Linkedin Ads Bidding & Auction Strategy: The Definitive 2021 Guide

Are you paying too much for your Linkedin Ads?  Are you using the right ads bidding strategy? Did you know that each Linkedin marketing objective has different ways of charging advertisers? 

Linkedin’s bidding system is the least understood yet most important point when advertising on Linkedin. 

The way advertisers are charged is very different from other social media platforms. 

If you don’t know how you’re charged, you can’t take control of your ad cost.

In this guide, you’ll learn: 

  • What is Linkedin’s Objective-Based Advertising system
  • What are the different chargeable clicks based on objectives
  • How to choose the right bidding strategy for your ads

Related: How to run a Linkedin Ads in 2021 – A Definitive Guide to Advertising on Linkedin

What is Linkedin’s Objective-Based Advertising System?

Linkin Objective Based Advertising
Linkedin’s objective-based advertisiing

If you’ve advertised on Linkedin in the past years, this image would be familiar to you. 

Linkedin has come very far and this is a major redesign to its campaign manager tool. 

Objective-based advertising (OBA) is meant to provide “higher-quality” clicks. Well, only if you know how it works and how to use it! 

When Linkedin knows your objective, it allows advertisers to do 3 things:

  1. Create campaigns and reports easily
  2. Customize optimization & bidding settings based on your objectives
  3. Pay for only the clicks advertisers want. 

Before you go on, think about what you’re trying to achieve. Are you going after leads? Providing air cover for your Sales reps? Are you looking to build a larger share of voice? 

Linkedin breaks down these objectives into 3 categories: 

  1. Awareness
  2. Consideration
  3. Conversion

Not everything is about conversions. Most times, it’ll make more sense to build brand awareness and consideration before going in for leads. 

Think about it, would a someone say yes and marry you before even knowing you? Chances are low. This is the same for advertising. 

People need to know and trust you before they buy from you. 

What is bidding in Linkedin and how does it affect your campaigns?  

Did you know that how you are charged on Linkedin is different compared to other social media platforms? Chargeability affects how you pay and bid for your ads. It is now aligned to the performance of your campaign objectives. 

Brand awareness 

All brand awareness campaign under the awareness category will be charged by impressions only. There are no chargeable clicks because you are charged by impressions. The main goal for this objective is to get your audiences more familiar with your brand name, service and products. 

Brand awareness example
Example of Sponsored Content on Linkedin

To measure this, the “clicks” metric show all clicks including engagements on the ad. 

Where to locate clicks metrics
Clicks on Linkedin Campaign Manager Tool

As you can see, it doesn’t matter if someone clicks on your ad because the charge is by impressions. 

Website Visits

You will be charged differently based on what bidding system you choose. There are 2 options

  • CPC
  • CPM

Not to get too technical yet since we’ll cover more on this later. Under CPC, you have Max CPC and Enhanced CPC. You still pay by clicks, only the optimization process is different. 

Linkedin Advertisement
Example for Sponsored Content

Great news! Now, you’ll only be charged when someone clicks on links that take members to your website. You do not get charged for clicks that are not related to your objectives, like engagement or company page clicks. 

Clicks to your website can come from clicks on specific URLs embedded in the intro text, image of the post, headline or CTAs. Basically, only clicks that result in pushing traffic to your site will be chargeable. 

Under CPM, you have Max CPM and Autobid. Both of these charges you by impressions still. So it doesn’t matter if someone clicks or do not click, you’ll still be charged based on every 1,000 eyeballs on your ad. 

Engagement

You have both similar CPC and CPM buying models for engagement. 

The goal of engagement is to get members to interact with your brand. Thus, every interaction will be charged. Interactions mean all kinds of clicks on the ad. 

Linkedin Sponsored content
Sample of Linkedin’s Sponsored Content

These chargeable clicks include 

  • Member page clicks
  • Linkedin page clicks
  • Landing page clicks (Within intro text)
  • Follow button
  • Landing page clicks (Post image)
  • Landing page clicks (Headline)
  • Social pill
  • Social actions (Likes, Comments, and Share)

Video Views

View views objectives are charged by CPV (Cost per view). This means, you’ll need to know exactly how Linkedin defines a view. 

A view is based on 2 or more continuous views at 50% on-screen moment. 

Linkedin campaign manager dashboard
Linkedin’s Campaign Manager Dashboard

The metric to observe in your dashboard would be eCPV which is the estimated cost per view.

Why is it “Estimated”? That’s because some of your videos view are free due to organic reach. eCPV aims to only give you the chargeable video views. 

Although video views are fit under the “Consideration” stage, i found it more useful if you’re trying to build awareness for your brand. 

Not unless you are retargeting warm audiences with a lower-funnel kind of video. 

