's more user activity on the platform of or on both platforms Facebook and Instagram than usual bidc caps allow you to scale up your spend on Sundays and some degree on Saturdays as well and scale it back down on weekdays when people are at work etc because it instead of giving uh an auto budget this the same budget every single day of the week in fact meta is even now saying they will spend up to 75% above your Auto Budget in a given day in order to go capture higher amounts of traffic when it's available so um it's definitely not that definitely doesn't explain the majority of why this happens and any notion I mean I've seen this this critique lobbied or lobbed in a few different places I mean I have one brand that was like you know 7x year-over-year revenue or something like that driven by new customer acquisition all bid caps there was no external traffic source that was doing this it just it just is not a reasonable way to think about what's going on in most of these cases okay so there's that onmar Jad uh great great brilliant dude onmar jaad onmar asks when first dialing in the bid for an account that was previously on highest volume how long do you give it that's also called lowest cost how long do you give it to spend before opening up the bid what does the process of opening up the bid tend to look like okay so basically saying if you're switching over from an auto bid to a manual bid to a bid cap how long do you give it to spend before opening up the bid to make it go higher my answer to this is probably I wouldn't have any problem I don't I wouldn't open up the bid here unless unless my unit economics suggested that I should the whole beauty of bid caps I think in this case in most cases is that you can set your bid relative to the C Target that makes sense for the economics of your business and so uh ultimately like I said earlier if you have a $100 aov and you've got 70 points of margin and you want to get to break even on first purchase well then in that case I'm going to set my bid cap to get me a $70 28 day click C and ultimately that's going to that's going to be where I said it and that's that I'm not I don't really wouldn't scale up the bid for any particular reason or scale it down for any particular reason related to how I was spending in the budget before I would Bas I'd set my bids according to my uh margin and that's kind of it all right Andre lunev who's been uh talking about a lot of stuff going on with BDC caps as he's made that switch swi over Andre I believe it's Dr Andre lunev I think he has like a math degree or something so um but he's he's been weighing in on Twitter a bunch and uh again another really smart guy great question here how do you work with bidc caps on higher ticket products if your target CPA is around $250 to $300 um okay well there's two things I'd say here the first is as always the same way I would do it just like I said to onmar a second ago the same I would do this the same way I would do anything which is as long as there is you know I'd set my margin and set do that according to my optimization timeline whether it's one day click or s-day click with the recognition that 28 day click revenue is going to increase relative to my one day click or seven-day click Revenue there's that delayed purchase Behavior I got to account for that in my bidding and in my optimization okay so then if that's the case uh what do I do uh well my answer is I just bid like I usually would I just bid like I usually would you know if there's a longer consideration cycle or also if there are less purchases per ad set for these because it's your higher ticket item something like that this is probably where I would run s-day click instead of one day click because I want the ad set to collect more purchases and one day click is going to keep the optimization window narrower and therefore perhaps not work quite as well for collecting you know meta suggest 50 purchases per week to get out the learning phase even if that number is not exactly right even if you sort of have some doubt about the effectivess of the learning phase there seems to me to be some logic to the idea that the more purchases that meta gets the better it's going to be able to train the machine learning to do this and so yeah so I would probably say the short answer is run on s-day click and if ultimately you're getting so few conversions that you can't consistent spend you may have to Auto bid this um if if your behavior is that high if your revenue is that high and the purchase volume is that low it's really not about um total spend volume it really is about purchase volume because you need um more volume potentially to get meta spending consistently but again even there I think in most cases met is very good at learning pretty fast and so that would be a rare case where i' all right um ashin Milani the great media buyer at obvy and the whole Suite of Brands everything those guys are doing uh Ron AAW and Ron Shaw and like just insane insane set of things going on there and Ash has become a friend uh which has been really fun Ash asks what do you do for a new brand entirely great question what do you do for New Brand entirely this depends on a lot of factors it depends on my goals and my spend my capitalization and all kinds of things but let's assume I have some money to spend but not endless money let's say I'm trying to get to $1,000 a day and that's going to be a bunch of purchases each day whatever my answer is I might set my big caps a little bit higher than usual to start just to guarantee some spend in the very very earliest days but as always I would set my bid caps relative to my unit economic targets and relative to the goals of my business and then pretty quickly pretty quickly I would start spending at the