Determining whether to use ABO or campaign budget optimization (CBO) on TikTok can be a tricky decision. Both have their pros and cons, and there’s no one-size-fits-all answer for every TikTok campaign. However, each budgeting strategy lends itself to certain types of campaigns and objectives. This means that TikTok marketers are faced with a choice: ABO or CBO?
The team at our agency, the House of Marketers following article explores which strategy is going to be the best fit for your particular goals, and the best fit during the different stages in your campaigns.
TikTok ads now reach over 17.9% of all internet users over the age of 18. This mind-blowing figure drives home just how important TikTok has become as a marketing platform. Adding to this, TikTok also has a particularly high average engagement rate of 5-16%. This far outperforms all major social platforms such as Facebook, Instagram and YouTube.
ABO and CBO can both be effective ways to capitalize on this high engagement rate and achieve campaign objectives. However, there are some key differences between the two budgeting strategies that marketers should be aware of. So, for those who are struggling to decide which one is right for their next TikTok ad campaign, we’re put together a guide to make the choice a little clearer.
TikTok ABO vs CBO – What’s the Difference?
Ad Group Budget Optimization (ABO) and Campaign Budget Optimization (CBO) are two different types of budgeting strategies that can be used when running ad campaigns on TikTok.
What is a ABO Campaign (Ad Group Budget Optimization) on TikTok?
An ABO campaign allows you to take control of how much is being spent at ad group level. It allows you to allocate different amounts of budget to different ad groups within your campaign. The minimum daily budget you can per each ad f use is $20/£20 per day in ABO campaigns.
What is a CBO Campaign (Campaign Budget Optimization) on TikTok?
CBO campaigns, on the other hand, allow you to set an overall campaign budget. Thereafter, TikTok’s algorithm will determine how the budget should be spent across your different ad groups. With CBO campaigns you have no control over how much budget each ad group is allocated within a campaign. The minimum campaign level daily budget you can use is $50/£50 per day in CBO campaigns.
Which should you choose?
Whether you choose ABO or CBO can have a significant impact on your campaign’s ability to generate conversions or engagements. Marketers often tie themselves in knots trying to decide which one is best for their needs. The truth is, it really depends on several factors. This includes how warm your TikTok ad account already is (and how much the TikTok algorithm understands who your ideal target consumer is). The more lower-funnel events you have triggered, the better the algorithm will get at identifying your target audience.
Let’s take a closer look at ABO and CBO so you can decide which budgeting strategy is right for your next TikTok ad campaign.
“For example, let’s say you set a budget of $100 for your CBO campaign. TikTok’s algorithm might determine that Group A is more engaged with your ads and more likely to convert, so it might allocate $60 of the budget to Group A and $40 to Group B. The algorithm is constantly learning and optimising in real-time, so the budget allocation can change as your campaign progresses.”
What is Ad Group Budget Optimization?
When you choose Ad Group Budget Optimization for your TikTok ad campaign, you can allocate a fixed budget to each ad group within your campaign. For example, if you have a budget of $100 for your entire campaign, you could choose to allocate $50 to Group A and $50 to Group B. Group A might be male sports fanatics aged 18-24, while Group B might be women aged 25-34 with a passion for travelling.
ABO allows you to stay in tight control of your ad spend. It also ensures that each group receives a predetermined portion of your overall budget. As a marketer, you might be thinking that ABO sounds a lot like traditional ad budgeting, and you’d be right. ABO is very similar to the way budgets have been allocated in ad campaigns for years. As a strategy, ABO is well-established and predates the rise of digital marketing.
What is Campaign Budget Optimization?
Campaign Budget Optimization is a newer form of budgeting that’s only become possible in recent years due to advances in artificial intelligence and algorithmic marketing technology. With CBO, you set an overall budget for your entire campaign. From there, TikTok’s algorithm automatically allocates that budget across your target groups based on a number of factors. This includes engagement rates and conversion rates.
