Why the $5 a day Facebook bidding strategy doesn't work in reality

If you are a serious Facebook marketer and you haven't been living under the rock for a while, you may have heard of the $5 per day Facebook advertising strategy.

This is going to be a behemoth of a post so buckle up, it will be worth it and even save you a few bucks.

What is the $5 a day strategy?

In summary, it is a method of spending only $5 per day on testing an audience.

You only stop testing a particular audience when the expense outweighs the profit that you are getting for the sale of the product.

And the key touted here is patience...

You simply wait until you find something that works and you want to think of at least 30 interests.


Since then many different variations of this $5 per day method have sprouted.

This is probably due to its catchy sounding promise of low advertising spend to obtain great results.

So the big question is...

Yes it is popular but does it really work?

We have been seeing mixed reviews on the effectiveness of this strategy and the amount of data and the accuracy of good reviews begs to be questioned.

But before that, let's take a quick jab at this strategy.

Here is the fundamental flaw in saying that spending $5 per day is a winning strategy.

Why?

You can take any failing campaign by a marketing rookie and make it better with this method because...

It is a failing campaign.

On top of that, this strategy does not have a guaranteed duration, the responsibility is left to time.

In one sentence, here is what this strategy will sound like

Test until you get it. It's simple right?

Here's another analogy.

Let's talk about the context of this in poor fitness advice.

If you want to lose weight, you got to run every day but run just at the bare minimum so that you won't get muscle soreness.

Eventually you will lose a satisfactory amount of weight.

It's simple right?

That is an exact reincarnation of the $5 per day marketing advice in the fitness world.

Through actual research, we now know that there are specific ways to train to lose weight or train for stamina.

There are also many factors to take into account such as the intensity of the exercise, the duration as well as the nutrition for effective weight loss.

And this strategy has conveniently ignored many ways that we know to be in true in how Facebook works.

Many chinks in this armour for this $5/day strategy

Here are some simple questions to ask when considering the effectiveness of this method

• Is there a better cost per lead? ( What is it being compared to ? )
• Can the results be attributed to other factors which are good?
• What kind of niche are the advertisements geared towards?
• How many scenarios does this strategy still hold true?

On top of that, so many other real-world business objectives are conveniently ignored when using this strategy.

What if you have a time-sensitive campaign?

Can you afford to wait 150 days for a chance of finding a winning audience?

Or what if you only have a few hundred dollars as your entire budget?

Does the risk of losing $750 ( 150days * $5 ) for just testing a winning audience sound good now?

Perhaps that covers your short term risk but...

It does not consider the long term negative effects of giving Facebook too little data to work with.

And what if all 30 audiences that Facebook provides are duds?

What happens next?

What are you left with?

Nothing.

And it is not surprising due to the inaccuracy and limitations of default audiences that Facebook has provided, this may actually happen.

But wait, how do I know which of these 30 audiences are the winning audience then? Isn't choosing a Facebook audience the same as playing Russian roulette?

If Facebook is really a casino of audiences and the odds are always against you, then $5/day may actually be a winning strategy.

But the opposite is true.

It is in Facebook's favour to have you win so you can spend more on their platform.

That is literally to only way for them to monetise their user's browsing activities by having users pay YOU money so you can pay Facebook.

So why would Facebook ever want you to lose?

There's nothing in it for them in the long run.

This strategy creates so many loopholes when approached with Cartesian Doubt

Cartesian doubt is a form of methodological skepticism, it's pretty intense

Now let's give the creator of this method our special Cartesian benefit of the doubt as this may really work for e-commerce people.

The only exception that we can think about is when you are testing too many low-ticket products that your budgets need to be extremely low.

But still, a piece of better advice would be to do better product research and actually pick a niche.

What worries us is the fact that we are seeing this trend in campaigns for small business owner's ad account that we take over from agencies.

When agencies are blindly following this tactic, that is dangerous for business owners.

Why business owners should be worried

If this phenomenon was happening with a research on the feasibility of a new drug, I am pretty sure you will be worried if this was approved by the FDA.

But seriously, why should popular marketing strategies be any different?