bid cap that I proposed so I worked with the brand this year that spent you know uh in the very low six figures last year on Facebook and was not even spending when when I took over the account so it's not a new brand entirely but pretty new and I just built the bid caps and went you know and it was kind of that simple and so um and so yeah I wouldn't make many changes here with a new brand entirely again I may open up my bidc caps a little bit more especially if I just if I really need to learn as much as I need to figure anything else out because just in the earliest earliest days of a brand you may just want to guarantee more spend even at a lower return kind of see what happens that might be what I would do but it wouldn't take me very long to set my bid caps at my true Target and just go from there so yeah I wouldn't make major changes because of that all right Robert uh from uh perform addicted I believe is the name of the company Robert ask number one is there a way to have both vidcaps and uh bidc caps and auto bids work on the same account I sort of addressed that earlier so I'll kind of leave that there the answer is yes sort of but I don't prefer it possible um and then suggest the same um question around how would you transition from 100% Auto bids to 100% bidc cap account uh let's say $1,000 a day spend so let's let's take that example $1 th a day spend um how do you go from 100% Auto bids to to a bidc cap account what I might do is start at $500 a day Auto bid $500 a day bidc cap and then tick the auto bid down from there as long as I'm spending I might even go 250 Auto bid and it's possible for a brand like that I may flip the whole thing over to bid Capal from day one because again it's not so much spend that you're going to pile up that many purchases per adet and I may want to have some consideration for that but there you go and then the question do you separate different SKS on the campaign level or the adset level again kind of answer this already but this this gets at um uh what I basically think here is is I don't care that much uh ultimately I like having things and Consolidated one campaign wherever possible exuse for sure separated adset level for sure for sure for sure uh but the campaign level I don't care you know my friends at kinship they run a million campaigns like they just everything is a new campaign one ad set per campaign Etc and and they run their cost caps and that it's not exactly how I would do things but I think um it's perfectly fine I care more that you run bid caps that you separate ski of the adset level than I do about the exact account structure and setup because ultimately as long as you're broad targeting as long as you have your bid caps you're going to be able to hopefully get your spend through as long as it's profitable which is kind of the goal for the whole point this okay khed alamry asks how do you test new creatives by using bid controls and my answer to this is to go listen to my whole episode I did about this so I actually won't I actually won't even revisit this go go check out the show notes creative testing strategy uh episode that I did where I it's I think it's called my exact creative testing strategy I did a whole episode yeah my exact creative testing method for meta ads did a whole episode about this go check it out it's in the show notes um the short short short answer is that I bidc cap my creative tests just like I do everything else I run them against my auto autoc creative in the same campaign and ultimately that allows meta to scale the winners and push down the losers which is what I wanted to do all right Kevin Thompson at what increments do you set your budget over your bid or cost cap relative to lowest cost for example is the budget set three to four times higher than your auto bid would be he says and so basically like how high do you set your budget for your bid cap or cost cap relative to your lows cost well this is tricky some people are very worried that if you run bid Caps or cost caps you are like and have a very high budget let's say let's say you're spending a$ th000 a day Auto bid um and then you set a budget of $10,000 per day with your bidc caps now the reason you would do that is because you want to give bidc Caps or cost caps even the freedom to scale up spend where there's opportunity let's say you have a new ad hit and you go to bed and the next day and the next morning it just starts spending because it's just crushing you don't want to miss any time and so um and so you know leaving some budget room on top is a good idea some people are very worried that your your spend is going to go really really crazy and ultimately you know sort of like spend a bunch of really bad money if you have are experienced if your bid caps are in the right place I'm not very worried about this I've seen this happen basically one time ever on millions and millions and millions of dollars of AD spend I've seen about like I said5 to $10,000 worth of AD spend that was overspent on a bid cap that didn't perform right so it's it's not really a problem in the Aggregate and I'm even lobbying meta to say like you should pay me this money back because this is your machine's fault not my fault we'll see if they do anything but anyway so I just don't see this as like a major problem ultimately that needs to be really dealt with so ultimately I don't care as long as your budget is significantly higher than what you've been spending each day that way your bidc caps have room to scale up with opportunity then there you go the reason I love bidc caps the reason I'm talking about it in this episode episode is because I care so much about the bottom line of my business and the bottom line of any e-commerce business that is what I am organizing all of my