For example, let’s say you set a budget of $100 for your CBO campaign. TikTok’s algorithm might determine that Group A is more engaged with your ads and more likely to convert, so it might allocate $60 of the budget to Group A and $40 to Group B. The algorithm is constantly learning and optimising in real-time, so the budget allocation can change as your campaign progresses.
CBO is a very different way of budgeting compared to ABO. With ABO, you have complete control over how your budget is allocated. With CBO, you’re handing over the reins to TikTok’s algorithm and trusting it to make the best decisions for your campaign.
“With CBO, budgeting allocation can vary wildly. For example, let’s say you’re targeting two ad groups – young people under the age of 25, and people over the age of 40. The algorithm may determine that the younger group is more likely to engage with your ads, and allocate over 90% of the budget to that group.”
ABO vs CBO – Which One Should You Choose?
With more Gen Zers now using TikTok than Instagram, there is a big opportunity for marketers to reach this valuable demographic if they can get their budgeting strategy right. Have you been tearing your hair out from the pressure of trying to decide between ABO and CBO? You’re not alone. It’s a tough decision, and there is no easy answer. But there are some factors you can consider that might help you make a decision. Let’s break down some of the pros and cons of each strategy:
Ad Group Budget Optimization (ABO)
- It’s a well-established form of budgeting that’s familiar to many marketers.
- It allows you to stay in complete control of your ad spend. You know exactly how much each group is being allocated. You can also make changes at any time without affecting the rest of the campaign.
- It can be a good choice for retargeting campaigns where you might want to tighten your budget, and focus on several segments of your website visitors or video viewers.
- You can spend as little as $20/£20 per ad group
- It can be more time-consuming. If you have a large campaign with many target groups, you have to keep a close eye on each group to ensure they’re performing well, and then allocate the budget accordingly.
- It can limit your campaign’s potential. If one group is performing very well but you’ve allocated most of your budget to another group, you might be missing out on an opportunity to scale up your campaign.
- It has an element of risk. If you miscalculate your budgets, you could end up overspending on a group that isn’t performing well. On the other hand, you could also end up underspending on a group that might have performed better.
Campaign Budget Optimization (CBO)
- It’s a very efficient way to budget your campaign. Once you’ve set your overall budget, TikTok’s algorithm will automatically optimise your spend for you..
- It’s much more effective for testing different audiences in A/B tests, as you can allocate exactly the same budget to different audiences. Note that TikTok does offer an A/B testing campaign objective but it has its limits.
- It can save you a lot of time and effort. You don’t have to constantly monitor each group’s performance because the algorithm will do that for you.
- CBO can maximise your campaign’s potential. By letting TikTok’s algorithm allocate your budget, you might discover new opportunities that you wouldn’t have found using ABO.
- It can be a big leap of faith for some marketers. Handing over control of your budget to an algorithm takes a lot of trust. At our agency, we’ve found that CBOs can underspend or overspend on particular ad groups sometimes.
- It’s not effective for A/B testing different audience ad groups, as it won’t evenly spend across each ad group.
- It might not be suitable for all types of campaigns. If you’re running a very targeted campaign with a limited budget, ABO might be a better option.
- It can be unpredictable. The algorithm is constantly learning and optimizing, so you might see some sudden unexpected changes in your budget allocation.
- It may only allocate very minimal resources to certain ad groups. As a result, those groups may not get the attention they need to perform well.
CBO and ABO both have their advantages and disadvantages. That said, there are some scenarios where you may want to choose one over the other. If you’re trying to test a certain ad group, then ABO would be the preferred budgeting strategy. With CBO, budgeting allocation can vary wildly.
For example, let’s say you’re targeting two ad groups – young people under the age of 25, and people over the age of 40. The algorithm may determine that the younger group is more likely to engage with your ads, and allocate over 90% of the budget to that group. In some cases, this may be the best decision. However, if you’re trying to test the older group to see if they’re a viable target market, you will not be able to do so effectively. ABO would be a better choice in this case, because you can allocate a set budget to each group and see how they perform.
