Thinking
Are your Meta and Google Ads campaigns underperforming? The problem might be your bidding strategy.
Many ecommerce brands struggle to hit their ROAS goals, not realising that the key lies in mastering bid caps and cost caps. But how exactly do these crucial tools work under the hood?
At Public Nectar, we've spent over £20M on ads for our clients in the last 12 months alone. Along the way, we've unraveled how Meta and Google's bidding systems work.
Here's a detailed look at how bid caps and cost caps truly operate.
1 → Understanding the Fundamentals: eCTR and eCVR
At their core, bid caps and cost caps are driven by two crucial metrics: the expected click-through rate (eCTR) and the expected conversion rate (eCVR).
Meta and Google can predict your eCTR with incredible speed and accuracy. With the sheer volume of impressions and clicks available, their algorithms rapidly tune in on how likely users are to click your ads.
eCVR can be a little tricky. Conversions are rarer events, so there's less data to work with. Many advertisers assume the platforms start from scratch, slowly figuring out your conversion rate as you make more sales. But that's not the full picture.
2 → The Power of Priors
Meta and Google rarely start from zero. Instead, they lean heavily on "priors" - pre-existing data points and user signals that let them forecast your eCVR before a single conversion comes in.
The algorithms use everything from your ad's engagement to a user's browsing history to predict how likely a click is to convert. This data is so detailed that their eCVR estimates are usually very accurate right from the start.
Priors aren't perfect, If your actual conversion rates differ significantly from the estimates the platforms must adapt. The algorithms learn and adjust to your unique conversion patterns at the ad set level.
3 → Putting It All Together
Bid caps and cost caps use your predicted eCTR and eCVR to set your bids according to your performance goals.
If you have a cost cap of $50, and your ad has an eCTR of 2% and an eCVR of 2%, the platform will keep spending as long as your effective CPA (eCTR * eCVR) stays under $50.
The real power lies in the algorithms' ability to update their estimates as your ads collect data. Generally, you can trust the platforms to find your optimal bids. If an ad set goes off track, don't panic. Allow the algorithms time to adjust, but feel free to step in and make changes if issues persist.
At Public Nectar, we specialise in auditing and optimising ad accounts to maximise ROAS. Our experienced media buyers know how to work with the algorithms, not against them.
If you're spending at least £20k/month on ads and are ready to take your performance to the next level, book a free discovery call with us today. Let's unlock your brand's true potential.
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