Welcome back once again.
So in this lecture, you're going to be learning about cost control.
Now, this is a slightly more advanced feature, but it's very important because it shows you just how
much control you have over your ads and you have the ability to make sure that you're advertising pretty
much always is profitable.
But this is just like the more advanced feature in the beginning.
We're going to leave this as automatic.
But I still want to show you just how to use this and how powerful this can be.
Let's dive in.
So here we are.
And we have this section that is called Cost Control.
Right.
And it says that it is optional.
And of course, it says that it is optional because Facebook wants you to spend as much as possible.
Now, the thing is, if we leave this blank, then Facebook is going to optimize it to show your ads
for the lowest cost possible.
And now the way that Facebook ads work, when you get to show that and when you not get to show them
is basically if we look at what we have, we have chosen our placement for Facebook news feed.
And we have also chosen the type of targeting that we have detailed a gender, age, etc. So we have
a specific audience that we want to show our ads for.
Now, the thing is, we are not the only people who are trying to show ads for this audience.
So the only way for Facebook to know whose ad they are going to show to this audience is simply to show
it to the person who is paying the most for it.
So it goes without saying that the more advertisers there are, the more the cost is going to be her
landing page view.
And the less advertisers there are, the lower the cost is going to be.
For your landing page view, basically, this is an auction house and you are bidding to have your ad
being shown.
Now, the thing is, if you don't write in your cost control here, well, that means that you allow
Facebook to do the bidding for you.
All right.
And that's good in the beginning because we don't have any data.
And also Facebook doesn't have any data from our account.
So it's very hard for them to to properly optimize things.
But they're going to do the best they can with the lowest bid.
However, once we do have data, we can set some maximal bidding costs.
And this is great because this gives us control.
Let me show you exactly what I mean.
So in order for us to set a cost control, we need to have some data already.
The first thing that we need to have is that we need to know our profit and what is profit.
Well, that is your revenue minus your expenses.
Let me show you what I mean.
So take this product as an example.
We're trying to sell this product and you can see that the price is nineteen ninety five.
So that means that if we sell this product to someone who clicks on it, well then we are going to get
nineteen ninety five from that sale.
But that is not a profit because we're also paying money to have this product taken to the customer.
So let's say that we were creating this product ourselves.
We would have to pay for the material, we would have to pay for the assembly, we would have to pay
for the shipping.
And all of those things would cost a lot of money.
And we might also have some employees and they would be in a payroll and we would need to calculate
that as well.
So all of those are expenses, right?
So once I take this this sum and I'm minus the expenses, that is when we have the profit.
So to make things simple, we are actually shipping this.
So that means that in order to deliver these to the customers, we only have two major costs.
That means that we have to buy it from the supplier, which costs us two dollars.
That's two dollars to buy the product from the supplier and then another two dollars to ship it to the
customers.
So that means that our expenses to have this product gets taken to the customer are four dollars.
So to understand our profit, all we need to do is that would take 19 minus four dollars and that would
result in fifteen ninety five.
Now to make the example, let's say that we actually have some expense that there were four ninety five.
So let's say that our profit for this product was just 15 dollars to make the calculations easier.
All right.
So understand then that we have the revenue that is the total that you're going to get from the sale
minus the expenses equals your profit.
So that means that in this example, that's going to be our profit from this product are 15 dollars.
All right.
Let's head back so we know that the profit is 15 dollars.
Right.
Next up, we need to know our conversion rate.
Conversion rate, meaning how many people that actually buy the product who enter our website.
So let's say that we have some data on this.
Now, normally you have a conversion rate, depending on your industry, is going to be anywhere between
two and six percent, sometimes higher, sometimes lower.
But let's say that we have some data on this and our conversion rate is actually five percent.
But right now we can do some calculations.
So what we're going to do now is that we are going to take one hundred landing page views and we are
going to timestep with zero point zero five zero point zero five.
That's five percent.
So that means that out of 100 landing page.
Meaning one hundred people entering our website, five of those people are actually going to be buying
our product, our bracelet, right.
So now that we know that five out of 100 people are actually going to buy a product, we can calculate
how much one hundred landing page views are worth to us.