advice around on this show is how to build your business for maximum Enterprise Value and the basis for the Enterprise value of your business is the bottom line one of the key principles I talk about all the time for generating a business that is highly profitable and therefore highly valuable is keeping your Opex low as a percentage of Revenue that means hiring Personnel Staffing all those things it's really really in D Toc not that hard to run a lean business relatively speaking relative to other business models and it can be done not only by keeping your team lean but by hiring incredible talent in the Philippines where there are amazing e-commerce professionals who are come at a much cheaper salary than hiring those same people in the US and yet I'm not just talking about like $5 an hour vas here I'm talking about amazing professionals where you can give them a salary that is better than competitive salaries for them in the Philippines that means you win win and they win and you entract incredible talent and you should do that with my friends at more Staffing more Staffing uh has helped me build my business and I've recommended them to multiple people I just talked to a friend the other day who I first recommended them to who is now up to like nine or 10 members of his team from the Philippines like seriously they are amazing at at recruiting onboarding training coaching great english- speaking talent in the Philippines for all areas of your e-commerce business I love my team that I work work with they've been an incredible Edition you will love them too go to more now.co if you are thinking about expanding your team in any way any part of your e-commerce team really any part of the business go to more now.co tell them I sent you uh and you will find amazing talent while protecting your bottom line in fact while seeking to grow your bottom line all right next question doe from RAB bahara I'm almost certain I'm pronouncing your name wrong sorry about that do you ever turn off ads or ad sets in your mega CBO bidc cap campaign what if they spend above the cap over a reasonable amount of time and so this references the fact that generally speaking I try not to turn off ad sets almost ever or ads almost ever uh because I am letting the bidc cap decide how much to spend for me and sometimes an ad that isn't spending for a while will pick up spend later sometimes an ad that spends a lot will come down later but question is is there a point at which essentially you believe the bidc Caps are not working correctly because they are uh the ads keep spending over your target over a long enough period of time the answer to that question for me is yes I have seen this and as I've referenced in this episode it has happened to me fairly recently but it happens so rarely that uh I don't really worry about it so yes so I have seen this occasionally and sometimes I'll also turn off an ad or an ad set if it is just not spending at all for a really long period of time and I just want to stop dealing with changing the bid caps on it occasionally if you you know the aob changes or if there's a different offer change or whatever I just don't want to manage it something like that and so that's the that's the situations in which I'll do that but generally speaking I really don't turn off ads or ads that's very often at all and if an ad is um is spending and getting me a return it's worse than my bidc cap it has to really be doing that for a long period of time before I I'm like really ready to turn off most of the time I just will not do that uh because um you know and people also think about this as a spend issue when really it's about a number of purchases so they'll they'll think like if it spends $1,000 you know if it spends $10,000 then and and your performance is coming in worse than your bidc cap is set at then what do you do well $1,000 $10,000 are really different first of all but secondly it's really about how many purchases $1,000 with 50 purchases is really different than ,000 with five purchases not so much because the bidc cap can't learn at $1,000 but because you're still really in small sample land at that point and even at 50 purchases you might be in small sample land so um so yeah so it's really really rare that I do it what I would probably do first is lower my bid cap if if it's happening too much because a lot of times if the if the machine learning is spending on it it's some kind of a good sign about the performance of the ad so if I'm really feeling nervous about it then I'll lower the bid cap a little bit but mostly I try to stay away from tinkering in those kinds of ways mostly I just don't see this being a real problem and this represents what people's maybe biggest concern about bidc caps is they like the idea a lot of being able to have meta only spend your money when it's going to work but they think it's not going to work they think that the tool doesn't work very well is my friend Jess Bachman who I me you know had the first question on this episode referenced one time you know bidc caps will only spend your money if it works is what it says on the can like and that's a good that's a good joke basically it's a good way of saying it's like people are concerned about this not actually doing the thing that say is going to do in my experience that's pretty rare um nor especially actually normally I think that it under that if there's going to be a challenger it's an underspend problem and usually it's because I'm not getting enough purchases in the adset to do that and I need to switch over to 7-Day click from one day click Etc that is probably the biggest thing I would do and maybe the thing I'm shifting my own position on the most is that um I tend to optimize for one day click on almost everything across