Pay Attention To CPM

Your account’s CPM is probably the single most important - and probably most overlooked - component to your overall performance.

Having worked on over 60 ad accounts in 2021, we’ve seen a shocking data point that very few people on the client side will ever be aware of: CPMs vary immensely at the account level. One account targeting the same exact audience as another might have a $7 CPM vs. a $50 CPM in the second account. 

All of this is allegedly based on a few factors:

a) Your Facebook page’s user feedback score 

Your user feedback score is something you can easily see within your account. Measured on a 1-5 scale, this is based on post-purchase surveys run by Facebook to follow up with customers, asking them how satisfied they were with their shopping experience. The higher the score, the more favorable your CPM might be. Anything under a 2.0 is considered penalty territory, where your CPMs stand to increase by as much as 50-100%. Focus on a positive customer experience to maximize your user feedback score and address the root causes of any negative feedback you may receive.

b) Your page’s organic engagement metrics.

This has more to do with the love your page is getting on the organic side. How many followers do you have? How often are you posting content that doesn’t fall into the promotional/ad category? How are your followers engaging with this content? 

All of these factors directly tie back to the CPM your ad account may see. Our clients with the largest follower bases and a steady stream of organic content that sees high like counts and comments enjoy the lowest CPMs. 

Don’t underestimate the importance of staying connected to your organic followers. You can even run a Facebook page likes campaign to grow your base. Focus on sharing valuable regular content that falls into the non-promotional category. Not only should this directly benefit your CPMs on the paid side, but it’ll also help to drive new business amongst this follower base.

c) The quality ranking, engagement rate ranking, and conversion rate ranking of your ads. (You can see these in Ads Manager)

Facebook will measure these metrics on a below average to above average scale. You can see how these rankings break down within ads manager, even at the individual ad level. While we don’t always see a perfectly direct correlation between these rankings and CPM within an account, they all do play a role in determining how much Facebook might charge you per thousand impressions on any given day. 

Our best advice on quality and engagement rate ranking is to strive for ads that are very clear in terms of what you’re offering. You may think that seeking to entertain will lead to a higher quality and engagement ranking. While it might, any CPM benefit that you could see here will be offset by a decrease in performance since you were less clear in your ad.

Conversion rate ranking is not to be overlooked. While you may believe that all conversion rate optimization takes place on your website, an ad that speaks more clearly to your offering and the reasons to buy will typically see a higher conversion rate as well. In other words, those clicks are more qualified and more motivated when they’ve been served with concise copy. 

d) The competitiveness of the auction.

On a seasonal basis, we see competitiveness to the max in November and December. Many advertisers flood Facebook with holiday sales offers, and CPMs typically rise by as much as 30-60% during this period as a result. 

This is purely due to the fact that more advertisers are bidding for inventory on the same people you are. With only so many possible ad impressions to go around, advertisers will typically see higher CPMs when the demand for serving ads increases.

Conversely, we saw a deep reduction in CPM on just about every one of our campaigns beginning in March 2020. The onset of the COVID-19 pandemic led to many advertisers pulling back on ad spend, or even cutting it out altogether. This led to a reduction in advertiser demand and a less competitive auction, which drove down CPMs.

During the months that followed, CPMs steadily climbed back up to their previous rates. In 2021, they’ve continued to rise even more. Facebook, in its most recent quarterly earnings update, stated that ad revenue increased by 46% while ad impressions only increased by 12%. Think about what that means. Advertisers have taken the hit, all at the expense of pleasing Facebook’s shareholders.

To mitigate high CPMs during competitive times, our team has found ways to target less obvious audiences that still highly correlate with the people we’re trying to reach. Doing the same will help you during these otherwise very costly times.

e) How aggressively you’re spending against the size of the audience you’re targeting.

This is a classic supply/demand situation. If your audience size consists of 500,000 people and you’re spending $300/day in that ad set, you’ll

We’re going to add one more factor. This one will be controversial because Facebook has never come out and publicly said it, but the price of what you’re selling:

f). The price and nature of whatever it is that you’re selling. 

Remember that Facebook understands the value of your offering. You may be sharing pixel data about how much your customers are spending. Even if you aren’t, your competitors might be. And even if they aren’t, Facebook could easily calculate your expected margins based on:

a) The price of what you’re selling. For Facebook to understand this, they simply need to crawl your landing page (or have someone manually review it) and find the numbers that follow the dollar signs on that page.

b) Your cost per customer and their overall understanding as to what profit margins may look like in your industry. A company with tens of thousands of employees and billions of dollars in cash could either perform this internally or commission it to a market research company.

All of these factors can influence your account’s CPM. This is one of the most overlooked influencing factors in a campaign’s performance, and while it isn’t entirely in your control, awareness and attentiveness can help steer you in a better direction.