From the course: Advanced Facebook Advertising

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Predicting diminishing marginal returns to ad spend

Predicting diminishing marginal returns to ad spend - Facebook Tutorial

From the course: Advanced Facebook Advertising

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Predicting diminishing marginal returns to ad spend

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- [Instructor] If you doubled your marketing budget would you get double the conversions? Not likely. Facebook operates on an auction model. So as you increase spend you usually pay more per conversion. This is called diminishing returns and you can calculate it to predict where performance would be at different spend levels. So, as an example, this is the type of data you might see. If you plot your spend and CPA over time, or your cost per acquisition, then you'll see that as you spend more, your CPA tends to increase. If you do a simple correlation between conversions and spend or spend and cost per conversion, you'll see the same thing. This chart on the right is telling you that as you increase your spend, which is on the y-axis then the cost per acquisition also increases which is on the x-axis. This correlation, however, is linear and that's not the best way to fit the model. We don't expect performance to…

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