Lead Generation

You can either bid on a CPC or a CPM model here. Autobid is by impressions too, so we’ll group that together under the CPM model.  

Linkedin Advertisement

This image for chargeable clicks only applies to CPCs. For CPM, you’ll only be paying by impressions. 

Chargeable clicks in this format include: 

  • Linkedin Company page click
  • Clicks on lead gen form
  • Clicks on social pill

Website Conversions

Similar to Lead Generation, you have both CPC and CPM options. 

Example of a linkedin advertisement

Clicks that lead prospects to a landing page is chargeable. If you are using video here, clicking anywhere on the headline – Call to action or video – will pull up an advertiser’s landing page below. 

Understanding Linkedin’s Ad Auction

The ad auction is affected by 4 main factors. Each unique factor is owned by 3 different stakeholders (Advertiser, Member and Linkedin themselves). It flows a linear sequence below

  1. Targeting
  2. Ad bidding, frequency caps, and budget pacing
  3. Ad relevance
  4. Ad ranking

Here’s a detailed breakdown of how Linkedin’s ad auction works.

How linkedin ad auction works

Targeting

When a member on Linkedin scrolls through their feed, they will see both organic and paid content. The paid content (ads) are slotted in between every few organic content. Once a Marketers launches ad campaigns that target a specific member, an ad request is sent to the Linkedin auction and a bid is placed for that specific member.

Bidding, frequency caps and budget pacing

An advertiser’s bid competes against other bids on a similar audience targeting using the same ad format. If you are running a video ad, you will not bid against others who are using Single Image Ads although the audience is the same.

Linkedin uses a second price auction model for the bidding process. Which means advertisers only need to pay 1 cent higher than the next highest bidder to win the bid. This would be more fair to the advertisers as they’ll always pay lesser.

All bid types are standardised to a eCPI model in order to operate on the same value.

  • CPC = pCTR x bid = eCPI
  • CPM = CPM Bid x 1000 = eCPI
  • CPV = eCPV x Bid = eCPI

When a bid is won, Linkedin will check that the member has not exceeded the frequency cap and budget before showing the ad.

Keep in mind that Linkedin also puts the member’s experience first. Thus, if an ad has been showing too many times repeatedly to that member (frequency cap exceeded), then the ad will not show to prevent annoying member experiences.

Relevancy

The auction winner gets the ad request slot based on the combined value of the eCPI score and the relevancy score is strong.

What is relevancy score?

Relevancy score is a prediction made by Linkedin AI Machine learning on whether the member will take action on the ad.

  • Linkedin CPC/CPM campaigns uses pCTR. pCTR refers to the predicted click-through rate of the member
  • Linkedin Lead gen campaigns uses pLTR. pLTR refers to the predicted lead-through rate of the member
  • Linkedin Video campaigns used pVTR. pVTR is used to determine the Relevancy of video campaigns, calculated as number of views > 2 seconds / number of impressions.

Ranking

A ranking will be given to the ad based on the above relevancy score. Having a high dollar value bid doesn’t mean you will win the bid.

You could actually spend lesser and win more auctions by having good relevancy scores. Relevancy scores can be achieved by running good ads to the right audiences.

The Linkedin Campaign Quality Score and the effect on ad relevance?

The Linkedin campaign quality score is a proxy for the ad relevance score as mentioned above. The actual ad relevance score is not shared, only the campaign quality score (CQS) is shared.

CQS refers to the campaign’s relevance compared to its competitors across all of the auctions in which they participate.

What is the Linkedin quality score range?

Each campaign is given a normalised score of 1-10 based on the comparison across all auctions that the campaign takes part in.

How is the campaign quality score calculated?

As a proxy to the ad relevance score, the system uses each auction the campaign has participated in: pCTR of the 1st slot / campaign’s pCTR*, based on the same audience and ad formats.

Use the Linkedin campaign quality score as a directional cue only. This should only be a secondary metric.

How to improve your Linkedin campaign quality score?

To see improvements in your quality score, i recommend experimenting with the following:

  • Different bid types
  • Different ad creatives
  • Different ad targeting

The campaign quality score will likely be a good indicator on whether you’re running an effective Linkedin ad campaign

How to choose the right Linkedin bidding type? [December 2020 Update] 

Getting the right bidding strategy is key to your campaign’s success. Smart bidding helps advertisers be more competitive and get better results from their ads.

Ad Creatives and audience targeting matter too, but bidding is the fastest optimization action out of them. So understanding the Linkedin bidding structure is key.

Bidding strategies should always differ based on the advertiser’s goals. 

Here’s a map on the right Linkedin bidding type to use.

Linkedin bid types and strategy

Budget

This refers to the amount of budget you are willing to spend. A budget and schedule must be selected before you can select your bid type in the campaign manager tool.

What affects your budget utilisation?

