If you want to succeed in scaling Facebook campaigns, you need to understand the Breakdown effect. The failure of so many digital advertising campaigns to profitable scale Facebook and Instagram campaigns is because of widespread neglect for this concept. In this article, you’ll find out how to detect the Breakdown effect and how to turn it in your favour.
Don’t scale Facebook campaigns until you understand the fundamentals
We’re returning to the point that advertising is the business of purchasing clients/customers. They are (often) varying in price. Advertisers willing to spend more for a single consumer – will be able to acquire more of them. We can represent the addressable market for a specific product in the circles below.
The red circle represents the Hot audience. Yellow means the Warm audience. You can figure out which colour is for the Cold audience. People in the red circle are more likely to buy as soon as they see your ad. You will get these conversions for a low price. But in the “cold” zone, you will probably need to show your ad to people more than once. That is, to convince them – and the cost of their conversion would be more expensive.
You can learn more about how to target your audience on Facebook and Instagram in this article.
Cheap conversions first!
When you set a budget of $500 and choose the Lowest Cost bid strategy (the default), Facebook assumes you want to spend $500 and get as many conversions as possible. Therefore, the algorithm will focus on achieving the lowest possible CPA (Cost per Acquisition) to get the highest number of conversions.
To allocate the budget, the ad serving system uses both bidding and pacing. Facebook uses discount pacing to ensure that the algorithm prioritizes the lowest-cost conversions while still ensuring that you spend the entirety of your budget before the end of the cycle.
The following graph from Facebook represents Discount Pacing:
With a smaller budget, Facebook may optimize for the few conversions in the lower-left corner of this graph. That will result in an incredibly low average CPA in your reports. Facebook continues to optimize for the lowest-cost conversions possible as your budget grows, but your CPA will naturally rise. This often happens when scaling Facebook campaigns.
The Breakdown effect in practice
But there is another side of the Breakdown effect that can help you get better results if you make your campaigns more “flexible”. The following is an example of how Facebook describes the breakdown effect.
Let’s imagine you decide to run a campaign with a conversion goal. You have two placements for distributing your single creative asset: Facebook Stories and Instagram Stories. Using the ad set level budget, the total budget for a single ad set is $500. When the campaign launches, the Facebook algorithm delivers ads to both placements to discover which will produce the best results for your target demographic — this is known as the learning phase.
And after ten days, you see this in the report.
Many will wonder why the algorithm spent more money on Instagram Stories, where CPA ($1.46) is more expensive than Facebook Stories ($1.10). But if we look at what happened to the cost each day – we will see a completely different picture.
Have you noticed what happened on Day 4? Facebook CPA was growing, and Instagram CPA was cheaper.
Now look on Day 10. How much would you rather pay for Conversion/Acquisition on Day 10? Instagram CPA ($2.70) or Facebook CPA ($5.30)? Yes, Instagram is a much better option on Day 10.
What does the Breakdown effect look like
This is how it looks like on the chart by Facebook.
To test, the Facebook algorithm might spend $50 on Facebook Stories and $50 on Instagram Stories before as the “inflection point” (when Facebook expenses were still lower than Instagram). And when the algorithm detects that the CPA for Facebook Stories is increasing faster than that of Instagram Stories – it allocates the remaining $400 to Instagram Stories to achieve a lower CPA over the campaign’s duration.
Before Day 4, Facebook Story had a lower CPA; the costs would have climbed quicker than Instagram Story, as seen in the chart. As you can see above, Facebook Stories cost $5.30 by Day 10, whereas Instagram Stories cost half as much.
If you want to know more about Facebook and Instagram Story features, you can read this article.
Why did the algorithm act in this way?
The system started delivering advertising to both platforms at the campaign’s outset to see where the best deals could be found. Because the system front loads low-cost results through our discount pacing approach, the lowest-cost results were obtained early on.
How should you interpret your following report?
So, if one placement had a lower overall average CPA, but the majority of the budget was dedicated to another placement, you should understand that Facebook was confident that it had maximized the lower-cost conversions that could be purchased from the first placement. As a result, the next incremental conversion would have cost more than what could have been earned by investing in the second placement.
How to turn the Breakdown effect into your favour – while scaling Facebook campaigns?
When interpreting the results of ads manager campaigns, the Breakdown Effect has caused some misunderstanding. It’s a compromise meant to take advantage of automation and discount bidding.
Without context, it may appear to be misguided, but in the end, it helps to produce substantially greater value for those who use this advertising system. The main thing to remember is that creating flexible campaigns with the lowest cost bidding (discount bidding), automatic placements, and campaign budget optimization tools that work together to maximize performance will usually work in your favour. And so scaling Facebook campaigns will become much more manageable.
To sum it up
Due to The Breakdown Effect, it would be hard to get consistently cheap results while increasing your spending – but there are things to turn it into your favour (some of them are mentioned above in this article).
If you want us to turn the Facebook algorithm in your favour – you can contact us here.