POF’s CPM-based bidding system can be confusing for people who are more familiar with CPC bidding systems. If you’re used to Facebook’s CPC bidding system, I promise you that once you get used to POF’s system, even though it’s not perfect, it will further justify your hatred toward the Facebook ad platform.
POF Bidding System Basics
POF does not implement an incremental bidding system. Meaning, you pay what you bid. For instance, if the highest bid out of all bidders for a particular targeting is $0.60, and you decide to bid $0.61, then you would get what POF deems as the highest quality traffic (more on that later).
Not knowing what everyone else bid, however, you may decide to bid $1.00 for the same targeting. In that case, you would gain no incremental benefit in comparison to a $0.61 bid, while paying exactly $0.39 more for every 1,000 impressions.
The lack of an incremental bidding system, along with a lack of a CPC bidding option, are the only shortcomings of POF’s bidding system. Save these 2 possible improvements, POF’s system is consistent and fair. They won’t penalize you for having poor CTR’s on your ads like Facebook.
What You Are Getting By Bidding Higher
Bidding affects two things: volume and quality. Volume is pretty self-explanatory. The higher your bid, the more volume you will get to your campaign. This is assuming that you have no frequency cap nor daily budget set on your campaign. Check out our Bid vs. Volume Case Study for some empirical data on this.
The quality portion is purely governed by session depth. The higher your bid, the lower the session depth you will get with your campaign. POF gives your higher bidding campaigns priority over other lower bidding campaigns and shows your ads to their users first. Check out our Bid vs Quality Case Study for some empirical data on this.
Let’s breakdown how this works. Imagine there are only 2 bidders, one at $0.51 (Bidder A) and one at $0.50 (Bidder B), and only 1 ad spot that people can self-serve. A user signs onto POF (session depth 1), and since Bidder A has the higher bid, A’s ad is shown to the user. The user reloads the page, and Bidder A’s ad is shown again. This continues until either 1) Bidder A’s campaign reaches its frequency cap for that user, 2) Bidder A runs out of daily budget, or 3) the user stops using the site.
So bidding higher generally gets you lower session depths. Does this really translate to higher quality traffic? In general, yes. This has been tested by many people over the years, and there is a clear trend that ads shown earlier to users in a session performs better. It could be a variety of reasons, but one possible reason is users who have just logged in have not immersed in the usage of the site and become blind to the ads. Is there, however, a difference between session depth 2 and 3? Probably nothing significant.
Thus, we can conclude that changes in CPM bids ONLY affect your session depth. Higher bids get you lower session depth and more volume intrinsically. Lower bids get you less volume since there are fewer users who get to higher and higher session depths. That is, everyone who logs in gets session depth 1, but some won’t get to session depth 2. Even less will get to session depth 3, and so forth. Therefore, if your campaign is the highest bid, it will be shown to the most people possible since you get their 1st session depth.
Based on what we’ve discovered here, you can create a 2nd campaign with the exact same targeting, and it will not affect the performance of the 1st campaign as long as your CPM bid is lower. This allows you to try to monetize higher session depth traffic without worrying about it competing with your 1st campaign.
CPM Bidding Out the Gate
So, what to bid when you first start a campaign? In general, I advocate setting bids at relatively high CPM’s when you first launch a campaign. This is when you want to hold all variables constant while you test your creatives. You want a controlled environment to weed out your poor performing ads so that you know when a creative performs poorly, it’s not because you were jiggering a bunch of targeting options.
Bidding relatively high allows me to make sure that 1) I am getting the best positioning so I’m not selling my creatives short, and 2) I am getting volume as fast as possible to test for creative CTR’s. Once I have done that and have found high performing creatives, I lower the bid and find a good balance between volume and ROI.
If you’ve run a lot of campaigns in the past in the same targeting, you probably have a pretty good idea of what makes a “relatively high” bid for that demographic. For people with less experience, however, let’s come up with a gauge as to what to bid.
To do that, we’re going to solve for your CPM ceiling based on your offer payout, your expected CTR, and your expected CVR.
The equation is:
Payout * Expected CVR * Expected CTR * 1,000
If you have no idea what you expect your CVR’s and CTR’s to be, then use these general rules of thumb. If you’re promoting an offer with a $4.00 payout, you might reasonably expect a 15% CVR and a 0.1% CTR. In general, if you aren’t able to achieve those numbers, it will be difficult for you to make any meaningful money. As a marketer, you should get to the stage where you’re achieving at least that, so those expectations are conservative in my opinion.
The CPM gauge in this case would be:
$4.00 * 15% * 0.1% * 1,000 = $0.60
With that general gauge, you know you could bid in the upper $0.50’s to the $0.60’s. In most cases, the more niche your targeting, the higher your CTR should be, and therefore your bid.
Next, start running the campaign, and track the volume the campaign gets over a few hours as you adjust the bid downward. If the volume doesn’t drop as you lower your bid, you’re good. Remember though, while your volume might not drop, the quality of your traffic might (i.e. you are getting higher session depths with lower bids), which is something you can’t measure at this point.
I would recommend that you never drop below $0.40 as a general rule when you’re starting a campaign to test for creatives until you’ve gotten a batch of profitable creatives and ready to optimize for the CPM sweet spot.
If, however, your campaign is a broad-targeting campaign, then you will be able to bid lower, perhaps much lower. Each campaign is different, and you really have to just test and get a good feel for it over time. Broad-targeting campaigns could be campaigns without login count targeting, campaigns without ethnicity targeting, campaigns targeting a wide age range, etc.
In a subsequent post, we will reveal how we collect and use data to optimize for the most profitable CPM bid levels for all our campaigns. So, stay tuned!