  1. Ad Auction (Your bid and current market competition will affect the auction)
  2. Pacing
  3. Relevancy score and campaign quality score

Schedule

The schedule you set will determine how the campaign’s duration. You can either set a daily budget, a daily and lifetime budget or a lifetime budget.

If you select the daily budget, you will be able to make your campaign run continuously. You can select a start and end date for the campaign. Take note that there is no budget cap, not unless you have capped the budget at the Campaign Group Level.

I’d recommend adding a campaign end date to be safe.

Daily Budget selection

If you’re wondering how much you would spend in total based on the daily budget, campaign duration (if any) and audience size, you could use the forecasting tool.

Forecasting tool for daily budget

In the example above, you will spend a total of $940 – $1600 in roughly 30 days for an audience target size of 2,900,000+

The other selection is a “Daily and Lifetime” budget option. While you may set a lifetime budget cap, you will not be able to select the campaign end date. The campaign runs until the total budget is depleted.

I’d recommend to use this option only if you don’t have time sensitive campaigns.

Set a lifetime and daily budget

It might be frustrating to be unable to set a campaign end date. However, this is due to the algorithm’s pacing. I’ll explain more later.

The last option is the selection of a lifetime budget only. Selecting this allows you to define a start and campaign end date.

Note: This is my recommended selection for most campaigns

But you might be wondering: “What happens if Linkedin blows through my entire budget in 1 day? I have no control over the daily budget?”

That will NOT happen.

Linkedin’s algorithm will pace out the budget evenly, based on inventory supply, across the campaign duration.

Still not convinced? Hang in there as I’ll cover pacing in a while. But here’s how Lifetime budget selection looks like.

Lifetime Budget Option

Pacing

Pacing is the speed and consistency of the spending over the campaign duration (if any).

There are currently 2 kinds of pacing: Daily and Lifetime. Linkedin seems to be moving towards Lifetime pacing only.

Daily Pacing

If you select Daily pacing and Continuous schedule, the ad algorithm optimises using a daily pacing.

Your campaigns will spend efficiently over the 24 hours period. Campaigns are optimised on a daily forecasted traffic.

Daily budget and Campaign Continuously

Lifetime Pacing

Lifetime pacing optimises spend across the entire campaign duration. Lifetime pacing will spend your budget by predicting and forecasting the variable traffic supply over your campaign duration.

This means that on some days, you might see your campaigns spending more. In the event that Linkedin predicts that the coming weekend is going to be low on member traffic, then they’ll spend lesser and spend more on weekdays when there’s more traffic.

You no longer need to manually look at your campaign on a daily basis to adjust the budgeting, Linkedin will optimise the pacing.

I highly recommend using this. If Linkedin is following Facebook, then Lifetime pacing will likely be the only default option in the future.

While this is new and the algorithm is still being tweaked, expect this option to get only better.

Here are the benefits of Lifetime Pacing and why Linkedin will likely make it a default

  1. Improve ROI of performance by increasing budget efficiency
  2. Saves you time in campaign management. No more daily changes
  3. Don’t need to pause and adjust campaigns over days/times when you feel member traffic is low.
  4. Cost per result should stabilise over time with this option.

Which budget schedule combinations would activate the Lifetime Pacing algorithm?

  • Daily budget and Fixed schedule.
    • Once you set an end date, it uses lifetime pacing.
    • This option optimizes the delivery over the duration of the campaign’s lifetime with a daily budget constraint.
  • Lifetime budget and Fixed schedule.
    • This option optimizes efficient delivery over the length of the campaign
  • Daily and lifetime budget and continuous schedule with a start date only
    • This option optimizes the delivery over the duration of the campaign.
    • If you are looking to pace out the campaign over specific dates, this option is not good for you.

Bidding

The bid is the amount you are willing to pay for each action or result from you campaign. Bid selection should be based on your goal.

Once your campaign is launched, you will compete in an ad auction against other campaigns. Your bid plays an important role to ensure your campaign is delivered. If your bids are too low, you will not reach your customer, even if you have a badass content or offer.

Here’s a break down of what manual, enhance cost per click and automated bidding is. 

Manual bidding

This is also known as maximum cost bidding. This offers you more control over your costs. However, you’ll need a lot more effort to manage the bidding. More time is needed to monitor, adjust, and optimize. Here are some useful tactics

  • Linkedin offers recommendations of bidding levels when you use this bid type. If it’s a new campaign, always frontload your ad to get data in early. Bid 20% higher than the recommended bid. Why? This ensures that you are winning more in the auction and your ads are being shown more. You’ll be able to see whether your campaigns are working and find optimization strategies early. 
  • If you’re delivering your daily budget in full, you can try lowering your bid by 10%. See if you’re still able to get the same level of results with a lower bid. Alternatively, you may find the Avg CPC in your Campaign dashboard and adjust your bid to that level. Linkedin operates on a second-price bidding auction. You will likely pay lesser than what you bid for. 
  • However, if you are not hitting at least 80-85% of your daily budget, this means you have an issue with delivery. Low bid levels could be one of the causes. When you bid too low, your ad loses out to competition in the auction. When this happens, you’ll need to increase your daily bid budget. Win more auctions, deliver your ads, and get traffic. Monitor and ensure that you are delivering at least 80-85% minimum of your daily budget. 
  • CPC (Cost per click)
  • CPM (Cost per impression)
  • CPV (Cost per view)
  • CPS (Cost per send) – This refers to message ads. 

