Recently, Facebook announced two very important news related to their advertising platform. Finally, it will not become mandatory to use CBO, the campaign budget optimization. And also, Facebook announced that Facebook Shops is coming for businesses who are on the platform. Here at J7 Media, we had several discussions on these topics and we will share our opinion with you today.

Nate Ross, Senior Media Buyer at J7 Media is with me. Nate, finally, is it a good or a bad thing to not have the CBO mandatory?

(Nate) Hi, Antoine and thanks for having me on the podcast again. To answer your question directly, I think it really depends on who you ask the question to. Personally, I tend to think it's a great thing, honestly, that they're giving us more options, basically. 

So as you mentioned, Facebook is abandoning its mandatory shift to campaign budget optimization. So just to bring you back and tell you more about what this campaign budget optimization thing is. We call it CBO for short. Basically, it enables advertisers to set a central campaign budget for all of their ad sets, which Facebook's AI system then automatically spreads between ad sets in real time based on the relative performance of each of these ad sets. CBO makes the most efficient use of your budget spending to get the overall best results and ensure that the cost of those results align with your bid strategy, regardless of the audience.

At present, Facebook allows advertisers to allocate specific budgets for each of the ad sets within a campaign, but the new system would have seen that capacity deleted, with advertisers only being able to set the budgets at the campaign level.Back in 2019, Facebook announced that all the campaigns would soon be switched to CBO by default. So that means all the other options to set the budget on the ad sets would be totally removed. And now Facebook is abandoning these efforts to have all advertisers switch to automated CBO systems.

So, Facebook is really backtracking on the idea and they're basing that on the advertiser feedback that they got from both the users, [and] the agencies. And if I go through the communication that we received from Facebook, it really read, ‘We will no longer be pursuing a mandatory migration to the campaign budget optimization (CBO) for your ad accounts. As previously communicated, your ability to set budgets either at the ad set level or the campaign level using CBO will remain unchanged.’ They actually recognize the importance of providing a choice and flexibility to make the budgeting decisions to work with the advertisers’ needs.

The reason why they're backtracking is because they do continued testing and their results led them to determine that in many cases we're setting the budgets at the ad set level. It could be beneficial, such as when you value a fixed delivery more than you value the performance and efficiency of the whole campaign. So, when you value the distribution on one of the ad sets way more than you value the overall campaign performance, they are making the change basically to ensure that they're providing more flexibility and choices to choose the right strategy in many cases.

So, in my opinion, I think it's definitely great that they're providing us with that flexibility. But campaign budget optimization remains a simpler, more efficient way to set your budget [and] manage and maximize value for your campaigns for sure. I would definitely still recommend adopting CBO in the majority of cases because it delivers more flexibility to automatically and continuously distribute a budget in real time to the top performing ad sets. 

Overall, Facebook's tests have seen advertisers benefit from one: lower cost per result for their campaign, two: better budget utilization, and three: automation, which basically frees up your time to focus on other optimizations, such as creatives or things like that, [or] maybe building more audiences. But definitely, in many cases, using CBO is the right choice.

(Antoine) Yeah, I think so. I think the main thing, and you mentioned it, like when you wanna create an ad for a specific audience... at some point, that's where going back to audience budget optimization can make a little bit more sense. And let me explain [to] you my point. I think we saw that, Nate, with a couple of different clients that we're working on together. When you are an online business, when you are an e-commerce, you will, let's say, set an objective on your campaign. The objective that you will put will  be purchases. You would like to generate purchases on your campaign. And automatically, since the Facebook AI is really, really good, Facebook will be able to find all these people who have, maybe, an intention of purchasing your product.

And this thing, the Power Five, the CBO – if we go back a couple of years in time – it was built for e-commerces. It was built for e-commerce or for online businesses, right? Then it's good. Facebook will be able to find people who want to purchase your product. But then if you're a different business... if you are a different business and instead of looking to get purchases, you're looking to generate leads [meaning] basically the transaction of your end consumer will not occur online. It will maybe occur through phone, through chat or something different than only someone putting their credit card online.

That's where it becomes completely different. That's where it becomes completely different because a lead doesn't have the same value from one audience to another. We saw that so many times, Nate, but sometimes you launch a campaign with the CBO objective, you have three audiences. One of the audiences gives you leads for $3. In another, audiences give you leads for $30. And then you're like, ‘Oh my God, this audience that gives me leads for three dollars, it's the best!’, right? ‘It’s the best!’ But finally, you take a look at the UTM, you take a look at the results, [and] at the sales that these leads generated, [and] a lead of three dollars doesn't mean that it generated a lot of sales. Maybe the leads of $40 generated way more sales than the lead of $3, right? So, leads do not have the same value.

And [with] this thing, Facebook is not able yet  – and I'm saying yet because maybe maybe Facebook will be able to to help us with that at some point – but Facebook is not able yet to find or at least with the efforts that we did, with all the different bids, the different objectives that we can do, Facebook is not able to find these high value leads. Yet.

(Nate) No, exactly. I think you're totally bringing up the right point there. The Facebook system is absolutely awesome, but it definitely has limits. 

