How does the Facebook ad auction work?
Placing ads in the Facebook ecosystem is one of the daily tasks of marketing managers in various organizations. However, only very few people understand which factors are responsible for the ads being displayed. In the following article, I present the factors of Facebook's ad auction so that you can understand which adjustments you need to make in order to run successful Facebook ads.
The allocation of advertising space in the Facebook advertising universe is based on an auction process. As there are more requests for the placement of advertisements than advertising space, only the winner of the auction receives this advertising space. The Facebook ad auction does not work like a normal auction, where the person with the highest bid wins, but the advertiser with the highest bid wins. Total valuet creates. Facebook is pursuing two goals:
- Support advertisers in achieving the desired advertising objectives
- Only display ads to Facebook users that are relevant to them
From this it can already be deduced that relevance, or the relevance score, is the most important KPI for advertising success on Facebook.
Facebook determines the winner of the advertising auction based on three factors:
1. the advertiser's bid
Of course, the bid you place has a decisive influence on the advertising auction. With your bid, you show Facebook how important it is to you to display your ads. There are different bid variants that need to be distinguished:
- Manual bids:
With a manual bid, you tell Facebook how much you are willing to pay to achieve your advertising goal. For example, you can set a CPI of €2 for an app install campaign. This means that you are willing to pay a maximum of €2 for each app install. This means you never pay more than your maximum bid. The higher your manual bid is, the more often you can achieve your desired advertising goal.
- Automatic bids:
With automatic bidding, Facebook sets a bid for you for each auction based on your advertising goals. You tell Facebook your total budget (whether daily or lifetime budget) and the goal of your ad (clicks, leads, etc.) and Facebook determines the appropriate bid to maximize your advertising goals within your budget.
2. relevance & quality of the ad
An important metric that you should definitely consider when placing and analyzing your ads is the Relevance Score. The relevance score tells you how relevant your ads are for the Facebook users you want to address. The Relevance Score is a number between 1 and 10, whereby the higher the Relevance Score, the more relevant your ads are.
3. estimated interaction rate
The estimated interaction rate is the expected conversion rate of the desired advertising campaign. Facebook shows your ads to people who Facebook assumes are likely to perform the desired advertising action. The expected conversion rate is determined based on the user's previous actions and the previous performance of your ad. You should note that your budget should be sufficient to achieve at least 25 conversions per week.
Settlement of the advertising auction
When determining the total bid, however, the price for displaying the ad is not calculated. The amount charged will never exceed your maximum bid. You will be charged the minimum amount necessary to beat the second-placed bid.
Conclusion Facebook auction process:
Similar to the Google quality factor, not only the bid plays a role, but also the user experience with your ad. This means you can win the advertising auction with a lower budget but higher relevance than other advertisers. For this reason, you should pay very close attention to the relevance, click & interaction rate and frequency of your ad.