7 Reasons Your Bid Caps Won't Spend transcript

[Music] foreign ER Ferris podcast thanks so much for joining me for another episode of the show today I'm going to answer one of the most common questions I get because I talk a lot about using cost controls to run your meta ads account vidcaps cost caps Etc I often get asked on Twitter and uh with clients everywhere why are my caps not spending I'm trying to use bid caps I'm trying to use cost caps but my ads will not spend if I'm using caps despite that when I run auto bids they perform perfectly fine relative to my expectations and then I have to come over to caps and it just doesn't spend at all so what's going on so I'm gonna try and answer that question today now I'm going to answer it theoretically but I'm going to do my best to get every reason I could think of as to why your bid Caps or cross caps are not spending if you have been listening to watching my show for a little while and been vexed by this I'm hoping this is going to help you a lot let's jump in all right I came up with seven reasons your bid caps may not be spending I'm gonna call them bid caps in this episode and that's because that's what I use those are my go-to I use bid caps but I don't really care if you're using Caps or mineral s or whatever in your meta ads if you are paying attention to this episode this should apply across the board but I'm gonna call them bid caps just because I think that's what I'm most comfortable with that's what I think is the best method for most brands to be doing most of their bidding with so there we go so I'll use seven reasons let me just set up the problem again really fast the problem is many people will be running an auto bid on their ad account and they are spending some amount of money all the time and their ads are spending and then they say okay I listen to somebody like Andrew or Taylor holiday or whoever and they told me that I should be using cost Caps or bid Caps or whatever in my ad account and I try and do that and suddenly my spend goes way way down now I get asked that question sort of theoretically all the time and what I don't have time to do is go look at every ad account where that comes up however I do think there are some common reasons that it happened some stuff I've seen when I've done it in my accounts though I'll tell you from the outset this is actually not a problem in the ad accounts that I run right now I like I don't really have an issue of bid caps not spending and I don't mean that to say that that's because I'm awesome I mean that to say I think it's because when you get this right and you do a few things right this actually isn't as big of a problem as you think if you're not spending at all it may indicate something more fundamental in your business and and so and so we'll get to that in just a second okay so let's talk about it seven reasons why your big caps may not be spending number one they actually are spending just not as much as you want because they're doing what they're supposed to so let's just review what a bid cap is in this case and again this would apply to a cost cap or mineral I spend in slightly different ways but we'll we'll do it with a bid cap first so a bid cap is where you tell meta ads do not spend my money on a customer unless your machine learning based forecast predicts that you can acquire that customer based on an expected click-through rate on my ads and an expected conversion rate on my ads and the quality score of my ads which are just those two things do not bid on that customer do not do not put my ad in front of that customer unless you think I will be able to acquire customers at or below a certain threshold of cost per acquisition so for example let's say I have a hundred dollar average order value and I want to get a two to one on my ads I would set my bid cap or excuse me not that I want to get a two to one on my ads but that I I don't want to spend more than fifty dollars to acquire a customer that would be a bid Gap if I wanted to two to one on my ads I'd use a cost cap that would give me the average but for a bid cap I would say I don't want to pay more than fifty dollars for a customer So Meta using the machine learning based forecast only spend if you think you can get those customers at 50 or less okay so that's the idea and so it's possible then that What's Happening Here is that the moment you switch your account over to bid caps let's say meta is spending but spending less than you're spending on Auto on your auto bids except that now it's the only conversions that meta has gotten rid of is actually the ones that you didn't want the whole reason you switch things over now there's going to be some confusion on this right away and I'm going to come back to this a couple times because it's possible that you eliminate a decent amount of spend and people will go wait a minute I was getting a two to one on my ads I was getting a 50 CAC on average but then you start spending way less so why did that happen well it's possible that what's happening is that what's is that meta ads is actually just cutting off the very sort of like bottom of your spend I'm gonna come back to this in a little bit but that would you should if you're getting a two to one on your ads right now you run bid caps your spend should go down it should go down so that's the first thing I want to point out they're spending they're just not spending as much as you want them to or expected them to and in that respect they're doing what they're supposed to and that's really the big point that I want to start with here it's possible that the reason that your bid cap ads are not spending is that they are doing exactly the thing you're asking them to do which is to cut off bad spend or cut off spend that is going to