The Ultimate Case Study: Facebook CPC vs CPM Bidding

Posted on Apr 13, 2011 in Case Study, Facebook Advertising | 11 comments

This was a case study i did for another blog about 4 months ago that was viewed by the completely wrong demographic, i think it’s fair to say the readers of StackThatMoney.com are far more knowledgeable in affiliate marketing then other ‘make money online blogs’. With that said, enjoy this detailed case study to help you determine whether you should be using CPC or CPM on Facebook.

Identical Facebook Ads Yield 0.177% vs 0.056% CTR.. How?

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Whats this case study about?

A while ago Facebook went on a little slapping rampage and banned quite a few accounts. Affiliates got their accounts banned and daily spend limits lowered. Very soon after they sent out a notification saying they’re changing their system and CPC advertisers are going to get priority over CPM advertisers. They said CPC advertisers will receive more clicks than CPM advertisers. (This took place early Q2 of 2010)

 

What does this mean?

It means Facebook was going to use some sort of system to give CPC advertisers a way of getting more clicks than CPM advertisers. This led to a bunch of questions; are CPM advertisers going to get worse quality traffic? Where’s the ‘less clicky’ traffic coming from (app pages?) etc…

 

Mythbusting the Facebook CPC vs CPM CTR & Quality Questions

This case study is a test comparing identical ads with both CPC and CPM bidding on Facebook. With real mythbusters fashion we will debunk whether or not CPC and CPM bidding on Facebook affects the ads CTR and conversion rates.

Offer: Shokz Starcraft 2 Guide

Total Impressions: 320,813

Total Clicks: 173

Total Cost: $60.99

Ad:


Targeting:


Screenshot of the Campaign:

As you can see the CPC ads are highlighted in Blue, and CPM ads are in orange.

The CPC ads dominated when it came to CTR (but don’t jump to conclusions just yet), let me show you the ads side by side.

Overall comparison of the top 6 identical CPC & CPM ads

Ad1

Ad2

Ad3

Ad4

The other 2 ads in my campaign followed the same pattern.

Ad5

CPC Ad (CTR) = 0.054%

CPM Ad (CTR) = 0.019%

Ad6

CPC Ad (CTR) = 0.052%

CPM Ad (CTR) = 0.015%

The common factor of CTR being much much higher in all the CPC ads is no fluke. Still, don’t go changing all your campaigns to CPC bidding model just yet. As you probably noticed, the cost per click for 3/4 CPM ads was cheaper (much cheaper in some cases) even though the CTR was significantly lower. So now we have to ask ourselves whats better, the higher CTR or the cheaper cost per click? You usually achieve high CTR so you can obtain a cheap CPC. This is what we’ll talk about next.

 

How much would 1000 clicks cost on our highest CTR Ad vs it’s rival?

The highest CTR ad was CPC Ad1 with 0.177% CTR and $0.32 CPC. It’s CPM rival ad had 0.056% CTR and $0.21 CPC.

Price of 1000 clicks on CPC Ad1:

1000/27 (clicks) x $8.67 (amount spent)

1000 clicks = $321.10

Price of 1000 clicks on CPM Ad1:

1000/23 (clicks) x $4.89 (amount spent)

1000 clicks = $212.60

OK, It’s more cost efficient to go with the CPM bidding model even though the CPC bidding model yields a higher CTR! We still don’t know if this is the right choice though. This is for 2 reasons.

1. I didn’t lower my bids as low as possible

2. We don’t know if the CPC or CPM bidding model yield better conversion rates

Some Thoughts

- Maybe CPM ads are shown closer to the bottom/ below the fold on some browsers?

- Maybe CPM ads are shown within Facebook Apps (we all know that’s terrible traffic), and CPC ads aren’t?

Final Observations:

- CPC ads have higher CTR forsure!

- CPM ads are still cheaper per click

But we still don’t know which bidding model to choose to make the most money!


Whats next?

The next part of this is key, because it will put this whole case study in perspective. There’s 2 things that need to be done.

1. I’m going to take my top 2 performing ads (Which is Ad1 & Ad2) I’m going to make a campaign with these 4 ads and lower the bids as much as possible while still maintaining traffic. This will allow me to determine if CPC or CPM bidding model is cheaper for identical ads.

2. I’ll be testing conversion rates for all 4 ads, to determine if CPC or CPM convert better. Which will be the ultimate deciding factor whether to use CPC or CPM bidding to acheive the best ROI on Facebook.
UPDATE as of April 13th 2011:

I never ended up doing the 2nd part of the case study, but i will be comparing 2 ads, 1 CPC and 1 CPM, then comparing conversion rates and ROI in the following weeks!