the board most of my uh clients they want to get somebody to buy right now you know and so even if the uh consideration cycle might be a little longer I'm optimizing for one day click but then I have an eye on the behavior of the customer for that one day so I'm sort um setting my bid cap relative to a projected Behavior after that one day that I can measure but I'm starting to think more about pushing more uh more ads towards uh 7-Day click optimization purely so that those ad sets get more purchases piling up in the uh purchase window that they want to um in the purchase window that will help the ad set say out of learning so there you go all right Kusha sha asks how do you plan or stick to a client's monthly ad spend budget with B with bid caps and an inflated budget spend can go crazy I get it usually only spends on the volume that there to capture that upside but it's not always that straightforward this is another great question really the question is like if you have if if what if the client has is really aimed at spending a very particular budget then how do you keep within that budget and here my answer is this really depends on the client so um for most clients what I'm going to actually first of all in DDC I rarely deal with a client who thinks about their ad budget that way instead what typically happens is they're either under spending a goal and they're going to be stuck with too much inventory or they're overspending a goal and they're burning through inventory too fast and so the constraint on the spend and and the sort of external Factor that's dictating how much I can spend is really about cash management in inventory more than it is about you know hey we had this budget you need to spend it and so in those if I do have a a client who's thinking more in sort of a traditional budget way in that case I'm going to do my best to tell them to not think that way I'm going to say you just shouldn't think about your business this way if I can spend twice as much and you have the inventory to support it and I can do that at or under your CAC yes you need to plan your cash you need to think about all the other things in your business that are related to that operational issues related to your 3pl are you g are they going to charge you overages if you go way over your forecast your own Warehouse are you staff to fulfill those things all kinds of questions like that operationally to support uh a massive increase in performance but assuming those things are all sorted out and most times my experience is that when operators see that they can spend more money than they thought and they can generate more more uh profit than they thought they are very happy to go try to solve those problems in order to make it so that I can keep spending okay so um so if I am overspending a client's budget because the performance is good my my way of handling that is simply to lower my bid caps and so essentially what I'm doing is saying I want meta to take higher efficiency on less volume that's what I'm doing so my bid cap goes from $100 to $80 it's going to constrain the spend but it's also going to do that while increasing the efficiency it's going to increase my row ass right lower my CAC so so that's the way I would typically handle that now the the exception to this is larger more Enterprise type clients who are more concerned about you know they they have a budget that's preset to spend they can't really function in that way they're just not as Nimble as smaller brands in that case I actually might just go to an auto budget it's probably not the best way to allocate your money I get that um you know there there's maybe some ways you'd handle that frankly I don't deal with a lot of those because it's not my preferred kind of client to work with it's just my favorite work is with you know smaller entrepreneurs who are building the thing themselves but that's probably the way I would handle that I would just if if the main thing that a client wants is to to deploy a fixed amount of budget then this is a case where bid caps are not the best tool you may still try to manage that by running something like bid caps that way you get a weekend increase in spend versus a you know uh weekdays a smaller amount of spend Etc but if there you know I may just go to an auto budget at that point now even that meta these days is saying hey we might spend 75% more of your budget than usual uh if the performance is good basically you know at Peak periods Etc so that can still be a a challenge in some ways or another and so I may run bid caps and just watch this really closely manage it really closely Etc the other thing that could be a really big help here is sort of forecasting and weekly reporting in a way that um and maybe even daily reporting if it's important enough to the client in a way where you've got clear budget and clear pacing that you need to hit and then you just sort of manage spend according to that and if you do that daily and you're you're adjusting your bid caps based on that spend volume more than on sort of pure efficiency plays then it can uh that can work really really well so that's the way I would think about Ray Lee asks in what situations have you ever felt like cost caps worked better for a company than bidc caps not many is my answer to this I actually will tell you that I basically don't understand the point of cost caps I don't know why people do this except because maybe it's slightly easier to manage because it's managing to an average I just don't really know what the point is that's the truth of it when I I believe meta's attribution is basically close to right it's not exactly right but it's close to right and if I want to make an adjustment to that then let's say I say oh meta is Under reporting by 5% 