perform above your CAC threshold okay so just remember when you go in this is the reason I made this number one that that's actually the whole point the whole point is to cut off whatever part of your spending bad and then of course there's some other points along the way too which is related to a few of the things I'm going to talk about here in a second so that's number one okay they are spending just not as much as you want number two related to that and this is sort of the other most obvious reason your creative or your website or whatever isn't good enough your bid caps are not spending not because meta ads does not have enough information but because meta ads has plenty of information and that information is telling it you are not going to produce the result you're trying to get many times I hear this question and what is behind the question is someone saying you know I don't know I I like my ads should be spending or at least I want to see them spend a little bit more before I determine that they are not performing well enough to turn them off but I think meta ads is actually preemptively turning off ads for you so to speak it's actually quote unquote it's actually turning them off but it's quote unquote turning them off okay because it is predicting very very quickly based on user engagement signals that your ads are not going to perform and I think this is another massively underrated thing about bid caps I think meta ads can figure this out very fast I think meta adds meta's machine learning like within a couple dollars spent it generally has really strong signal that this ad is not going to produce the kind of value that the that the user has asked me to produce and so it's just going to cut that off ahead of time but like I said behind this question of like why aren't my big cast spending people are kind of going like wait a minute is it not spending because it's not getting enough information and therefore it's not giving a fair chance to my ads and and sometimes we will combine that with the idea that sort of like you need to season the pixel first quote unquote if people ask something like if I have a new account should I use bid caps and my answer is yes use bid caps right away and I'm going to come back to the new account thing in a minute but basically one of the things you should be considering somewhere in your process of why your bid caps aren't working is simply that it's because your ads are not expected to perform at the level that you want them to perform at that is they're doing once again exactly what they're supposed to do so that is I think an important reasons why why this may be happening for you and and it's something you should consider closely there may be all kinds of other errors and we're going to get to those in a second that I think are also part of this but it's possible that they're doing exactly what you're asking them to do and they're saving you from spending that money and and there you go okay so number number one they're they are spending just not as much as you want number two your creative isn't good enough or I should say more simply your performance is not expected to be good enough whether it's because of creative or landing page or product or whatever could be all kinds of things offer but it's just it's just they're just not Slaughter to do well enough okay and this would lead to another third one here which is that possibly they're just set too low it may be that you're just asking Neda to perform better than you could reasonably expect it to because you just want your most efficient spend or whatever it is but that's number three you might have just set your bid caps too low and actually you would be okay if you took a little bit of a higher number and this is where sort of determining your threshold for performance is really really important work you need to know in some real way in some tangible way what your performance threshold what your performance Target is going to be and and it's possible that your ads are set too low because actually your margin is like too crappy and because your margin is so is not good enough you just can't reasonably expect to get a good enough return on your ads to make to give you profit like like you actually may have your big caps may be set too low not because you've done some math wrong but because your business isn't that good and so what I mean is like if you don't have that great of margin and also you don't have that much LTV and therefore a customer is just not that valuable to you the problem isn't your bid cap that problem is your business and you need to go back to the drawing board and understand whether or not this is a good business or whether it's a good business to be in on meta ads right it may be something like that maybe you actually do have a decent business but you just can't afford to pay for customers you have to grow your business in some other ways and and you know again there's all kinds of reasons for that that we won't get into in this episode but but yeah they may just be set too low and if they're set too low then you might not spend now in that case if your bid caps are set too low one possibility is that actually you are setting a bid cap to an average Target instead of a top Target and this is the other big possibility here and it's this is where it's really important to understand the distinctions between bid caps and cost caps again a cost cap is going to produce for you at average CPA a bid cap is going to bid to a maximum CPA and so let's take my example earlier if I want to produce a if I don't want to spend more than fifty dollars to acquire a customer then I should run a bid cap at 50 and actually my expectation should be that my my realized CPA the actual CPA is lower than that because what