Internal Labels vs. Custom Labels: Which is Better for Ad Performance?

We've emphasized throughout our content that your product feed has a direct impact on marketing performance. For most businesses, the priority is usually completing all required product attributes and maintaining a clean feed structure.

However, many advertisers overlook one of the most powerful segmentation tools available in their feed: labels. 

Specifically, the difference between custom labels and internal labels, and how that choice affects campaign speed, delivery, and results.

If you're running Dynamic Ads on Meta, this distinction is important. 

Today's guide explains what internal labels are, how they differ from custom labels, and how to implement them strategically.

What are labels in a product feed?

Both custom labels and internal labels are tags you assign to products in your feed to organize, segment, and optimize campaigns. 

These labels enable you to group products so you can target specific subsets more effectively. 

Neither type of label is visible to customers. 

They exist purely for your internal campaign structure and ad targeting.

What are custom labels?

A custom label is a tag you create in your product feed to group or organize products for ads and targeting purposes. 

Most advertising platforms use custom labels as the standard method for product segmentation. This includes Google Shopping, Meta, TikTok, and other major ad platforms.

Custom labels are a core attribute of your product feed. 

When you update them, the change flows through your entire feed management process. 

You are limited to five custom label fields in Meta and Google. 

Custom labels are useful for cross-platform campaigns because they are consistent across various advertising channels. 

If you're running ads on both Meta and Google, custom labels ensure your product segmentation stays synchronized.

What are internal labels?

Internal labels are a Meta-specific feature available in Catalog Manager.

These label types function differently from other catalog attributes. They update quickly because Meta processes them separately from your main product feed. You can add, remove, or modify internal labels without triggering a full feed sync or policy review.

You can assign unlimited internal labels to products, which gives you significantly more flexibility for segmentation, testing, and campaign structuring within Meta.

Like custom labels, internal labels are invisible to customers. 

They are an organizational tool for advertisers building Dynamic Ads and product sets.

Some catalog ad platforms, including Cropink, also offer internal labels for organizing campaigns and products before they reach Meta. 

Custom vs. internal labels

Why should you switch to internal labels?

The main advantage of internal labels is speed. When you update a custom label, Meta treats it as a product feed change that requires policy review. Internal labels bypass this entirely.

This is what that means for your campaigns:

1. You avoid the policy review bottleneck. Every time you change a custom label, Meta pauses the affected products, reviews them for compliance, and either approves or rejects them. This process can take hours or longer for large catalogs.
2. You can iterate campaigns faster. If you need to add products to a seasonal promotion or remove underperforming items, you can apply changes almost immediately. With custom labels, you will be forced to wait for feed syncs and policy reviews.
3. You prevent Meta from pausing your ads. Because internal labels don't disrupt ad delivery, your campaigns stay active while you make adjustments. Custom labels can cause Facebook catalog ads to pause mid-campaign.
4. You're not limited to five buckets. Custom labels limit you to five fields, while internal labels have no limit. This comes in handy when you need to segment by margin, performance, seasonality, inventory status, and testing groups simultaneously.

Let's assume you want to promote a Valentine's Day collection across Facebook and Instagram Ads. 

You have 120 products that qualify.

If you are using custom labels, you’ll need to edit your feed and add custom_label_0 = Valentines_2025 to all 120 products. Meta detects the custom label change and treats it as a product attribute update.

Because custom labels are part of the product feed, Meta pauses those 120 products from appearing in your ads and reviews them for compliance. 

This review can take hours or longer for large catalogs.

Unfortunately, your Valentine's campaign can't start until the review finishes.

In the end, you will have to deal with a lengthy product feed review process and the risk of ad delivery being posed at a critical campaign season. 

What if you had used internal labels?

You would create an internal label called Valentines_2025 in your catalog and apply it to all 120 products.

The update is instant since internal labels are not a core part of the product feed, so it will not trigger a review of the product feed.

You can then filter by the internal label 'Valentines_2025' and create a product set for the campaign.

Types of labels and how to use them

Labels are most effective when they segment products in ways that standard feed attributes cannot. Below are #5 strategic label types and their applications.