And as you brought it up, I think this whole CBO system was definitely built for e-commerces. And the best practical way you can use it is by using it for e-commerce. Facebook will always understand the value of a transaction. If you sell an item for ten dollars, it doesn't matter if that ten dollar transaction is coming from audience A or audience B. What matters is that there's a transaction for ten dollars. And so Facebook will recognize that one of the two ad sets or audiences is generating cheaper cost per purchases and it will just provide that audience with more budget. 

But if you're talking in a lead generation context, leads can have way different values, as you brought up, Antoine.  And I think in that context, CBO is not necessarily the right tool to use as a marketer, as an advertiser. If you're able to understand and get some data on the sales qualified lead to opportunity ratio that you have for a certain audience or ad set, and you understand that that ad set is performing better than that other one... even if the the other one, ad set B, for instance, is generating cheaper cost per lead, these leads are less valuable to you. So, you want as an advertiser to be able to set the budget on the ad set level on that audience to make sure it gets distribution and that you're not wasting money on cheap leads that won't convert down the road. 

So, I think it really depends on the context. As you brought up, in an e-commerce context, it's straightforward. The Facebook system was built for that. It was built for e-commerces. It will understand what audiences it should prioritize and put money on. But then if you're talking about a lead generation context, it's way too complex for the system. It can't recognize the value of a lead. And I think you're probably better off trying to understand your audiences, [and] better understand the sales qualified lead to opportunity ratio that you can get out of that particular audience and then set your budget on the audience rather than on the campaign.

(Antoine) Yeah, yeah. Especially if your sale cycle is really long. Let's say if a lead comes in your system, and usually the transaction will occur maybe 24 to 72 hours after. You know, it's not a big deal, right? The transaction happened very fast. But, when the transaction will take a couple of months, now it's really, really important that you do a deep analysis on which audiences are providing the best value leads, right? Because otherwise maybe your money will not be invested on the right audiences and that's where it becomes very important.

(Nate) No, exactly. But yeah. Yeah, absolutely. You're right. But I think yeah. Bottom line is, as an advertiser, I think you should really consider the context in which you're operating and then make your decision off of that context. For myself, if I'm working with an e-commerce, I will definitely choose CBO as an optimization technique or method. If I'm working with a lead generation client, then I might want to start with CBO, get some data on the audiences, and then maybe switch to a more manual optimization.

(Antoine) Interesting.

 Nate, so, after CBO that will not be mandatory, there's a new thing that Facebook rolled out a couple of weeks ago. So we're recording this podcast on June 3rd, 2020. And I think...yeah, two weeks ago, Mark Zuckerberg did a Facebook Live announcing new features for Facebook Shops. Can you tell me and also tell the audience, what is this new Facebook Shops thing? I think it can be very interesting if you sell online to learn a bit more. So yeah. Tell me more.

(Nate) Yeah, absolutely. I think Facebook Shops is great news and Facebook was really opportunistic when they launched it in the context of COVID-19 and the fact that everyone's trying to start selling online. Small businesses are trying to find alternatives to keep growing and keep selling. Rolling out that feature or that platform was such a great idea on the part of Facebook. 

So they announced, basically, Facebook Shops as a new thing. It was a platform that already existed in the past. I worked with it. Many of my clients also were Facebook Shops in the past. But basically, it's a native, immersive full screen storefront that enables businesses to build their brand story and drive product discovery online. It's a free, feature free platform, and it's just a simple way to set up an online store for customers to access on both Facebook and Instagram.

If you boil it down to what it really is, Facebook Shops is basically an e-commerce platform for small, medium, but also large businesses as well. It's absolutely free. It takes minutes to roll out. And the whole idea behind it is that anyone can have a virtual storefront to promote their products online. Once the shop is set up, people can discover a business through Facebook or Instagram, and the advertiser can also tag their products in their posts, stories, ads. And from there, people can go onto Facebook Shops, browse the products, add to their cart, and also place an order. 

So there are some key features actually that they announced in that Facebook Live that you're talking about with Mark...some key features that are really important. And I think they're really the game changer in that whole thing. 

The first feature is Messages. So just [as] when you're in a physical store and you need to ask someone for help, maybe for support, you have questions on a product or anything the same way you do that in a physical store, you'll also be able to basically send messages through the family of apps. So, WhatsApp, Messenger, Instagram Direct, to ask your questions, get support, track deliveries and much more directly to the brand with which you interacted or for which you bought a product. So that was the first feature, Messages. They're rolling it out in Facebook Shops and it will be accessible broadly.

Second feature is the Live Shopping feature. So people started using live videos on Facebook to showcase products from for years now. It's been something that really people got creative with ever since they launched Facebook Live or Instagram Live. People showcase their products, from shoe stores announcing new sneakers, beauty influencers trying different lipsticks, or anything. And now they're making it easier for people to shop products in real time while the live is happening. 

So brands [and] marketers will be able to tag their products from their Facebook Shop or catalog on the lives or directly on the video on the bottom of the screen. People will have the option of just clicking on there,  going on the product page, browsing the product, getting all the information, and also if they care to, they can buy the product directly on it. 

