When advertising on LinkedIn, you have the option to use automated bidding when setting your budget. LinkedIn will then spend your advertising budget for you using machine learning. This can be very convenient, as you no longer have to do anything yourself. But is this the most efficient way to spend your money? We will explain it to you.
What is automated bidding?
When you launch an online advertisement on LinkedIn for a target audience with specific characteristics, your ad must compete with other advertisers who also want to reach this audience. To appear at the top and thus be visible to the target group, a certain amount must be bid for your advertisement that is higher than the competitor’s amount.
Automated bidding takes full control of this process with the goal of getting your advertisement to the top. Based on your daily or weekly budget for the ad, the algorithm works to spend it. The algorithm’s sole purpose is to ensure your advertisement is at the top. It is not concerned with cost-saving. Consequently, it can result in paying too much for a single click.
When should an advertiser use automated bidding, and when should they not?
When you start advertising, you can choose to use CPC (cost per click), CPM (cost per mille), or automated bidding. We have listed them for you:
Cost per click (CPC):
With CPC, you only pay once someone clicks on the advertisement. With CPM, you pay per thousand impressions of your advertisement. When using CPC, you have full control over the costs per click for your advertisement. Imagine: you have an advertisement with a low CTR (click-through rate) because it does not resonate well with the target audience. In this case, you have not wasted money because few people clicked on it. This makes it a safe way to test advertisements.
Cost per mille (CPM):
When using CPM, you want to ensure that your advertisement has a CTR of at least 1%. At a 1% CTR, the return is approximately equal to when you use CPC. If your advertisement has a CTR higher than 1%, it is cheaper to use CPM. This rule is merely a heuristic and varies, for example, by target audience. There are also differences between video advertisements and sponsored images.
Automated bidding:
Under the hood, automated bidding operates on a CPM basis. This makes advertisements with a low CTR less suitable, as CPC is usually the cheapest option in those cases. Furthermore, you should never set a new advertisement to automated bidding. You do not yet have any idea how the advertisement will perform. This can lead to unnecessary costs that can be avoided through proper testing.
Automated bidding can work if you already have an advertisement that performs well with a relatively high CTR of over 1%. If you want to keep this advertisement online, you can choose to enable automated bidding to see if it produces better results. Especially with target audiences that are typically targeted by many different advertisers, automated bidding can lead to better results. But beware: this also applies to expensive campaigns. Automated bidding can lead to sky-high costs.
If the results do not show a significant increase through automated bidding, then monitor the advertisement yourself using manual bidding.
How do we use automated bidding in practice?
When you have a list of leads that you know are already interested in your offer, automated bidding is a useful tool. It allows you to ensure that the algorithm sorts your advertisement at the top of the bidding list, so your prospects see your advertisement first.
In all other cases, we recommend always starting with manual bidding first, so that the advertising budget is spent as efficiently as possible.
If you still want to test how advertisements perform with automated bidding, we recommend duplicating an advertisement, setting one to automated bidding and managing the other manually. This allows you to test the differences in results and choose the most profitable option. You can do this by performing a suitable A/B test.
Conclusion
When starting an advertising campaign on LinkedIn, it is wise to first test your advertisements manually on a CPC basis. If the CTR is subsequently high enough, you can choose to test automated bidding. Would you rather start with automated bidding immediately? Then duplicate the advertisement and test whether this is effective for the campaign.
Do you have questions about LinkedIn marketing, or are you looking for other marketing advice? We can be reached via:
info@primemarketing.nl
