Do Facebook ad sets compete against each other?

My experience running FB ads is the following : 

• when I ran LaL targeting adsets, it was key and mandatory to avoid any overlap between adset as the audience is not that large, especially in tier 1 non US country like western Europe. 
• For other targeting, i try to avoid big / obvious overlap. I can't confirm the potential CPM increase but from my perspective, this is more related to common sense to avoid them as much as possible.  

Audience overlap isn't really much of a concern on Facebook -- Facebook has 1.56BN DAUs as of Q1 2019 -- but it can become problematic when you start using very broad lookalike scoping (eg. 10%) on AEO and VO campaigns that are running simultaneously (see more in this answer: What is the difference between AEO and VO bid types on Facebook?).

VO and AEO campaigns naturally tend to iteratively reduce / hone targeting to the same groups of people, and running campaigns with those types of bid strategies on the same audiences will magnify the impact of the simultaneous targeting.

EDIT: re-reading this answer a few weeks after writing it, I think the point I was trying to make isn't clear.

Audience overlap doesn't have to be / shouldn't be a concern on Facebook: Facebook's penetration is large enough that, if you are smart about campaign construction, you don't need to be concerned with audiences overlapping (and thus driving up your CPMs).

But what does being smart about campaign construction mean?

• If you are running multiple AEO / VO campaigns, you are either targeting very specific segments that are independent of each other, or you are running fundamentally different creatives;
• You aren't using broad Looaklike (eg. 5%+) audiences in the same geos across multiple campaigns;
• You aren't running test campaigns against the same custom audiences as live campaigns with significant budgets;
• With multiple AEO / VO campaigns, you are using very strong signal events (eg. purchases) and not up-funnel events like registration or tutorial complete. If you have multiple event-optimized campaigns running, make sure the events are down-funnel enough to really segment users.

The point I was trying to make with the original post was that audience overlap doesn't have to be a real liability on Facebook -- it's certainly possible to avoid that problem with just a little bit of planning and strategy. Obviously if you are spinning up multiple VO campaigns with 10% LaL audiences based on payer seeds and targeting up-funnel events in the US, you'll run into problems with overlap.

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Advertising on Facebook does not come without challenges. No matter your experience level, you’ll likely find yourself making mistakes from time to time. However, the one we’re here to talk about today is a real doozy. It is the one mistake that has the potential to overthrow the results of an entire campaign. It’s a problem that I see even “expert level” Facebook marketers making again and again. Today we’re here to talk about audience overlap and why you need to be doing everything in your power to avoid it.

While I do see small-budget advertisers creating overlapping audiences, it’s the bigger-budget advertisers that are more prone to competing against themselves. Spending more money running more ads may seem like an effective approach, but a portion of that comfy advertising budget might be going right down the drain. No one intends to do it, but it happens more than you may think.

Today you’ll learn to recognize audience overlap and how to avoid it with a few simple tactics

What is audience overlap?

Simply put, audience overlap is marketing to the same audience with different ad sets. The larger the overlap, the worse your campaigns will perform. Don’t waste your time and money paying for two (or more) ad sets that fight for the same audience’s attention.

Audience overlap is an error that occurs when sponsoring content to two or more target audiences. Often enough, the audiences we create won’t be very different from one another. In these cases you end up paying for your ads to run against one another and the results of your advertising can be affected dramatically.

To completely understand the problem, all you have to do is look at the way Facebook campaigns are structured. A campaign contains multiple ad sets that, in turn, contain your individual ads.

Ads within the ad sets will automatically be competing with one another, but that’s O.K. because that’s what you create them to do. You want to display a variety of ads with the same goal to the same audience. In this way you’ll be able to test them against one another in order to judge their efficacy and refine your Facebook advertising strategy.

The problem begins when you create your second and third ad sets. You already have ads competing against each other within your ad sets, so avoid creating further competition.
You following along? Good. It’s time for a practical example.

Let’s say your company sells sports shirts online and you create 3 different ad sets with “unique” audiences.

• Your first target audience was defined by interest: you know that a large portion of your customers are bodybuilders, thus create a targeted audience with an interest in bodybuilding.
• You create your second target audience based on the demographics of 35- to 50- year-old women, as they are known to be some of your best customers.
• To create your third target audience, you use Facebook’s lookalike tool. You upload your current list of customers to Facebook and it generates a lookalike audience of 1% of its users.

This is an example of a very commonly structured Facebook Ads campaign, so let’s look at how the audience overlap error would likely present itself.

The three audiences will most likely have several commonalities between them, in particular:

• Among those interested in bodybuilding you’ll likely find women between 35 and 50 years old.
• Among women 35-50 there will be those interested in bodybuilding.
• As many of your clients will be similar, your lookalike audience will contain both women 35-50 and people interested in bodybuilding.

When you advertise against yourself, the cost to reach your audiences increases and the frequency that your ads are displayed is limited. The result is paying more for fewer results and, well, that’s not good marketing.

Keep from paying to advertise against yourself and you’ll see your ROI improve dramatically.

How to compare targets and discover your overlap

Facebook has recently released an awesome tool to help you determine whether there is an overlap in your target audiences.

You can find it in the Ads Manager, under Tools -> Audience. If you’re working with Power Editor, you’ll simply click on the “Audiences” tab.

Note: To compare your audiences, you’ll need to visit each ad set. (Learn how to create Facebook Ads Reports.) You can see them all by selecting the display…”all ad sets”… from the initial Ads Manager dashboard

Hover your mouse over each ad group and click on “Edit Ad Set.”

Scroll down to target settings to find “Save This Audience.”

Be sure to give a specific name to each of your audiences.

Now let’s visit the “Audience” section. To select the first audience you want to compare from the menu choose “Show Audiences Overlap.”

This will bring you to Facebook’s tool for controlling audience superposition (audience overlap). This important tool makes it possible to control the overlap of up to 5 audience groups at a time.

The audience you select first will be the one on which it will compare the others.

To add the audience(s) you want to compare, click “Add Another Audience” and enter or select any audience(s) that have a potential for overlap.

Facebook will proceed to display Venn diagrams that provide you with the amount of overlap between the first audience and each additional audience, as well as the percentage of overlap and the number of people overlapping.

NOTE: The fact that two or more audiences are overlapping is not necessarily a bad thing; the important factor to analyze is whether or not they will be competing with each other in the ads.

Limits of the audience overlap tool

The capabilities of this instrument should be clear. It can be used in a variety of ways and it’s an excellent resource for all Facebook marketers.

However, it does have its limits…

The audience overlap tool does not allow you to analyze audiences with less than 1,000 people, for privacy reasons. An attempt to add smaller audiences will leave you with the following message:

To protect the privacy of people on Facebook, we don’t share data for audiences of fewer than 1,000 people.

How to avoid advertising against yourself on Facebook Ads

If you have found a high percentage of audience overlap within your campaign’s target audiences, there are two possible solutions to the problem:

1. Regroup overlapping ads into fewer ad sets – If ads under different ad sets are targeting the same audience, keep them from competing against one another by compiling them into a single ad set.
2. Refine your targeting – You can use a more detailed targeting approach to exclude certain interests/behaviors/demographics and refine different aspects of your targeting for each ad set.

There you have it. With a few simple tweaks to your existing Facebook ad strategy you’ll be able to avoid paying more and receiving less. Plus, you’ll be able to ensure the optimal publication of your ads without the chatter of your own competition getting in the way. Now, that’s something we can all get behind!

Should I combine Facebook ad sets?

How do I compare Facebook ad sets?

How do I stop Facebook ads from overlapping?

Can I create multiple ad sets in one campaign on Facebook?