July 11, 2018
If you have not realized it yet, Facebook’s ad delivery system works on an auction system. This method Facebook has developed runs automatically to determine which ads will be seen in a user’s feed. A traditional auction system works on a “highest bid wins” system but let us make one thing abundantly clear, that is not how Facebook’s auction works. So how exactly does it work? Well if you are curious, continue reading and we’ll breakdown the components of the auction to get a better understanding.
The Balance
When showing ads, Facebook aims to balance two things at all times. First is to create value for those advertising on Facebook. They want to help advertisers reach their target audience and get results from that target audience. Second is to keep the actual Facebook users in mind. Ads help Facebook pay the bills but they must deliver a positive and relevant experience to it’s users. The ads that are served to someone should be relevant to that person. To say this in another way with a quote from Facebook; “People see ads they’re more likely to find relevant, and advertisers reach the people who can help them meet their business goals.
The Auction
Remember, the goal of Facebook is to achieve that balance by delivering the right ad to the right person at the right time. It achieves this through its automated auction. Like mentioned before this is not a traditional auction of highest bidder wins. So lets look at the three things that make up this auction to understand what Facebook calls an ad’s Total Value.
- Bid
- Estimated Action Rate
- Ad quality/relevance
Bid is the traditional part of the auction. You can use Facebook’s two methods of bidding called lowest cost and target cost. Lowest cost is the more automated of the two and lets Facebook bid for you attempting to achieve your desire result at lowest cost. Target cost tells Facebook to achieve a result at a set goal and is more manual.
Estimated action rate is how likely Facebook’s algorithms think a person is going to take action on an ad. Facebook is looking for if your ad is generally relevant to someone or if it will actually get them to take whatever action you are optimizing for. These “estimates” are based on historical ad performance and previous actions of the person you are attempting to advertise to.
Ad quality and relevance. This one is a bit self explanatory. Facebook tries to find if your ad is going to be interesting and relevant to the person seeing it. They looks at things like positive feedback and negative feedback to help determine this. Meaning an ad with negative feedback can decrease overall value. Keep in mind that relevance score is NOT factored into this. Improving relevance score won’t necessarily impact your Total Value so it should not be your end goal.
Again, this is an auction so a users bid is a part of who will have their ad seen. Just don’t forget the other aspects! An advertiser who’s ad has a higher estimated action rate and/or ad quality and relevance can easily achieve a higher Total Value over a higher bidder.
Post Click Experience
One thing that is and is not included in Total Value is a user’s post click experience on your website. You might house this under estimated action rate but it could be its own criteria. What Facebook is looking for here is an advertisers website performance (load speed for example) and a user’s network connection. Facebook says “We will show ads to people when they are interested in the content and have a network connection that can quickly load the post click content.” This is their attempt to help users have positive ad experiences with advertisers. This system should also help to reduce a website’s bounce rate. If someone who clicks an ad can load a website quickly and engage with the content on the page, that is a positive things for both user and advertiser.
Conclusion
This was a quick insight into how Facebook’s ad auction works. Remember that Facebook tries to achieve a balance of good advertiser experience and good user experience. They do this through their ad auction which prioritizes Total Value over just highest bidder. This helps more relevant ads to be shown and enables people with smaller budget to compete in the auction competitively. Finally don’t forget about a user’s post click experience, invest in building a fast website with engaging content.