10% whatever meta is almost never over reporting if you're based on a click-based attribution model and so so in that case I would just say like run tell tell meta uh okay if that if if you're telling me basically what's true about the return that I want I have a CA Target to get I want to be at or under that Target and I don't want to subsidize bad spend with good spend you know I don't want to take I don't want to go to a situation in which um spending a cost cap will allow will go and get customer over my CA Target there's a name for that and it's called a cost center when if you have a CA Target based on the unit economics in your business then any dollar you spend above that CA Target is a cost center assuming that your ca Target is set that way now now some people might say yeah well what if you want to spend more aggressively or whatever and I say fine raise the bid cap that's fine but don't do this thing where you allow meta to sort of as it says dynamically bid above your average that you've set in order to go get net out the average in the end that really doesn't make any sense to me I don't really understand the point and actually one of this is like the most meta conspiracy theory I get there are like so many nudges that meta gives you to use cost caps instead of bid caps but none of them say that your performance will be more efficient or you'll get more vol more volume at the same efficiency they're all pushing you uh to you know like like for example if you're if you have an adset that is out of learning and is set on a bid it will note you it will note to you that you are quote bid limited and I've had clients ask me why does this adset say I'm bid limited what does that mean well what it means is meta is constraining your spend based off of your bid I.E the tool is doing exactly what you asked to do right so and it will tell you sometime you know I've even seen it recently where like will force you when you duplicate an ad set it will default you into cost caps instead of bid caps because it says oh you'll get more volume but it doesn't say you'll get more volume at the same efficiency or a better efficiency in fact it doesn't work that way so there's all there's like an extra step to use a bid cap instead of a instead of a cost cap cap is buried on the bottom of the selection all the only reason I can think of this is that it's like one of the best ways for meta to hide some bad spend that still piles up for them as money in their pocket uh I think meta's incentives are very much aligned with yours as an Advertiser and I'm not much of a meta conspiracy theorist like this I think meta reports pretty well reports very accurately the tool mostly works I think they're trying hard to serve advertisers because what they realize is that when you spend your money on meta's platform and it produces a good outcome for your business you'll spend more money on their platform and that's ultimately the way for them to make the most money but this is one of those cases where I just really don't understand why you would use the cost capap over cap assuming that you believe meta's attribution is pretty much close to correct I don't get it I don't get it at all and if you um unless you really really really are saying you want an average and you're willing to spend a little bit above that average at times as a way to sort of keep your spend a little more aggressive and keep warming the top of the funnel or something I guess you could do it that way but otherwise I don't see much of the point so let's see we got a few more here let me check them uh okay Ben mendleson asks what are you doing your CPA is 4X which you've sent your cost caps at over the past seven days uh I'm assuming you means bid caps but maybe cost caps as well essentially what do you do in that situation I talked about this a little bit in this episode already but the other thing I'll say is just um the way this question is framed is probably the wrong way to look at it so what do you do when your CPA is Forex which you've set your cost caps at over the past seven days well I don't really care about seven days I care about dollars spent and purchases Acquired and purchases lined up because seven days could mean $ thousand dollars for somebody and it could mean four purchases and so I don't know I don't know what Ben's business is like I don't really have an idea but in that case I would say I wouldn't do anything you just are in a small sample at that point it's possible they're running ASC with cost caps here which I've seen be pretty pretty volatile when I've run ASC for clients I'm not a big ASC fan at this point I don't really see the point of it but that's kind of a discussion for another day um but yeah that's the way that I would think about this is like I would just look at it and say I I don't um I don't think you're thinking about this right in terms of a time period I would think about it as an amount of spend the lower your spend the smaller the sample the more fluctuation it will be the analogy I always use here is if you flip a coin 10 times you know it's very very rare that you get 10 heads it's very rare but it could happen but if you do a 100 sets of 10 coin flips you're going to have I think you know five of those are going to come up or three of those or something like that I forget what the exact math is but they're going to come up you know nine heads one Tails or nine tails one heads and I think it's it's like 25% come up five and five and so the point is the smaller the sample the more volatility there is in these even though the larger in the larger sample it will work out to being something like 50-50 heads and tails uh over that over the course of that larger sample and so sample size is more concerning to me is is the bigger