The “Breakdown Effect” on Facebook ads is one of the most important concepts advertisers need to understand. It answers the most asked questions “why do my cost per acquisition increase when I scale?”
If you want to learn more in-depth about the Breakdown Effect, I recommend Facebook’s article on the subject I linked above but you should understand everything you need to understand in this article.
I came across the question when I started scaling my first Facebook ads a few years ago. I was wondering why my results were so inconsistent. One day a $5,000 per day ad set would generate $4,000 in sales and another day it would produce $15,000.
Furthermore, when I started my ads my CPA was $3 and when I was spending $25,000 per day, my CPA got up to $6. Why is that? It’s what we call the “Breakdown Effect” of Facebook ads.
Here’s a quick definition of the Breakdown Effect: “it’s the increased cost of your CPA when you increase your Facebook ads budget at the campaign or ad set level.
What’s happening behind the Facebook ads curtain?
When you launch Facebook ads with an objective, Facebook’s machine learning tries to find you the best results at the best cost. Essentially, Facebook has a limited amount of results it can give at your price point to advertisers.
To get more results, you eventually need to be ready to pay a higher bid on the Facebook ads auction. This often results in increasing your Facebook ads budget. It’s also why you can’t always get cheap results while increasing your budget: if you want more results, you’ll have to pay more.
Factors affecting the Facebook ads “Breakdown Effect”
Factor #1 – The Breakdown Effect” is only applicable to an automatic bidding strategy.
For instance, you will not feel the influence of this effect that significantly when using manual bids as you limit Facebook with the maximum bids to use. However, in this case, if your limit is too low, you might not generate enough traffic for your campaign.
Factor #2 – “The Breakdown Effect” is different for different mediums – say you are using Facebook stories and Instagram stories as placement options. In this case, you get different breakdown effects (which are not interrelated) for both placements.
As explained by Facebook, if 2 different placements have been chosen, the machine initially evaluates which one of them generates cheaper results and pushes more traffic through this medium (on the graph below – Facebook).
BUT, at some point, since “The Breakdown Effect” on different mediums is different, Facebook mighttransfer to the second medium that will start giving cheaper results due to having more options on the auction;
Factor #3 – “The Breakdown Effect” is only applicable to significant budgets.
When testing the results, I’ve noticed that it really doesn’t apply to my campaigns with $10-20 daily budgets.
How to deal with the “Breakdown Effect”
As you scale your ads, you go from paying $10 per purchase to paying $25 per purchase and turn out to be not profitable anymore. How do you deal with such a situation? This is what I’ll try to go over with you in the coming words.
- Automatic Placements: you should let Facebook optimize the placements for you. Sometimes, you can’t use all placements but if you can please do. Automatic placements were part of Facebook’s Power 5.
- Select Placement: if you don’t like Automatic Placements, you can run individual placement ad sets to see which ones perform best and then only keep your top 5. Make sure to let the Facebook ads run for enough time before you draw any conclusions.
- Facebook CBO: this feature allows you to set your budget at the campaign level instead of the ad set level. It lets Facebook optimize in real-time your ads to spend on the ones that perform best. If a Facebook ad stops working then Facebook will spend on your other ad sets.
- Lowest Cost Bidding: lets Facebook find the bids that allow you to get the cheapest results for your budget.
- Multiple ad accounts & 1 pixel: you can also run your Facebook ads on multiple ad accounts. This is a great Facebook ad strategy is you want to spend over $100k per month on Facebook & Instagram ads. This is somewhat of a new strategy but we’ve used it for some of our bigger clients and it has always been working amazingly well to keep our CPA low when scaling.
Here’s a quick recap of what we’ve learned in this article so far:
- When scaling up, you are most likely to have a higher CPA because of the Facebook Breakdown Effect
- There are five ways to diminish the effect of the Facebook ads Breakdown Effect
- You can leverage Automatic placements to reduce your CPA when scaling up your Facebook ad spend
- Facebook CBO can also allow you to keep a low CPA when ramping up your Facebook ad spend
- Always select the lowest cost bidding when choosing the bid for Facebook ads campaigns
- If you are spending more than $100k, you can use the same pixel on two Facebook ads account to keep your cost down
If you need help with your Facebook ads, don’t hesitate to check out our Facebook ads agency page! We’d love to help you reach your goals faster with Facebook ads thanks to our expertise.
Just fill the form after clicking on get proposal and we’ll contact you to see if you are a good fit to work with us!