What is Scaling Ad Spend and why is it so Important?

Ad scaling is the practice of increasing advertising budget on successful campaigns. The most obvious reason for scaling your ad spend carefully is to make more money while avoiding overspending. Just because your ad sets are performing well at $5/day, does not guarantee that you will have the same results at $500/day. This is fundamental to any advertising platform.

  • Let’s say you have a $5 daily budget. If your cost per thousand (CPM) is also $5 you will reach about 1,000 people/day. If the total audience size that you are targeting is 250,000 people, $5 will only allow you to reach 0.4% of your total audience. That is not nearly a large enough sample size to predict reliable results for the rest of the audience.

Facebook has one of the most powerful ad delivery engines in the world. If you understand how it works you can start to use it to your advantage. When you choose your optimization objective (engagement, clicks, conversions etc.) your ad will deliver to those most likely to complete a certain action. Facebook will determine a user’s likelihood to complete a certain action based on their behavior on and off Facebook.

As more people start to engage, click, or convert on your ads, the engine will learn about those people and deliver it to others within your audience who are most similar to them. If you scale too fast and don’t let the engine learn from a large enough sample size of your users, it won’t be able to optimize delivery as effectively.

  • At $5 daily budget we reached 0.4% of our total audience. If we were to scale this up to $500/day we would likely reach 100,000 people, or 40% of our total audience. By scaling too fast the engine will not be able to learn enough about those who are converting, clicking or engaging. You will have wasted money delivering your ad to people who are less likely to complete the action that you want. There could be customers left behind in the 60% of the audience we didn’t reach making your campaign less profitable.

We began this study with the same testing strategy by setting the budget of multiple ad sets to $5-10/day on day one. Once discovering our best performing ad sets in the first couple days, two different scaling strategies were put into practice; Target Highest Revenue and Daily Incremental Increase/Decrease. Both examples brought in vastly different results, we hope to show you how and when to incorporate these techniques into your playbook.

Target Highest Revenue

Targeting the highest revenue possible is an approach that uses current revenues to dictate when and how much to increase your ad spend. Essentially, you take what you earn from the campaign to reinvest into your advertising budget to push your daily ad spend and daily revenue numbers as high as possible.

In the example above we had a very successful campaign. As revenue was pouring in, the daily budget was increased rapidly. If we know that the ad is converting well and is already making good money, there is less risk to dramatically increasing our spending. In the example, the revenue peaked on day 4.

On the relaunch of this campaign, we had significantly lower results. This is likely because we oversaturated in the first 7 days and now the engine can not optimize as effectively because it didn’t learn enough about those most likely to convert. ROI began to drop off quickly so ad spend had to be adjusted.

The rapid drop off that happened on the relaunch of this campaign doesn’t mean that you should never use this strategy. It is perfect if you are trying to promote a campaign that you don’t intend to relaunch. If your campaign revolves around a holiday or a one-time sale like Black Friday, using this method will allow you to get the most revenue in a shorter promotion period if you’re not concerned about long term revenues.

Daily Incremental Increase

The Daily Incremental Increase strategy is an approach that slowly increases ad spend each day. As a general rule when using this strategy, you shouldn’t need to increase your spending by more than twice of what you spent the day before. In other words, just double your ad spend each day if you continue to see the same results. This requires patience, especially when you have a campaign that is doing very well.

The Daily Incremental Increase approach made $431 less profit overall in the first seven days compared to the Target Highest Revenue in the previous example.

Where these two strategies greatly differ is on the subsequent relaunches. If your custom apparel campaigns are set to 7 days and you hope to continue selling past the first run, the Daily Incremental Increase strategy is a far more effective approach for sustaining revenues. The downward ad scaling in this approach is just as important as the upward scaling. It’s important to deeply analyze your changes in stats like Cost Per Acquisition (CPA) and Cost Per Thousand (CPM) overtime to know how much you should keep spending.