It’s important to note that the minimum spend per day differs between budget types. For CBO campaigns, you must spend £/$/€50 per day. For ABO campaigns you must spend at least £/$/€20 per day per ad group.
How Does the TikTok CBO Algorithm Work?
Before you choose between CBO or ABO, you may want to learn a little more about how TikTok actually determines budget allocation during a CBO campaign. On TikTok, CBO campaigns only require 50 conversions to exit the learning phase, ideally within the first 7 days.
The learning phase refers to the time period when the algorithm is still collecting data and trying to determine which ad groups are performing well. During this phase, you may see some unusual budget allocations as the algorithm tries to figure out which groups are most likely to generate conversions.
That means you can expect your CPA to fluctuate quite a bit as the algorithm optimises. Once the learning phase is over, your CPA should start to stabilise. So don’t panic if it looks like your ad is not performing well initially. Once you get through the testing phase, you can determine whether CBO is actually working for your campaign or not.
Although your campaign performance will stabilise after the learning phase, you may still see some sudden changes in budget allocation. That’s because the algorithm is constantly learning and making adjustments based on new data. So even though your CPA should be more consistent, you may still see some unexpected changes from time to time. Due to the nature of auction ads, it’s not possible to completely predict how the algorithm will behave.
How to Test Ad Groups Using ABO
There are a number of circumstances where an ABO campaign is more suitable than opting for CBO. If you have a brand new account with no data, ABO will be the best way to test ad groups and get a feel for how they perform.
To get started with ABO, you first need to decide which audiences you want to target and create ad groups for each one. Once you have your ad groups set up, you can allocate a budget to each one. The ABO campaign type is best for advertisers who want to have more control over their budget and how it’s spent. ABO also allows you to test different ad groups to see which ones are most successful. If you find that one ad group is not performing well, you can pause it and reallocate the budget to another ad group.
Let’s say, for example, you have an ABO campaign with two ad groups. One is targeting male gamers under the age of 25, and one’s targeting female gamers over the age of 30. If your budget is $100 per day, you can allocate $50 to each ad group. Once your campaign has been running for a while, you can check the performance of each ad group and see which one’s performing better.
If the female gamers ad group is generating more conversions at a lower CPA, you can pause the male gamers ad group and reallocate that $50 to the female gamers group. This way, you can ensure that your budget is being spent in the most effective way possible. This is one of the main advantages of ABO over CBO. You have the ability to fine-tune your budget and ensure that it is being spent in the most effective way.
What’s the Verdict?
Nothing is cut and dry in the world of online advertising. The best way to determine whether ABO or CBO is right for your campaign is to test both and see which one performs better. Keep in mind that your results may vary depending on a number of factors. This includes your campaign goals, target audience, and ad quality. One option that some marketers opt for is to test with ABO and then once they have established which ad groups are performing well, they can scale using CBO. This way, they get the best of both worlds. For starters the ability to fine-tune their budget with ABO and then the scaling potential of CBO.
If you need help getting started with your next TikTok campaign, House of Marketers is here to be your guide. We know TikTok inside out and we were founded by one of TikTok’s early employees. This gives us a unique insight into the platform and how to make the most of it.
To learn more about ABO and CBO, or find out which one is right for your campaign, contact us today. One of our expert TikTok marketers will be happy to chat with you and answer any questions you have. Happy advertising!
House of Marketers (HOM) is a leading TikTok Marketing Agency. Our global agency was built by early TikTok Employees & TikTok Partners, which gives us the insider knowledge to help leading brands, like Redbull, Playtika, Badoo, and HelloFresh win on TikTok. Want us to convert more of Gen Z and Millennials with TikTok? Get in touch with our friendly team, here.