it's what meta ads in fact it should never get to 50 over at least enough time for meta's sort of averages to to hold in the in in the larger sample because I actually meta's auction is called a second price sealed auction what that means is that as you bid a certain amount as all of the bids come in meta is going to award the impression to the second highest bid so the person who wins the bid is the person with the highest bid but then the person with the highest bid is the winner and they pay the second highest bid amount that's how a second price seal auction works okay so if I mean I don't I can't even imagine how this works at the impression level in Real Time across millions of Impressions all the time but just like let's say you and I you watching this and me talking right now are bidding on the same impression and I'm bidding at a number that's going to be a 50 CAC in your bidding and remember that's a 46 dollar CAC and and you are the second highest bidder on that impression right I'm going to pay the 46 dollar price so I win because I have the higher bid but I'm going to pay the 46 dollar price that's the way the auction works and so actually because of that that means that you're you will never actually hit your bid cap in the average your your actual average row ass will come in your average CAC will come in better than your than your bid and so so if you set your bid cap where you set your cost cap expect volume to decrease because if you bid for the average it's going to be really different than If you bid for the top threshold this is also why I think you should use bid caps and not cast caps you don't actually want the average you want threshold you want to you want customers to come in at or below a certain Target whatever that Target is what you should set and and so there you go so it may be that your your bid caps are simply set too low which is kind of another way of saying that your performance isn't good enough okay but but you may have some room to go up with your bid caps relative to unit economics you should know those things as well as you possibly can and and there you go all right number four this is a really common one it's really easy to sort of get wrong and that's you have your attribution settings wrong so don't forget that when you set your bids at the ad set level you have the opportunity to bid in one of at least four ways though actually I've seen some recent changes that maybe there's a fifth way coming and that is one day click seven day click one day view combined and your bid is going to be relative to the attribution and optimization that you set so if you bid a one-day click Target but you are actually expecting a 28-day click return and you're looking at a longer time period to measure the value of your return then those two things are going to be misaligned and actually it's probably more likely to happen the other way right where if you if you bid maybe the way it would happen actually most likely is that you bid a one day click Target a seven day click Target but you have a one day click a potential return and so for example you say oh I want to get 25 CAC on seven day click and then you never actually get there on one day click because you're you're if you do that you're giving you're giving meta seven extra seven full days to realize the value of the click and to assign that to the click that you bought so if that doesn't make sense the point is make sure that you know that you are aligning where your bid is set relative to the attribution that you've set for me I bid almost everything one day click occasionally a bit seven day click I don't even know how this plays with you attribution in fact I don't think meta factors in view attribution into a bid on even if you include view attribution in there I don't know I can't even imagine why I would include view attribution in my default distribution settings and so but I'm betting one day click almost all the time the only times I would go to a longer time period like a seven day click would be if I know for a fact that this customer is going to have or this client's gonna have a long consideration cycle with its customers and I wanna I wanna sort of bid into that a little bit more so that might be the reason I do that but most of my clients are going to be on one day click basis and I'm going to pursue I'm trying to get that return as much as possible in that case I'm setting my bid relative to the fact that I know that I'm not actually going to realize the full value of the clicks that I've gotten on day one what I mean is there's going to be plenty of people who click today and buy in two weeks and so I want to factor that value into my bid so I'm gonna actually take a higher CAC than you would expect on a one day click basis because I know that there's going to be some additional clicks that are going to come over the next couple weeks in fact over the next four weeks on the 20 I take click return that meta ads gives me and because I'm expecting that because I'm building that we call that delayed attribution because I'm building that into my Approach then I know that I can then I can actually take a higher attack on one day and then expect some additional value to come over time as people get my emails and all those kinds of things okay so in any case aligning your bid with your attribution setting is really important if you get that wrong it's possible that you'll constrain your bid too much or actually you'll open up your bid too much because you've sort of not understood this quite correctly and you'll you'll get customers for a little bit more than you meant to so you have your attribution settings wrong make sure you understand that in this case I would say this is this episode I don't really have time to dive