Target Cost Bid

This applies to CPC, CPM and CPV. I believe target CPL will be available soon. It only makes sense right?

Target cost allows you to set a target cost. Linkedin will automatically bid and optimize your campaigns to deliver the most results while staying in the range of your targeted cost. Your bid might get flexed up to 1.3x the target cost.

This option is great if you have a target ROI.

The daily average cost per result will be optimised to be close to your target. The actual cost will never exceed 30% above the target cost on a daily basis.

Enhanced CPC Bid

Think of this as a semi-auto way of bidding. 

Enhanced CPC bidding example

Once you tick this checkbox, you will enable Enhanced CPC. This bidding option will auto-optimize towards individuals who will likely take your desired action. 

Linkedin will raise or lower the bid to reach the most relevant people who will take action. 

In eCPC, you can still select a bid amount and the deviation will not be far from the selected bid.

Enhanced CPC is only available for website visits, engagement, lead generation and website conversion objectives.

For autobid, you won’t be able to put in your bid price. Bid control is given to Linkedin. 

Is that a good thing? Read on. 

Automated bidding

This bidding model uses Linkedin machine learning. The goal is to get as many results as possible while spending the daily budget in full. This puts delivery as a priority as well. This means, if you are extremely cost-conscious this might not be the best model to start off with. No bid setting is required. 

Good news with autobid: You don’t have to manually micromanage the account. You can still win auctions without optimizing your bids every other day – hands-free. You will not find yourself in situations where you go way under the competitive bid. This prevents any throttling of your delivery.

  • It’s important to note that auto-bidding operates on a CPM model. 
  • There are times when bids are set too high with manual bidding. This causes campaigns to deliver too quickly. There’s a possibility these bids could have won at a lower bid and achieved the same results. There’s no way you can find out. This is where auto-bidding can help. 
  • Alternatively, Advertiser might bid too low and the campaign doesn’t deliver. These clients should have bided higher for better results but they have no way of knowing. Fixing these potential issues with autobid approves the pacing of the ad

So which is better for you? Manual or Autobidding? 

Advertisers mainly sit in 2 camps. One is all about cost management while the other camp focuses on delivery. 

Which are you in? 

Cost as a priority

Use a Manual bid model for a start (CPC, CPM, CPV). This means you will not pay more than the max cost you’ve set. 

Let this run for about 1 week. Check if your campaign is healthy after 1 week. If you’re delivering at least 80% of the daily budget with manual bidding, then your campaigns are healthy! 

If overall campaign performance like CTR, CPL, VTR, etc is great too, then advertisers could switch to automated bidding.

With some initial consistent data in, Linkedin should be able to optimize your cost further through auto-bidding. 

However, their ad algorithm doesn’t seem as sophisticated as Facebook. So be observant during this switch. If results start to sink, switch back to Manual CPC. 

Delivery & Results as a priority

If delivery and getting your message out fast is a priority, then start with auto-bidding. Automated bidding will get as many results as possible while spending the daily budget in full. 

Automated bidding takes the guesswork out of the bidding and maximizes results. 

Autobid ensures smooth delivery. However, using this too early will shot your cost higher. If you’re extremely cost-sensitive, then starting with the auto bid is a bad idea. 

Here’s a good chart from Linkedin on when to use auto bid. 

Chart for automated bidding
Linkedin’s Algorithm and Content Approval process

Other Bidding Features

Bid suggestions and recommendations

You will come across suggestions when creating your Linkedin ads and mid-way through your campaigns.

Linkedin uses the history auction data and updates the recommendations every day. If your campaigns could benefit from it, Linkedin will flag it to you in your Campaign manager tool.

Final Thoughts

There is no one right bidding strategy. It all depends on what you’re trying to achieve. My recommendation is to start with eCPC for the first 1-2 weeks. This is semi-auto, yet give Linkedin some flexibility to increase the bid on members they feel will likely convert. 

If the results are stable, test 1-2 weeks with autobid. Revert to manual if cost gets out of control. 

Mastering bidding is not enough. Ad Creatives are just as, if not more, important to drive results. 

If you’re ready to dive deeper, check out the compiled resources for running Linkedin ads

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