The different Bid Strategies allow you to choose whether you want to limit your bid by a maximum or average limit, and other selections.

Here's Facebook's visualization on how the different bid strategies behave:

Lowest Cost (without cap)

Used to be called "Automatic bidding".

Facebook delivers to people most likely to convert, bringing you the cheapest conversions it can find, while spending your defined budget optimally. In practice, this means that if budgets were unlimited, there would be no upper limit for how much you would pay per conversion. However, since budgets usually do limit delivery, Facebook uses optimal bids in the background: just high enough to spend your daily or lifetime budget fully. In practice, the budget might not be spent due to e.g. audience smallness and frequency limitations.

Note: Facebook will try to spend your full budget, even if it is very costly. Remember to limit delivery with reasonable budgets!

Lowest Cost with Bid Cap

Used to be called "Maximum bidding".

Like with Lowest Cost bidding, Facebook delivers your ads to people who are most likely to convert — but you can set a Bid Cap. This means that you don't want to bid higher than your Bid Cap for any single, individual conversion. Facebook first covers the users who it thinks you can convert the cheapest. The delivery is then expanded to more expensive user segments, as long as the next user segment is not (expected to be) more expensive than your Bid Cap.

This means that you get some cheaper conversions, and some conversions roughly the price of your Bid Cap, and this results in an average cost per action (CPA) that is lower than your Bid Cap.

Bid Cap when bid is not the limiting factor

When budget or frequency is the factor limiting delivery — meaning, when the Bid Cap is high enough to spend your budgets fully — the Bid Cap will have no effect on delivery or costs. This is because Facebook's Pacing adjusts your bid just only high enough to spend your budget fully.

Lowest Cost with Cost Cap

Used to be called "Average bidding".

This Bid Strategy is similar to Lowest Cost with Bid Cap, but instead of a Bid Cap that limits the marginal cost of individual conversions, the Cost Cap limits the average cost per action (CPA). This means that you won't end up with an average CPA (calculated with the Conversion Window you define in bidding) higher than your Cost Cap.

Note: Facebook does not guarantee that the average CPA does not exceed the limit; costs may exceed the target by up to 10%.

Cost Cap when bid is not the limiting factor

When budget or frequency is the factor limiting delivery — meaning, when the Cost Cap is high enough to spend your budgets fully — the Cost Cap will have no effect on delivery or costs. This is because Facebook's Pacing adjusts your bid just only high enough to spend your budget fully.

Read more: What's the difference between Bid Cap and Cost Cap bidding?
Facebook help center: About Cost Cap

Target Cost

Not recommended. Facebook will deprecate Target Cost in Q4 2020.

This is a new Facebook Bid Strategy created to satisfy advertisers that value predictability over cost efficiency. In a nutshell, it keeps average costs at a defined level, even if it needs to keep it artificially high.

The documentation says that Target Cost keeps your average cost per action (CPA) stable as you scale up your budgets. The point is, it mainly achieves this by getting very expensive conversions in the beginning — before you scale up — in order to be able to expand to the cheaper ones when you scale your budget up.

The Smartly.io Data Scientist team never recommends using Target Cost bidding. It does not give you optimal results.

Here's an alternative visualization that might help you understand the differences between Lowest Cost, Bid Cap, Cost Cap and Target Cost bidding:

Lowest Cost with Minimum ROAS

This option is only available with the 'Value' Optimization Goal.

Minimum ROAS Bidding is like a Cost Cap for Value Optimization. Value Optimization maximizes Return on Ad Spend (ROAS) based on your conversion events' reported revenue. with Minimum ROAS Bidding, you can set a minimum ROAS level you want to achieve, so that Facebook will limit ad delivery to the people who are more likely to generate revenue, in order to reach your ROAS target.

Beware: the minimum ROAS target works in a different way: a higher ROAS target means higher expected returns and therefore lower delivery. A lower ROAS target gives Facebook more leeway to scale the delivery (and spend) up.

ROAS = revenue / ad spend

For example:

$100 spend and $0 revenue equals 0% (0.0) ROAS
$100 spend and $50 revenue equals 50% (0.5) ROAS
$100 spend and $100 revenue equals 100% (1.0) ROAS
$100 spend and $150 revenue equals 150% (1.5) ROAS

Min ROAS Bidding when bid is not the limiting factor

When budget is the factor limiting delivery — meaning, when the Minimum ROAS Target is high enough to spend your budgets fully — the ROAS Target will have no effect on delivery or costs. It will behave identically to Value Optimization with Lowest Cost bid strategy. This is because Facebook's Pacing adjusts your bid just only high enough to spend your budget fully.

Viewing the Bid Strategy in Campaigns view

You can see which Bid Strategy your campaigns or ad sets are using by selecting one of these columns:

• Ad Set Effective Bid Type (visible for all items)
• Ad Set Bid Type (visible for ad sets when CBO is not enabled)
• Campaign Bid Type (visible for campaigns when CBO is enabled)