I recently wrote a thread on Twitter that went semi-viral (46.3K views) on Twitter. It’s filled with gold. So I want to ensure you get it, too, in case you didn’t see it. Here it is in newsletter format👇

I run our Meta ad account 100% on math and game theory.

A blind monkey could run it 🙈

And still, we're having our best month since peak Virus-Who-Must-Not-Be-Named.

• No 3rd party pixel.

• Zero daily maintenance.

• 100% focus on creating new ads.

Here's the secret sauce:

Overall Account Structure:

We're running all sales campaigns in 1 CBO campaign with a crazy high budget. The CBO makes sure that we use our money most efficiently.

A flaw in running everything in 1 CBO campaign is that I can't direct spending toward specific products. But we're operating in small, European countries. So we have to consolidate to get “enough” data. You could probably do this successfully with separate campaigns as well.

I will explain the crazy high budget later.

Ad Set Structure

The CBO campaign contains multiple ad sets.

All ad sets target the same broad audience. E.g., +45-year-old women.

But each ad set represents a single product or offer. This is important.

Why? Because each ad set is dialed in with a magical, secret bid cap calibrated to each product or offer. Note: A bid cap, not a cost cap.

This is where the math and game theory starts.

The Secret Sauce - The Math and The Game Theory

Meta ads are governed by something called a VCG auction.

When you do the math, using game theory, the optimal way to run ads in a VCG auction is to:

1. Use bid caps. Again, not cost caps. Bid caps.

2. Set the bid to your break-even CPA after COGS, shipping, pick N pack, etc.

THIS IS THE SECRET SAUCE!

I repeat: Use bid caps and set your bid to your break-even CPA after COGS, shipping, pick N pack, etc.

This maximizes your contribution margin by winning as many ad auctions as possible that are profitable for you.

I know a lot of you won't be comfortable using bid caps, let alone setting the bid to your break-even CPA.

But it's not up to debate. THIS is the right way to run Meta ads.

The math proves that this is how you maximize your contribution margin. There's only one exception:

If you're low on inventory or selling more than you can restock, it doesn't make sense to maximize your contribution margin in every auction.

Instead, you should balance your sales to run out exactly when you get a refill.

But I don't recommend doing this in 99% of the cases:

1. It's impossible.

2. It's an inventory problem, not a Meta ads problem. Fix your supply chain and optimize your contribution margin.

But what about the crazy high budget?

Simple. We want to maximize spend as much as possible on the "good" days when we win a lot of auctions at or below our bids.

And we don't risk anything because the bid caps ensure we're not spending on "bad" days.

= More upside.

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