These are notes based off an incredible video that Dimitri – an Australian multi-millionaire eCommerce extraordinaire – gave in a recent live stream that was posted mid-May 2019 (i.e. a week ago). I’ve seen him talk at Digital Marketers Australia and he really does give a lot of value, so I would go and watch the video if I were you for the full context of everything he says.
Here are my summary notes of his video, which I cannot recommend highly enough.
Acronyms and definitions
Note that if you’re new to Facebook ads, there’s a lot of acronyms and concepts here that will pop up here that won’t necessarily make sense, and you would likely benefit from just starting your own ads from scratch so you can get a more practical grasp on what all these terms mean. Once you’ve created a few ads, this article/video would be way more useful, but I would say this is absolutely pitched to intermediate to advanced Facebook marketers who are hitting hard with ad spend.
- Lookalike Audiences (LLAs): Facebook’s statistically most likely audience to match a chosen Custom Audience. 1% LLA means 1% of people that most closely match that custom audience. Useful for prospecting.
- Time Spent on Site (TSOS): 5% TSOS means audience of top 5% most spent on site.
- Manual Bidding (MB)
- Cost per acquisition (CPA): e.g. cost per purchase. Some people take this to mean cost per lead.
Introduction and Context
Note that you’ll actually already want to have a fair bit of data from traffic before running these strategies. You can see that even in Stage 1, we’re using 1% LLAs.
Dimitri’s agency’s focus is very CBO-heavy. It has had a surge of performance at the end of 2018, then has regressed a bit – but unfortunately in September 2019 we’ll be forced to do CBO as Facebook marketers regardless.
Note that throughout the entire process and even when scaling, you’ll always be wanting to run a Stage 1 campaign to “feed” your other campaigns.
Stage 1: Initial Test Campaign
At this stage, we don’t have historical spend.
You want ideally 50 conversions per day, but – because a lot of people can’t achieve that – you should aim for a minimum of 10 conversions per day.
This $500 recommendation is based off a $50 CPA (i.e. we’re hoping that you’ll at least get 10 conversions here). We use five different ad sets as above.
1. Ad set 1: Lookalike 1% Customers. These should almost always be profitable.
2. Ad set 2: Lookalike 1% Customers x 5% Time Spent on Site (TSOS).
3. Ad set 3: Lookalike 1% x Events > n. For example, create a custom audience with people that have visited 5 different pages on your website. This indicates that people who are researching and jumping around on your website – who therefore are extremely high intent- are worthwhile to target.
Note that we’ve mentioned Lookalike Audiences a ton here – but LLAs of what, exactly? And here is where testing can get a bit crazy. You can try these:
Within ALL of these different custom audiences to create LLAs from, you’ll also want to test the time frames. Often – for example – those customers who purchased within the last 30 days are more valuable than a bigger list of customers who purchased within 180 days. However, keep in mind that trying to hit 50 conversion events for said audience makes this kind of LLA more stable; obviously a “LLA 1% Purchased in 1d” window won’t do well if there’s only 7 conversions there to make data from.
In all cases, use dynamic creative. Your copy and your creative will be the biggest levers at the end of the day as to whether your visitor will convert. This matters both at the macro and micro scale.
A note on Facebook’s auction
Facebook works on an auction.
You’ll get better results within Facebook’s auction events (i.e. more likely to win the conversion or website visitor or whatever you’re optimising for) IF you have multiple creative formats within your ad campaigns. By using video, photo, AND carousel ads, the Facebook algorithm does like seeing those.
Stage 2: Lookalike Narrowing
At this stage, we’re narrowing down on our winning lookalike audiences. We’re taking our successful lookalike and plugging it into the new campaign.
Set up a new CBO campaign with e.g. $500 (if your CPA is $50, aiming for at least 10 conversions).
Target 1%, 2%, 3%, 4%, 5%. Note that this method is heavily reliant on a large amount of data, so e.g. that initial $500 from Stage 1 Campaign may not be enough to make the LLA high quality.
Again, we include more or less the same dynamic creatives. However, we turn off the dynamic creatives that are underperforming within that dynamic creative.
Stage 3.1: Scaling Winners
Let’s say that from Stage 2, our ad sets with LLA 1% Customers and LLA 3% Customers are winning.
You would then start an entirely new campaign with 5 duplicates of the LLA 3% Customers ad set and run that at $500. You’ll also start another entirely campaign with 5 duplicates of the LLA 1% Customers ad set.