more deeply into that issue but if you're confused right there or if something I said makes you go like wait a minute what what is happening then that's something I would go look into make sure you if you don't deeply understand what I'm saying it's probably some somewhere where you can do some more work because you should deeply understand that in your media Bank why should you use more Staffing to hire incredibly Commerce talent in the Philippines two reasons among the many the first is that more staff has built their business around quality not 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being cheap you have to find great quality people and that is available to you with Incredible Talent for e-commerce in the Philippines more Staffing is built to help you find them I am personally doing it right now in my business and they have been a joy and a pleasure to work with go check out more now dot Co to work with more Staffing and hire incredible virtual professionals from the Philippines for your Ecommerce business today [Music] all right number five you are not generating enough conversions relative to your spend to get out of learning and to allow meta ads to work as best as it can now this is this is I'm actually sort of mixed on whether this is a real problem or not but I have occasionally seen bid caps not work very well in this case and here I'm I'm not talking about a problem of saying like it's a new account and therefore this is a problem that's not that's not all some people will say this to me as I mentioned earlier they'll say well if I have a new account should I run bid cap and my answer is yes because because Matt is actually going to optimize your bid caps at the ad set level and it's going to take information into account fresh on each ad set each ad Etc and so it will compile information quite quickly all right what I'm thinking of more here is like brands with very high average order values and and not quite enough spend like I've seen furniture brands for example where it's like long consideration cycle very high aov and you know I remember seeing one brand a while back that was spending like I don't know hundreds of thousand dollars a month and still only generating a couple hundred conversions across a bunch of different campaigns right that that math might be a little bit wrong but because the aov got high enough that the value like it wouldn't actually produce that many conversions and so tons of ads would be set in in learning all the time and while I'm sort of mixed on the importance of the learning phase Etc I do think that sometimes with this sort of like built-in forecasted bidding if you know that's going to be a problem in your brand it can make this kind of bidding work a little bit worse in some cases so far as I can tell that probably still in some way means that your ads aren't performing at the level that you need them to to hit the bid cap number that you've sent that you've set but yes if you have a high aov relatively low conversions relative to your spend this can create some problems and by the way this is one of the underrated things about running a low average order value brand people love the idea of having a high aov for all kinds of reasons that I actually don't even fully understand but the great value of a low aov is that especially in the earlier stages of a business you don't necessarily need very much money to start producing conversions on meta ads and learning pretty fast whereas you actually do need quite a bit of money on for advertising if you have a higher aov to produce conversions it's just going to make make things a lot harder all right number six this is something I talked about in my last episode and so I unpacked it more there but I'm going to reference it again here and that's that you're using your bid caps that what I'll call the bottom of your auto bids and here's what I mean if you are auto bidding 20 grand a day in spend and then you decide wait a minute I'm gonna use bid caps because somebody else told me that that would help me create efficiency and scale or whatever then what's going to happen is that you're telling meta there spend twenty thousand dollars make sure you get through that spend you must do that with your auto bids and then on top of that spend as much as you can at or below my price and then people typically will do that and they'll set their bid cap at their target row ass even though they're actually already auto bidding all the way up to a number that's producing their target roast so let's say their target OS let's let's stick with CAC terms here let's see the target roast or the target cack is fifty dollars you spend twenty thousand dollars or spend as much money as they can auto bidding at that 50 Target which means if they're getting an average of 50 CAC that means some part of that spend is performing worse than 50 right because let's say it's twenty thousand dollars if they'd only spent fifteen thousand dollars on those same ads they'd probably be getting a 40 gak or something like that and so the the last five thousand dollars is not actually getting you a 50 cash it's getting worse than a 50 pack and it's pulling that number down until you get down to that average and so if you run a bid cap at that 50 number now you've sort of got no leftover spend to hit it now I'm not I'm gonna stop there if that notion of what I'm gonna call incremental row ass doesn't make sense go back to my last episode and listen to or watch that episode including it's probably good to watch on YouTube I have on that episode a chart that I sort of brought up that Illustrated this point I think it's a really important point for understanding the details of your media buying and for understanding where there's some cost centers in your