• Performance labels. Tag products based on sales velocity, like bestsellers, steady performers, or slow movers, to allocate more budget to products that bring the most revenue.
• Profitability labels. Segment products by profit margin into high-margin, medium-margin, and low-margin tiers to prioritize Facebook ad spend on products that generate the most profit per sale.
• Campaign labels. Group products for specific promotional periods, such as Holiday2025, Valentine'sDay, or BackToSchool, to activate and deactivate product sets for time-sensitive campaigns.
• Price labels. Group products by price range, such as $0-50, $50-100, or $100+, to allow you to adjust bids based on product value. You can allocate higher bids for premium products and lower bids for budget items.
• Collection labels. Highlight curated product groups like LimitedEdition, Premium, or ExclusiveRelease to increase visibility for products that deserve special promotion treatment.

How to create internal labels

1. Determine how you want to segment your products. 

Common segmentation approaches include:

• Seasonal campaigns (valentines_2025 or holiday_2024)
• Performance tiers (bestseller or slow_mover)
• Profitability segments (high_margin, low_margin)
• Audience intent stages (discovery, retention)

When naming your labels, use lowercase letters for consistency and separate words with underscores. We also recommend keeping labels concise and descriptive while maintaining consistent formatting across all labels. 

2. Add internal labels to your product feed

Prepare your catalog file in one of Meta's supported formats, such as CSV, Excel/TSV, or XML. Then, add an internal_labels column to your feed and assign labels to the corresponding products.

For products with multiple labels, use bracket notation with comma separation, such as ['valentines_2025','bestseller','high_margin']. 

When you have added the labels to your feed, upload it to Meta's Catalog Manager. The internal labels will be processed and applied to your products, ready for immediate use in campaign targeting.

3. Create product sets using internal labels

After Meta gives your product feed a go-ahead, you can immediately use the internal labels to build targeted product sets. 

You can filter by single or multiple labels to create precise audience segments, and layer labels to create sophisticated targeting strategies. For example, you might target products that are both bestsellers and high-margin items.

Since internal labels update instantly and don't trigger policy reviews, you can adjust your product segmentation throughout active campaigns without pausing ad delivery. This way, you’ll be able to respond quickly to inventory changes or testing needs while keeping your ads running continuously.

When are internal labels not the right fit?

1. When you need cross-platform consistency. 

If you're running campaigns across multiple platforms (e.g., Meta, Google, TikTok), internal labels may not map correctly to each platform. In this case, use custom labels in your primary feed.

2. When you want to use a supplementary feed. 

Meta does not accept the internal_label attribute for supplementary feeds. If you're using supplementary feeds to update product information, you'll need to use custom labels instead, or ensure internal labels are in your primary feed.

3. When feed management tools don't support them. 

Not all feed management platforms have full support for internal labels. Verify if your tool supports these labels before building your strategy around them. For example, Cropink supports both internal and custom labels, making it easy to manage segmentation before and after products reach Meta. You can organize products before they even reach platforms like Meta, and continue to adjust labels dynamically after publishing.

4. For permanent product attributes. 

Internal labels are best for campaign-specific or temporary segmentation. For permanent attributes, such as ProductCategory_Electronics or Brand_Nike, these should be standard catalog fields, not labels. 

Best practices for using internal labels 

Here are a few ideas to get the most value from internal labels without overcomplicating your catalog structure.

1. Begin with 5-10 core labels that directly support your primary business objectives. 

Prioritize categories that drive decision-making, such as margin tiers, seasonality, stock status, and performance levels. These foundational labels will cover most of your campaign needs without creating unnecessary complexity.

2. Avoid label proliferation

More labels don't automatically mean better performance. Each label you create should serve a campaign or reporting purpose. Before adding a new label, analyze whether it will change how you target, bid, or optimize your ads. If it doesn't add strategic value, skip it.

3. Think broadly, update strategically

Rather than creating separate labels for every seasonal sale throughout the year, create a single seasonal label and update which products carry it as your promotions change. Similarly, use clearance instead of maintaining separate labels for every promotional period. 

4. Document your system

Create a reference sheet that documents your labeling conventions and share it with all team members who manage your catalog. Include the purpose of each label, naming formats, and when to use them. 

Should you switch to internal labels?

If you're running Dynamic Ads on Meta, internal labels offer a significant performance advantage. The difference becomes obvious when you're trying to launch a time-sensitive promotion or test new product groupings mid-campaign. 

Internal labels update instantly, eliminate policy review delays, and keep your campaigns running without interruption.

Book a free demo to see how internal labels work in Cropink and how they can help you improve your Meta ads.

FAQs

Sources

1. Facebook. Product data specifications for catalogs in Commerce Manager
2. Facebook. Reference - Catalog