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Definition
A bid cap is the highest price an ad account is willing to pay for one result, such as a click, a lead or a purchase. It turns the profit target into a maximum cost, so that the account does not buy results that lose money.
Bid cap per result = contribution per order before ad cost - profit target per orderExample with made-up numbers: A store keeps 15 per order before ad cost and wants 3 of profit per order. Bid cap per purchase = 15 - 3 = 12. A month later, a shipping change cuts the amount kept to 11. The old cap of 12 would now mean a loss of 1 per order, so the cap is lowered to 11 - 3 = 8.
How to use it
Set the cap from the money each order leaves before ad cost, minus the profit the business wants from that order. If a sale keeps 15 before ad cost and the business wants 3 of profit, a purchase can cost up to 12 in ads. The cap is a ceiling, so the actual cost per result is often lower. A cap set too low can leave budget unspent or limit reach.
The effect of a cap depends on the bid strategy and the platform, so check how it behaves in the platform's documentation and in a small test. Review the cap when prices, shipping fees, discounts or product costs change, because the same cap then means a different margin.