business that right now you just might not see but basically I think that you should be running almost all of your spend on a bid cap and if you're very high spending maybe you know maybe you found that ASC works great for you advanced advanced shopping campaigns work great for you and therefore you're going to you know put some of your spend let's take my twenty thousand dollar per day example maybe you put five thousand of that into ASC because you just know you're gonna spend that money every day you take your best performing ads you put them there if you like the machine learning there whatever that works that's fine I suppose but I love I don't do any accounts that way I run all my accounts bid cap only and or cost control only occasionally I'll do Monroe ask for a couple reasons that are not worth getting into here but if I'm running an account and I'm running any auto bids just know you're telling better you have to soak up that spend before you get into any of the rest of my bid cap spend so that's that's the key point so big caps at the bottom of your spend are actually probably going to be set at a Target that is worse than what is achievable for you at the bottom of your spend because the bottom of the bottom of your current spend before the bid caps is probably already worse than the bid cap again go back to my last episode if that point didn't make sense number seven and this is another thing that I've talked about a lot but I think it's another thing that's sort of tricky here it's this there are less available auctions at your price today one of the biggest mind mindset shifts you have to make as a media buyer if you're switching to bid caps is that you need to you need to realize that your daily spend is going to fluctuate wildly if you run bid caps and that's also true with cost caps and probably with mineral s and that's because you are asking meta to get you a certain return on your ad spend per auction per available auction right so if there are varying numbers of auctions in a given day if there are less auctions one day and more auctions the next day then you are likely to get less spend through today and more spend through tomorrow if there are more auctions tomorrow it's very common on the weekends weekends more daily active users on meta ads people are not at work and therefore there are more options to win and so I regularly see massive spend increases on weekends or on holidays or something like that than I do on other days and so actually this is sort of another way of saying your your ads are spending they just don't spend at the same level of consistency as Auto bids do and by consistency I don't mean performance they actually spend incredibly consistently on a performance level people but they spend they but the but the volume varies a lot more and this is where it can be a little tricky and this is also where I tend to like to do my analysis of my performance on a weekly basis not a daily basis because otherwise if you look at things on a daily basis you're too likely to make changes based on something that sort of isn't real and and what you should be doing is instead don't make changes day to day instead allow the fact that there's going to be some volume fluctuation allow that to just be part of the game and build your planning around that and start to look at this on a weekly weekly level so again I actually talked more about that concept also another episode uh that was the definitive argument for cost controls and so I think I referenced him as costcaps in that episode but the same again same thing applies here and so go listen to that episode as well both that and my previous episode links will be in the show notes of course as always all right I'm sure there are more reasons but those are the seven that I could think of I'm just gonna recap them really fast they are spending just not as much as you want uh which is actually because they're doing what they're supposed to that's number one number two you're creative or your performance just isn't good enough so they're constraining your spend on a performance level and it's not because you did something wrong it's because they're actually constraining performance the way that you want them to number three they're just set too low for all kinds of potential reasons but but they're set to low number four you've got your attribution settings wrong your optimization and attribution settings wrong number five you're not generating enough conversions relative to your spend typically in a high OV low spend account I also noted there this is not a new account issue so far as I can tell number six using them at the bottom quote unquote of your auto bids and they're soaking up only the worst part of your spend and number seven there are less available auctions at your price today and if you just hold tight and wait till tomorrow or the next day or the next day you'll actually get increase in volume over that time all right that's my answer for you if you still are not satisfied with any of those in your account well you should reach out to me and we should talk about it hang on just for a second after the break I'll tell you how to reach out to me and how to tell me why I'm still wrong and why they just don't work for you no matter what I tell you [Music] all right that was a mouthful for me I have my notes here today I often do this show without notes I just got a few ideas in my mind but I'm trying to keep all these straight as best as possible I'm sure I left some out and you should tell me about them if I did and the ways to do that would be to reach out to me on Twitter at entry Ferris you can email me at podcast today jfgrowth.com those will be the best places to do that I would 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