issue to me spend volume purchase volume than than actual number of days all right Brew Sawa ask the question be interested I'd be interested in how you restart an ad set that started to slide down on spend do you clone and add new creative drop new creative into existing or what essentially what happens when you have an adet that's not spending as much as as you could before well if you're running bidc caps what I'd say is the bidc cap is doing exactly what you asked it to do if the performance is going to be worse my short answer to this is I would generate new creative I wouldn't go try to revive the ad set I would go launch new creative into the ad set and I'd keep an eye on things like seasonality and some of that possible that your performance is getting worse in a way that has nothing to do with your ads but that's just that the seasonal Trend in your business is what it is and so you have to start planning your business for that seasonal Trend and that might mean product development to go address the down Seasons it might mean cash management to to go bigger you know I've seen all kinds of crazy examples of this you think of an extreme holiday brand right like uh their February is going to be really different than their November and so they need to plan their business according to those and you can try to fight that or you can try to lean into it there's all kinds of ways handle it but assuming it's none of those factors my answer is I wouldn't do anything I would launch new ads into a new ad set and see if I can beat it and I would trust that the bidc cap is doing exactly what you asked them to do by constraining spend that isn't working all right let's go to RZ rdtc asks do bidc caps look at the conversion rate of the store or the conversion rate of the campaign if it's by the store how do I set up campaigns where the countries I'm targeting have different CVR rates if it's by campaigns will separating cbos by countries solve that so by the store or by the campaign bidc caps are feeding are responding not to anything on either your store or your campaign they're responding to your adset and so uh you know I think there may be some information stored at the pixel level but ultimately uh it's by the adet and so if as your adet launches it may have some kind of regression built into to the broader conversion rate of your total account uh but basically what I would say here is uh launch your new adsets to different uh areas and if there's going to be a massive conversion rate difference in different locations then you may want to Target locations differently or you may just want to assume that's part of the broad targeting you're going to build internationally and um and Trust meta to sort of distribute to the best opportunity in those places so yeah the the in the the conversion rate optimization is going to happen at the adset level as far as I understand it and therefore you're going to get feedback at that level okay Bernie is in the arena asks what percent do you set bid and cost cap over CPA understand you want to set it higher but 10% for cost caps 20% for bid Caps or do you want even more room my answer so essentially like above your current CPA Target how high do you set your caps my answer is I don't build my caps based on my actual CPA in platform I set my caps based on my unit economics so I understand understand what the value of a customer is to me if I have let's say I have a brand that's uh got 65 points of margin and has 4 100% LTV in a year something like that well I might set my bid caps to take a first order loss and make my money on the LTV if I have a brand that has 80 points of margin and 10% LTV then I have to make all my money on acquisition and I want to set my caps to generate more contribution margin for me on first purchase and ultimately I would ladder all those back ideally to a cohort-based forecast Mar model where I've forecasted out what my business will look like so I've sort of designed my business I've designed my p&l and this cohort forecast model would include I'll send a link to some my information about that but this cohort forecast model would include in uh the model everything in my business so I'd forecast my entire p&l and I would I would look at okay how am I doing based off of uh not only my ad spend but how is this business going to look based off of my uh entire higher business forecast my Opex forecast my cogs all those things give me an outcome and then my spend plan my C my advertising plan is part of my broader business plan all right and that then becomes the way that I think about what happens in my business overall that's going to um factor in things like like I said your LTV uh factor in your margin all those kinds of things and that's going to help you visualize what your bottom line the bottom line of your business is going to look like you may want to take for example depending on your business more margin um at less volume you may want to take more volume with less margin as a percentage but increase the outcome I mean there's all kinds of ways to think about this but that's the way I would start with business design think about p&l design think about cowork forecasting then go from there and then build my bid caps off of that I wouldn't really be about what my actual performance in platform is and I think this is the last question today let's see from Dom ATD 1997 what steps do you take when an adset is spending full budget at CPA over the bid capap usually happens on bad days but defeats the purpose of a bid capap so the reason Dom's question is not the same as other questions I've gotten here about like sort of what happens if over seven days you get this Dom asks the question what on a bad day what happens when you're when your adset spends the