Why shouldn't we be worried?

After all, money is being spent and clueless business owners or enthusiastic solopreneurs may be spending their last critical dime doing this.

It is literally a life and death situation for some people that believe in this.

When it comes to running advertisements for businesses, it's mission critical that we do not run our advertisements based on "Folklore" strategies.

Because businesses are literally the livelihood of people and their families.

The only practical step we want to take is understanding the First-principles of what is actually true of Facebook.

When there are simply too many unknowns to consider such as how the Facebook algorithm actually works, we need to learn it's initial conditions.

We need to actually read the handbook that came with this for it's specifications.

That is what we actually know to be true.

First Principles as a North Star

Let's start with what we actually know to build a strategy

Before we start, let's define our objectives.

We want to be profitable quickly and get as many customers as possible for the lowest possible price.

Now that's the dream right?

To do that, the unanimously agreed truth is you want to give a campaign enough data quickly so that the A.I can take over and successfully scale to that amount by itself.

The role of the human operator ( The Marketing Technician ) should only be to set directives and feed the software the right data.

Facebook runs like Google, it's an intricate algorithm running on pre-determined rules and fed by user behaviours.

And if you have done any sort of search engine optimisation, you will know that there is no space for "Luck" when it comes to how these mechanisms work.

Get a wrong diversity of backlinks to your website your the next moment your site is nowhere to be found on Google.

That is crazy for businesses whose 90% of sales are attributed to SEO, they would go bust overnight.

Therefore we must thread with extreme caution what information we find on the web.

We want to understand what is really true on Facebook instead of "industry secrets" touted by marketers with large advertisement spend to back it up.

Large advertisement spends alone should never be a metric to measure a successful campaign. It's a logical fallacy simply because the biggest fails in marketing too, have a large advertisement spend.

So let's get to the meat of this article.

Where can we obtain such fundamental truths? Simple, it's already provided in detail by Facebook's Help file.

Facebook literally provides ALL the information that you need to know about how their advertising platform works.

And we are not asking you to read the entire help file but here are some critical points that question the reliability of the $5 per day method.

We will present the facts and you be the judge

Facebook advertising fundamentally is an auction

Facebook is an auction for attention

Everyone who is advertising is literally bidding for views on their advertisements.

And guess what, the view goes to the most relevant advertisement with the highest bid.

The keyword here is relevance. You win more auctions and get cheaper bids by being relevant.

If you have a relevance score of 3 ( Just a hypothetical number, relevance scores don't work exactly like that ) and you are bidding $2 for a thousand impressions, somebody with a relevance score of 10 could be winning that auction with just $0.50.

Now that's 4 times as much conversions to be had just by being more decisive with your initial audience.

Why does this happen? Why does Facebook like relevancy?

Facebook rewards you for feeding good data to the machine and keeping up the great user experience of Facebook.

The only way to ensure you are relevant is to be hyper targetted so you can get cheaper conversions to reach your goal.

Another question is how does Facebook actually know what price to bid for if you select automatic bidding? ( Assuming you do not know how to manual bid yet )

If we are building this software, here's our take.

We will be looking at your daily budget because we wouldn't want to be bidding out of your comfortable spending range so that we don't scare small pockets away.

We will also be looking at your spending history and other past histories of transactions.

By entering each ad set at a lower budget of only $5 per day, how many auctions would you win with automatic bidding?

The answer is very little and on top of that, you will probably only be winning the cheapest bids which more than likely will not be your best audience.

What should be done here: Create narrowed audiences to get better relevancy and start with a HIGHER daily budget, you may not know the upper end of the bid but Facebook does. They have information on ALL the bids that are coming in and they will know where to position your bid.

Limitations of Audience segment

Food for thought.

If you have experience running Facebook ads, do you notice that the audience that you can select are limited to just a few interests and brands in the space?

Our hypothesis is Facebook limits targeting by specific brands because it becomes a breach of privacy for Business who are advertising on Facebook.

No business would want to give their competitors direct access to their existing customers.

What should be done here: Quickly getting the Look-alike-audience capabilities to leverage on the underlying data that Facebook doesn't allow marketers to immediately access.