Which brings me to that last feature that they rolled out, which is Instagram Checkout. So, that was announced on March 19th. And Facebook is basically introducing a checkout on Instagram. So when you find a product you like, you love, you can now directly buy it without leaving the app. When you tap to view a product from a brand's shopping post, you'll see a checkout on Instagram button on the product page. People will be able to access various option sizes, colors, quantities, then proceed to a payment without ever leaving Instagram.

So the whole sales cycle for someone can absolutely stay on Instagram, never leave the platform and you can discover the product, browse, get the information, choose the colors, quantities, and check out directly on Instagram. That is an absolute game changer for many businesses and also for Facebook as well. 

At the moment, that feature is only available in the US, and for now, it's also just a beta version. They're trying it out with major brands like Nike, Adidas, Dior, Uniqlo, Zara and brands like this. But they actually said that they will roll out this feature nationwide in the US very rapidly and then also across the world in the coming months. 

I think the main goal for this new platform is to make buying and selling online way easier. If you have a Facebook business page, you can add a Facebook Shop to that page. You can use this section to list products, connect with your customers, showcase anything, and you're always staying on the platform, connecting with that audience.

(Antoine) Yeah, totally. And I think, you know, I was doing a Facebook Live with a colleague of mine, Danilo, that runs a Facebook advertising agency in Europe. And we had a discussion on the future of Facebook. What is the future of the platform? What is the future for advertisers?

And one of the things that I mentioned to his audience is I think the more – you know, slowly but surely, Facebook will try and do everything to keep everyone on their platform, right? It makes sense. A platform, a social platform, wants to be sure that people stay and consume content on their own platform and also in a business perspective. From a business perspective, for people who advertise online, it's important to understand why. And how many times have we seen that?

Let's say you run a campaign for a client. You are the only marketing channel for this client. You launch ads, you see purchases, you see revenue generated on the backend of your client's website. And then on Facebook, these sales are not attributed to your ads. And this can happen for many reasons, right? First, maybe you have the wrong tracking. Maybe your tagging is not set up properly, but also maybe [it] can happen because of data privacy, right? Because, you know, you don't accept cookies on your browser. So many different things...maybe [the client] can be in a private connection, right?

So there's a lot of things that Facebook does not control from the moment people leave their platform. But now, for instance, like you mentioned, if people stay on their platform and buy products directly on Facebook, directly on Instagram, now they don't have these problems anymore. And in terms of business, it means a lot for Facebook because now they'll be able to tell their advertisers more accurate numbers. 

And let's say you were running ads and on 10 purchases only 8 purchases were attributed to your ads. But you generate 10 purchases with your ads. So now if you stay on the platform, you will see on your ads manager these 10 purchases generated, right? Automatically, the advertisers will just invest more. The advertiser will just invest more because he sees that his return is way better than it was before, just because now we advertise on Facebook Shops.

So, there's so many reasons that they want us...Mark (laughs) wants us to stay on the platform. It makes sense. And I think it's just the beginning of something because at some point we will be able  – and we can see it - we will be able to run ads specifically for Facebook Shops and all these different features. And that's where I think there will be – and I don't know exactly what will happen – but I think it will be a game changer for many online businesses. Their return will be way higher when we'll shop strictly on the social platform.

(Nate) Yeah, absolutely. I think there's many features they can add onto this platform. There's so many ways you can leverage Facebook. And also it's a great way for Facebook to stay relevant. I mean, they understand that there's a pretty strong, dynamic wave of businesses that want to start advertising online and selling online. And it's just such a cool, great new feature. Easy to implement, [and] easy to access, that basically these small and medium sized companies can leverage super quickly and start selling online from one day to the next.

And it will definitely help Facebook down the road to stay relevant. They're creating a micro system in their community and people will stick to Facebook. [They’ll] use Facebook as such a great selling tool that brands will have to stick with it, grow with it. It will become an intricate part of them. So I think it's super visionary on the part of Facebook, and I'm definitely sure it will help them in the years to come as well.

(Antoine) Yeah. 100%. I agree with you on that. 

We saw it with Facebook Marketplace. You know, they launched it because they already had this platform. They knew that it could leverage your platform in a different way. They launched marketplace and so many businesses now, they have their product on marketplace and they are able to sell it. And you know, slowly by surely, we will see more and more and more of these features on the platform. It just makes sense. It just makes sense.

(Nate) Yeah, for sure. They understand how to leverage their platform. They link people together. They link businesses to people, people to people. And there's so many ways you can use that tool that they have or that advantage that they have to create things, as you mentioned, like Marketplace, Facebook Shops, maybe Event Features as well. And they're all integrating that to the platform to build something even greater. So I'm looking forward to seeing how this whole thing evolves into the coming years.

(Antoine) Okay, Nate, before I let you go, anything else to add? You mentioned two great points today with great explanations. Anything else before I let you go?

(Nate) No, that was all, I think two great pieces of news by Facebook. Giving us more flexibility and basically giving a new tool to small and medium businesses, which is great on their part. 

(Antoine) Okay, well, Nate, thank you very much for your time. I hope everybody likes the explanation that we gave you today and see you soon for a new episode of Social Selling .