What’s happening here is that we’re targeting the exact same audience within a campaign. In the USA, a 1% LLA will be about 2 million people large. So this scaling phase will hit different pockets of that 2 million people. Of that, some will perform and some will not.
Again, note that stage 1 traffic should continue to feed into the later stages. You should always be testing the different kinds of audiences listed.
Stage 3.2: Scaling Winners out of the Winners
When Stage 3.1 yields a winning ad set, scale that by duplicating that particular winning ad set into yet another fresh CBO campaign with another $500.
Forcing Facebook to test better
Thus far, we’ve been on auto bid and auto CBO all this time. As I’ve mentioned in another blog post on futuremake.io, this is a big problem as essentially Facebook can prematurely stop giving money to ad sets before it’s had enough time to see whether that ad set is working or not (i.e. not testing it enough).
So you should e.g. use a CBO campaign with $500, and then for your 5 ad sets make sure that you set an ad set minimum spend of $100 each.
Target splitting (scaling)
Out of all these successful ad sets, what we should aim to do is to target split our demographic so we can scale more. I’ve also mentioned this in another blog post about finding your most valuable customer demographic.
Stage 4.1: CPA Reduction Using Manual Bidding
This method initially comes from a marketer called Alex Still, who talks about a target cost strategy. It can, in Dimitri’s business for hair extensions, drop CPA from $150-200 —> $30 (for a $250 AOV product) – which is incredible. Many people report 10x ROAs with this.
We start a new CBO of $5000 (daily spent max $500) with our absolute best winners and creatives from previous campaigns. We duplicate that winner into 10 ad sets.
Previously to this point, we’ve been using cost cap bidding i.e. just using Lowest Cost + bid cap, for our bids. What that means is that we’ve been telling Facebook: “hey, go and find me the cheapest conversions, but I will spend no more than $100 per conversion.”
However, for these ad sets in Stage 4.1, we will set a target cost bid. This is where we say to Facebook:
“Hey, I want all my conversions to come at around $100 per conversion (e.g. cost per conversion of $90-110). ” It won’t look for drastically cheaper conversions, but it also won’t spend much more than your target cost.
This is why we’re putting the target cost of $5000/day, but we’re not actually spending that much. We need to set our budget high so we can force Facebook to spend. A good figure to go by would be to spend 50x your CPA. You’ll have to play around with it to get it to start spending.
Our Manual Bidding (MB) percentages:
MB10% = Manual Bid @ 10% of Target Cost
MB20% = Manual Bid @ 10% of Target Cost
Up to MB80%.
Ad set minimum
We’ll also want to set ad set minimum budgets to about 3x our CPA. Again, it won’t spend the full $150 (in this case), it’s only going to spend if it’s profitable.
How to prevent overspending
Use a Rule to actually automatically stop the spend e.g. if you spend $500, so you don’t wake up to some crazy bills.
You want to see traffic trickle in. This is aiming to get the most valuable traffic at the cheapest price. The whole aim is that we’re wanting to get conversions for lower costs than what we were doing before.
Determine the winners out of your ad sets from Stage 4.1. Then plug it into Stage 4.2.
Stage 4.2: CPA Reduction Part 2
Take the winner out of Stage 4.1, then plug it into a new CBO campaign whereby we have ad sets that match Manual Bidding of +-5% and +-10% of the one that won.
So for example, if your winning ad set from 4.1 was the MB50% ad set, then you’ll create a new campaign with MB50%, MB45% and MB55%, and MB40% and MB 60%.
Again, you’ll set a huge amount of budget.
And don’t forget
- Retargeting: all of this has essentially been scaling up budgets for top or middle of funnel traffic. But don’t forget that running retargeting (BOFU) campaigns are also going to be an extremely profitable action to take!
- Rules: make sure you have a stop loss for traffic that cuts off unprofitable ad sets!
And then scaling from $10k to $100k
Set up a rule where the campaign budget is doubling every 2-3 days. So for example, you will be doubling $10k -> $20k -> $40k /day etc. You’ll need a hell of a lot of creative to refresh with if you plan to do this.
Dimitri Nikolakakis gave an insane amount of information from his own digital ad agency in order to deliver this information. This is all TOFU, but there’s even more that goes into running successful ad campaigns — retargeting and rules, for example. If you found this valuable, consider joining his Facebook group here. He also runs a digital agency which you can consider contacting if you want them to handle your marketing and he plugs a free consulting call if you think you might benefit from giving them the reins in terms of marketing.
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