Today I want to talk a bit about our favorite topic: bid caps. But before we get to bid caps, I need to take you on three small detours to bring the point home.

"Ad performance is BRUTAL right now."

Quote by David Herrmann of Herrmann Digital. And he's not the only one saying this on Twitter lately. For many, the performance of their Meta ads decreased in February. Some say it's because of Super Bowl, but who knows for sure?

This means that you and others have potentially spent a lot of money on ads in February that wasn't profitable. That sucks!

Spend when people want

In one of Sean Franks, latest newsletters, he talks about spending money on paid ads when people want to buy and sell stuff people want. Let's unpack the two.

This idea is simple. There are certain periods where the demand for your product is higher than in other periods.

If you're a swimwear brand, more people want to buy your product in the summer than in the winter. Therefore, you should focus your spending on the summer months instead of thinking you can spend the same amount of money on paid ads all year.

Sell what people want.

This also sounds simple, but it's actually not that simple in practice.

Why? Because we're all biased. We all love our own products and think it's the bomb. But that doesn't mean our potential customers think that. Or maybe they just don't understand the product well enough (which often means we're not communicating it well enough, but that's for another time).

Either way, it's important to sell what people want, not what you think people want.

What does this have to do with bid caps?

I know. It sounds like I'm rambling. But I actually have a point.

Most of us know the highs and lows of our business during a calendar year. And while we're prone to bias, we also have some idea about what our customers want - and maybe also when.

But demand can vary a lot during smaller timeframes, too. Maybe the sun will shine on Monday, so we're selling 30% more swimwear than we did on Sunday when it rained. Maybe there's 25% more demand for rain jackets on rainy Sundays than on normal days. Or maybe it's just because of good/bad news in the media.

The problem is that these changes in demand are more or less impossible to predict. So how do we capture this sudden increase in demand? And vice versa, how do we make sure that we don't waste a lot of money when performance suddenly drops?

In my opinion, our best bet is to hand this decision-maker over to Meta and their almighty algorithms. And I think it's best to do it by using bid caps.

Just watch this week’s spending pattern in one in one of my brand accounts.

As you can see, Meta hasn't spent much the whole week relative to Feb 12. Why? Because we run with bid caps. So it's not spending unless it believes it can deliver results below the bid caps.

In other words, the algorithm takes care of deciding both when people want my product and what they want. If Meta doesn't think people want the product I'm advertising at this time, it's not running the ad.

But there's more!

The safety net of bid caps also allows me to have higher budgets than I normally would. As I'm not at risk of spending a shitload of money because of my bid caps, I can set higher budgets for my campaigns. That's awesome because, with higher budgets, I get to potentially higher spending on good days.

And what happened on Feb 12? We hit a new ad winner. So Meta spends 2.18x more than the weekly average with a 2.39 POAS. Winner, winner, chicken dinner.

So bid caps select what to run, when to run it, limit our downside in a bad period (Super Bowl), AND increase our upside when we hit a winner. All automatically.

What's not to like?

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