This way you don't bid for expensive competing interests that everyone has excess to as well finally using the creepily accurate data that Facebook has on you to the truest potential.

Inaccuracies of Primary audiences

On top of that, if you browse your advertisement preferences as a user, you will notice that 30-50% of your interests are either outdated or just simply wrong.

It is because Facebook literally learns through machine learning and it isn't perfect.

If you realize, Facebook does not allow you to key in "Tags" or "Keywords" for your advertisements or posts which is usually the case with popular search engines like Youtube and Google.

So how exactly does the machine get accurate data on what type of advertisements you are posting or clicking?

Either clicking on an ad that may be wrongly "targeted" or liking business pages that are limited by industries of course.

What should be done here: It's logically sound to narrow your audience at least ONCE to limit the inaccuracies of interest tagging.

This way you don't show your advertisements to irrelevant people who may in some cases be as much as your target audience. $2.50 per day on irrelevant audiences anyone?

Facebook's learning mechanism is brutal

This is where even veteran marketers get wrong.

Facebook's learning algorithm happens at 50 conversions within 7 days for a reason.

It's because the numerous data scientists at Facebook think that 50 results are statistically-effective enough ( Significant is subjective to the model you use ) to start narrowing the audience base on user interactions.

And no they are not doing it to make you spend more, there is little overall incentive for advertisers to lose money at Facebook. They are setting you up to win with this information and you should be doing just that.

That also means that you will never be able to recreate the "Same Exact" audience again even if you duplicate that audience after the learning period.

The workaround is if you scale your advertisement budget at an excruciating rate of 5-10% a day with the fear of Facebook losing the optimisation on your first advertisement in the first place because of a significant edit.

So where does the $5 per day audience go wrong with this?


1. The budget is too small to give Facebook any data to optimise your audience properly.
2. Even if you find a "winning audience" how do you then scale this already inaccurate audience ( Reference to first 2 points) up if it is different after the learning period?
3. When are you actually able to use the look-alike-audience feature? ( Facebook's most POWERFUL feature )

What should be done here: You want to be driving 50 conversions as quickly as possible within the time period so that Facebook's learning algorithm can kick in again to further optimize and get the seed conversions you need to start a look-alike-audience.

Instead of spending 150 days and hundreds of dollars to let a machine lazily find your "winning audience", speak to your customers and run customer research advertisements so you can confidently target your first customers with the narrowing option. Want to minimise the risk? Try just 3 audiences of this accuracy.

Does it sound like a low risk strategy now?

Probably not.

So what's a more sensible strategy than this? ( Still not the best but hey, it's a better spend of your money )

1.) Do proper customer research advertisement form with a giveaway of your product.

a.) This way, people who respond have the interest in obtaining your product ( There is less friction to enter a giveaway than purchasing it, you get more data here than a default audience )

b.) You learn more about this audience who is actually interested and what are their pains/goals with your product, their motivations to have your product.

You may even be surprised to see that some people may want your product to give it to others. ( We use to do $700,000 of offline sales in one week, we know that the decision maker may not always be the user, it could be a gift etc. )

Even if it fails, you won't be left with nothing, you now have excellent qualitative data to craft your messaging rather than being left with a bunch of quantitative data that provide little to no analytical value.

c.) You can even upsell them in the process with consolation coupons through messenger sequences to purchase your product ( You already make sales with this )

2.) Run a proper seed audience with your observed interests or even create a look-alike-audience with interest narrowing at this stage for people who filled up your form. ( Yes forms and videos can capture audiences ).

If your form submissions are too little, you can even start with people who opened your form ( Look-alike audiences on clicks )

Your audience is already more accurate than any default audience that Facebook can provide you.

3.) Watch the money roll-in and cost per sale stabilise or drop when you reach 50 conversion because of the learning optimisation event.
This will happen FAST.

4.) Now you have a range of 1% to 10% LAL ( Almost 10 audiences ) with a varying range of accuracy to market to. And these audience changes over time as the data improves so you are not going to runout of prime audiences to test your ad copies on.

We hope we have dispelled the myths and helped you save a few bucks

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