Right.
So we're just going to take five times fifteen dollars, which equals seventy five dollars.
Right.
So the interesting thing here now is that we know that one hundred landing page views is at the value
of seventy five dollars because we know that we get one hundred landing page views to our website.
We are on average going to make seventy five dollars make sense.
So this is so great the data and we're calculating this just from understanding our profit and understanding
our conversion rate.
So one hundred landing page views, it has the value of seventy five dollars for us.
So next up, we can actually take those seventy five dollars, that is seventy five and divided with
one hundred.
So we're taking the value of all of those landing pages and dividing it with the amount of landing page
views we're getting.
And that means that each landing page view is worth zero point seventy five dollars for us.
Are you following with me so far?
Because now we're calculating that if we get one hundred landing page views right, then five of those
100 are going to actually buy our product, which is going to make us seventy five dollars.
So that means that each and every landing page view, on average, it's going to be valued zero point
seventy five dollars.
All right.
So that means that our cost control is going to be zero point seventy five dollars.
So that means that if we bid a maximum of zero point seventy five dollars, we can stay profitable.
All right.
This is some really great news.
Let's head back.
So now, at this point, we know that for our cost control, with the data that we have, we would enter
in zero point seventy five dollars, because if we make sure that we don't pay more than that, we are
going to remain profitable based on the calculations that we have now understand, Facebook are always
trying to optimize for your lowest costs.
Right.
So that means that you're not going to be paying zero point seventy five dollars for the different times
that your ad actually gets a landing page view.
Rather, it's the maximum that you're going to be paying.
So you might even be paying us either is zero point one.
What we're setting here is to cost control the maximum.
All right.
So I hope you follow that calculation.
If not, just rewind and go through it again, because once you get it is actually quite simple and
very powerful.
Now, next up, we have two additional bidding strategies, and that is the cost cap and the bidding
cap.
And these are different because the cost cap basically says that you are not going to pay more than
an average of zero point seventy five per bid.
So that means that some bids, they might be a little bit more, but then the others are going to be
a little bit less.
But for your entire budget, which we're going to go through in the next lecture, you are going to
have an average of zero point seventy five.
Right.
So if they see that there's a great opportunity by going to zero point eight point nine, then Facebook
will do so.
So these cost cap, it allows them to do on average and then go a little lower later to even things
out.
The bidding cap is different because it's very strict.
It means that even if there was an opportunity at zero point seventy six, Facebook would not show your
ad because it's strictly cap at zero point seventy five.
Right.
So this is the more advanced technique and the more strict and precise technique.
But once you have your data, you can truly optimize with this.
So once you have the data later on, as you become more advanced, I recommend it to stick with the
big cap.
All right.
Because that's more strict.
But once again, you're going to want to try them both out and see, which gives you the best results.
But in my experience, generally, the big cap is more powerful.
So now you know what cost control is and how it works and how you will be using it.
However, as we are rookies and we probably don't have that sort of data yet and it might take a while
before we have it, we are not going to set a cost control.
We are going to hope for Facebook to optimize them for the lowest cost for us based on our total budget.
So remember, we want to give Facebook Escalada control as possible, but in the beginning we have no
choice.
It's just something that we're going to have to work up as we go and as we become more advanced.
You're going to want to use cost control when you have somewhere between 25 to maybe 50 conversions
per week.
That means quite a bit of sales per week because this is a more advanced feature.
And you want Facebook to be able to optimize this feature for you.
As long as they get data, the more data Facebook gets, the better the art, optimizing the ads for
you.
So if this felt advanced, don't worry about it.
You don't have to worry about this for quite some time, but.
Now, you know how it worked, you know how precise it can be, and we will be using this as we go on
later on in the course and as we become more advanced for now, we leave this blank.
We allow Facebook to optimize it for us.
And we're still going to have some great results from that.
And we can still get some really great results from that.
All right.
So then we can hide the additional strategies because we're not using them.
We are allowing Facebook to optimizing for us.
Next up, we're going to go through the budget and schedule.
All right.
I hope you're having fun.
See you in the next lecture.