Five Keys To Achieving Positive Return On Advertising Spend With Facebook
- by Rafaela Baquero | October 16, 2017
- Facebook Advertising
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As seen on Forbes, read the original article here.
Facebook Advertising Spend
Achieving positive return on Facebook advertising spend (ROAS) is a key objective for many Facebook and direct response advertisers. Sustaining positive ROAS with a large media spend is not an easy feat to accomplish. But it is possible with the right approach.
My company has spent over $200 million on high-performing Facebook campaigns for companies across multiple direct responses, mobile and lead generation verticals. The following are our five best practices to increase ROAS for high-scale Facebook advertising campaigns.
1. Start With Heavy Creative Testing
Heavy, constant creative testing is necessary to uncover winning ads that significantly improve ROAS. Using high-performing creative can increase ROAS by 200% or more. For our direct response advertisers spending over $50,000 per month, new ad designs typically have a 5% chance of significantly outperforming top-performing ads in terms of ROAS. This means large direct response advertisers are testing hundreds of ad creatives and must deliver a constant supply of fresh creative concepts to avoid ad fatigue and maintain positive ROAS at scale. Your best-performing ad creatives may have a lifespan of fewer than 30 days. So you’ll need to continue your creative testing to produce wins that offset performance degradation that happens naturally as creative fatigues.
2. Know Your Early Metrics (KPIs)
Knowing and monitoring your metrics limits wasteful spend. Maintain high ROAS through heavy creative testing with many creative variations. You can use software to automate which ads to pause and which ads to scale the media spend. There are early signs of a promising creative. Such as identifying a user event that occurs before a purchase (i.e., completing an app tutorial). As a result, helps advertisers make decisions before ROAS is fully understood.
Once a promising creative has been identified, additional spend is required to measure ROAS at a higher scale. Depending on the average cost per paying user, it’s generally safe to measure ROAS for a creative after $200 in ad spend.
It’s important to understand how revenue and ROAS cohorts age over time. For instance, many gaming companies measure ROAS on day seven of the cohort, then use that day’s ROAS to predict lifetime value (LTV) over 12 to 18 months. In this scenario, revenue and ROAS are fully mature seven days after ad spend, so it’s critical to understand target KPIs for ROAS each day up to day seven.
If ROAS appears poor at day three or five, this could signal an opportunity to pause an ad that likely won’t meet day seven ROAS targets. Pausing early limits ad spend from underperforming creative. For any ads showing strong ROAS, advertisers can then scale these ads to new audiences quickly and determine whether performance holds up at scale or if metrics fall apart due to a false positive winner.
3. Automate Your Rules
Marketing automation tools allow performance advertisers to set and manage campaign logic (if I spend more than $10 without an install, pause the ad, etc.). Automating campaign rules allows you to monitor ads around the clock, and quickly scale winners while avoiding spending wasteful money on low-performing creatives. Automation technology makes thousands of decisions dynamically to accelerate winning ads while suppressing poor performers. Once you have historical data to determine early ROAS indicators, set rules for each day or use AI-powered, machine learning to automate decisions and scale campaigns.
4. Expand Reach
Facebook has robust data on its two billion users and can place users into a propensity to pay bands through lookalike audiences. Provide Facebook a list of your highest value users. The company will convert that “seed audience” into a series of lookalike audiences that behave similarly and provide similar revenue. These users are likely to be interested in your business, app or products. As a result, will often purchase at a high rate because they’re similar to your highest value users.
By targeting lookalike audiences, Facebook can narrow an ad’s reach to the best-quality users based on attributes you specify. In fact, the quality of Facebook lookalike audiences is getting better as Facebook analyzes spend and determines who is most likely to purchase your product or service and continue to do so over a long period of time. Additionally, spend per transaction is likely to get more efficient as Facebook’s algorithms learn which users and creative are more likely to convert.
By giving Facebook more control in determining where to place the ad, the ad format and who sees the ad, Facebook can efficiently expand reach to your audience and optimize campaigns. If you are using Facebook for mobile app acquisition, we recommend using app event optimization bidding techniques coupled with auto placements target users likely to install and also make a purchase. Doing so will increase the LTV, average revenue per user and ROAS.
5. Get Back To Creative Testing
Even when you find a big win from creative testing, it will eventually reach maximum saturation and fatigue. This happens when an ad’s target audience sees the same ad too many times. For example, when the frequency exceeds three views per person. When this happens, your ad click-through rate (CTR) will drop as frequency rate increases. You’ll then know it’s time to start the testing process again. Even if your ad’s CTR is declining, you should start with an existing creative. Because the ad can still be optimized through variations and improve performance by 20 to 30%.
Achieving and maintaining ROAS is important for performance advertisers, and it’s doable with frequent creative testing. Advertisers should start by closely monitoring early metrics to avoid wasteful spend. The rules should be automated to scale winning creatives. Using lookalike audiences with demographics targeting allows Facebook to find high-quality users and expand reach. Creative testing is absolutely required to maintain ROAS at scale, and it never stops. But, the results will be worth the continual campaign and creative management.
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