Managing Risks vs Rewards: Facebook Bidding for Mobile App Install Campaigns

Managing Risks vs Rewards: Facebook Bidding for Mobile App Install Campaigns

By Jay Gleba • April 20, 2016

Understanding how users are acquired and paid for is a matter of survival for mobile app developers. Most marketers have a good grasp on how Facebook bidding affects their costs directionally, but to amplify performance and drive volume, we take our partners’ campaigns beyond basic bidding techniques and embrace strategic, calculated risks to yield the strongest possible results. To do so, our analysts assess the unique risk profile of each bid type and combine it with a detailed knowledge of our partners’ business and goals. In doing this, we are able to build the most advantageous strategy for each partner and campaign.

Three Bidding Component Types for Mobile Apps

For mobile app install campaigns, the three components that determine your Facebook bid type are as follows:

  • The objective is app installs.
  • The optimization event can be app installs or link clicks.
  • The billing event can be impressions, link clicks, or app installs.

The two most common combinations of these MAI bid components at Ampush are optimization for installs/bill for impressions (“oCPM” – optimized cost-per-mille) and optimization for installs/bill for installs (“CPA” – cost-per-acquisition).

 

What is The “Risk”?

The billing event we select for our partners’ campaigns shifts advertising risk throughout different portions of the funnel.

For oCPM bids, Facebook bills advertisers for the impression, regardless of the action (or lack of action) taken. Each time an impression is served, there is a risk that the user viewing the ad won’t continue down the funnel. That ad inventory is gone forever; there’s no “redo” for Facebook to serve a different ad which may have converted the user. In this scenario, the risk is on the advertiser, our partner.

For CPA bids, Facebook only bills advertisers when a user converts to an install, so if an impression is served and the user leaves the funnel before installing, Facebook takes the hit. In this situation, Facebook assumes the risk because our partner only pays for the goal action of installs.

This is visualized below:

facebook bidding types ocpm and cpa

 

The Value of Shifting The Risk

Facebook places both CPA- and oCPM-bid ads into the auction, so it’s important to think about what the risk profile means for your ads’ competitiveness against other advertisers who may be running those bid types. The two most important metrics-at-risk are the advertiser’s CPI (when the advertiser assumes the risk of oCPM ads) and Facebook’s CPM (when Facebook assumes the risk of CPA ads). Remember, Facebook has to worry about CPM when they assume more risk because it determines how much money they make off their impressions.

A table illustrating the risk assumed by Facebook and advertiser with each bid type is below:

ocpm facebook bids cpa bids

When conversion rates are lower than predicted, oCPM-bid ads drive higher CPI for the advertiser and CPA-bid ads drive lower CPM for Facebook.

 

Over many years of running campaigns for top tier brands, we’ve concluded that the Facebook algorithm places ads into the auction using an eCPM (estimated cost-per-mille) which it calculates based off of many variables like your app’s historic conversion rates, relevance score, bid level, and also information about the specific user on whose inventory is being bid. This tells the platform how much revenue it should expect from the impression, regardless of bid type. When the eCPM is overestimated for CPA-bid ads, fewer of the users who have seen the impression go on to download the app, and Facebook charges less from the advertisers than expected (the actual CPM is lower than the market CPM). This can be good for the advertiser, but if the CPM is too low, it encourages the platform to not serve your ads over other advertisers.

On the flip side, when Facebook overestimates the eCPM of oCPM-bid ads, the advertiser pays the price with a higher CPI than expected. This benefits Facebook, but if the CPI is too high it encourages the advertiser to shift budget to other channels. Here at Ampush, we’ve compared identical ads (same creative, copy, per-install bid level, etc) with these two bid types, and seen the CPM of CPA-bid ads move almost perfectly in the inverse direction of the CPI of oCPM-bid ads while the campaigns pick up traction and optimize. That means the at-risk metrics behave exactly as predicted by the risk framework.

 

How We Think About Risk For Each Partner

Each of our partners’ apps is different, as is the “risk mindset”, a framework for comparing their app’s strengths and weaknesses to the other advertisers in the Facebook marketplace. For example, we’ve found that apps with exceptionally high conversion rates can benefit from CPA bids because this bid type reduces risk to our partner while delivering competitive CPMs for Facebook. This occurs because a larger proportion of impressioned users will likely download. But for some apps partners, we’ve noted that CPA limits us from driving significant scale. For these partners, oCPM can help add incremental volume, though at a greater risk of high CPIs.

At Ampush, we determine Facebook bidding strategy by asking about the short- and long-term goals of our partners. If they’re at a point where growing their operations and scaling their reach is the top priority, we’ll be strategically aggressive with oCPM ads, using risk mitigation features in our AMP platform to drive volume while maintaining efficiency. When efficiency and controlled growth is their biggest priority, we work diligently on optimizing conversion rates at every step of the funnel so that CPA ads can drive the greatest possible volume. Usually, a strategically implemented mix of both bid types drives the best scale at volume. However, we consider the risk/rewards and unique business goals of every app developer partner and develop a Facebook bidding strategy that’s exactly right for them.

Get in touch with us if you’d like us to give you an assessment of and recommendations for your Facebook strategy.