full budget over your bid cap okay well uh you know he again he says usually happens on bad days that notion usually happens on bad days is the mistake in this question the idea that like you would have a bad day so so the point is think about what forecasting does forecasting is giving you a probabilistic outcome that will get better over a larger sample size so a quote unquote bad day depending on your sample size may be a decent amount of purchases you might even have 40 purchases at one point and that still might be over your bidc cap Target and that would count constitute your quote unquote bad day well if that happens uh all right well then what would I do I would do nothing as long as my bid cap is set correctly relative to my targets and all those things generally speaking assuming there's no weird extenuating circumstance I would I would do nothing because probabilistic forecasting by definition is not going to be correct all the time in terms of the actual outcome it's not going to be that precise but it's going to be the best way possible to make decisions because the alternative to that is I get in there with my brain and I start meddling I start making decisions oh gosh the bid caps I got had too much spend today it came in over my CA Target and has a bad day and so what should I do I should lower lower my budget you know or I should lower my bid cop or something no no that's not the way to think about this the way to think about this instead is keep letting the probabilistic forecasting machine make probabilistic forecasts which are going to be a much better uh future predictor than you are and trust that in the long term they're going to work out it's the coin flip analogy again any given one set of coin flips has a pretty broad range of outcomes but a hundred sets of 10 coin flips is going to generally produce 5050 heads and taals over the total over the total sample set um you just have to keep remembering probabilistic forecasting is much better way to make decisions about the future than your brain and don't worry about a quote unquote bad day because a bad day really might mean nothing at all all right okay so I have one last question here and I'll do that and it's similar to some other questions but I think I think maybe some slight differences at Red symbol says when one must run both Auto bid and bidc cap campaigns is a solution to create two different ad accounts one for the bidc caps and another for everything else will that prevent the cannibalization you discuss in the hidden place where your business is losing tons of money which is an episode I did earlier I wouldn't do that I would not run two out of cting the reason is really simple is that I believe that meta is pretty accurate in its uh in its attribution as I've said before and so I just don't want to do anything that's going to screw up my ability to manage my attribution in meta if I run two ad accounts it's going to just throw off how meta measures absolutely everything that's happening in a way that it's ultimately not going to be very helpful for my business so no I would not do that I I think if you have to run Auto bidget budgets for some reason then you just have to run auto budget for some reason it may make this tool less effective if there's a third extenuating circumstance that I'm not thinking it's kind of [Music] that all right there you have it an episode of just question and answer I had a lot of fun doing that I hope that you have to give me some feedback on that there was too much in the weeds it was too detailed I don't know there's a bunch of stuff referenced in that episode that are all in the show notes of course go get the cohort forecast you you can get my unitex economic sheet as well those things are all on my website and just go out there and you'll be able to get that those documents from my email popup I don't even have a newsletter so I'm going to ask for your email address to give you those things but I promise I'm not going to spam you with all kinds of stuff that's the way to get those free resources so you can set your bid cops according to your unit economics you can also build a cohort model forecast for your business and hopefully that will help you a lot if you would like another AMA another question and answer episode I'd love to do it please email me your questions podcast ajg.com or hit me up on Twitter andrewj Ferris is the place to find me there and if you have follow-ups to this episode I'd love to hear from you about any of that stuff too of course I'd love if You' rate a review I'd love if you would send this episode to a friend if it was helpful for you maybe it will be helpful to them if they're in our space as well and don't forget if you are expanding your team to look in the Philippines for incredible Talent with my friends at more Staffing who will help you they've helped me build my business they've been an incredible partner to me to be honest with you and I would love to recommend them to you get them up if you have questions about that you can email me podcast a.com love to help you think about whether or not that's the right solution for you and I will be honest with you if I do not think of this all right that is everything I've got great great great episodes coming up I've got uh juu coming up uh from hero Cosmetics had an incredible massive business outcome for her you know hundreds of millions of dollars exit from her business I've got a really good opening the books episode coming up I've been uh talking about that one for a while but the point is you should subscribe there's just great episodes coming you're going to like them more slow episod the whole thing thanks so much for listening you get the idea I'll see you next [Music] time I know the my eyes CL and [Music] I