How Does the Facebook Ad Auction Work?

Anyone who’s tried to master Facebook Ads by relying on good fortune will agree that this efficient advertising tool is not too different from investing. It seems simple enough at first, so you roll up your sleeves, put some money in it and hope for the best. The harsh truth is that, without understanding how the Facebook Auction works, you can quickly find yourself burning money with Facebook Ads.

If you want to get a proper bang for your buck, read on and take the guesswork out of Facebook Ads.

Behind The Scenes: Facebook Ad Auctions

Facebook uses ad auctions to determine the best ad to show to a user at any given time, with the goal to maximise the value for both the user and the business. Sounds pretty good, right? It is, but you need to understand that it’s an extremely competitive game! There are billions of auctions taking place every day across the Facebook family of apps.

The auction competition

When advertisers create an ad, they tell Facebook who they want to show the ad to by defining the target audience. The better they define it, the bigger the chance to score, but that’s not the end of the story.

Take the example of an advertiser who is targeting men who like snowboarding, while another advertiser targets all snowboarders who live in Canada. The same person in this case – a “male snowboarder who lives in Canada” – would fall into the target audience of both advertisers.

When the opportunity arises for Facebook to show this guy an ad, the ads from the two advertisers are both eligible to compete in the auction. As you can probably imagine, no matter who you’re targeting, you will still have to compete with a lot of other advertisers to put your ad in front of your potential customers.

How to ensure you win the auction

You might think that putting more money against an ad will solve the issue. That’s only partly true: the ad with the highest total value will win the auction, but value is determined through different variables.

The highest total value is scored by three major factors:

• Bid: How much the advertiser is willing to pay to achieve the desired outcome.
• Estimated Action Rates: This is the estimated action that someone will most likely take that is in line with the advertisers objective (clicking, converting, engaging etc.)
• Ad Quality: This is a measurement of many sources, including relevance, feedback from people viewing or hiding the ad and assessments of clickbait.

Avoid clickbait and engagement baiting as this does not improve the ads performance, quite the contrary.

Overall, estimated action rate, ad quality/relevance and bid are key indicators for the success of your ad campaign. Facebook is always aiming to create a better in-app experience for its users so subsidises ads that are most relevant. If your ad is getting good engagement, it’s deemed as relevant to the audience. In other words, if users are taking the desired action (clicking, engaging etc.), your ad will be placed in better auctions, which will bring down your overall cost.

However, if your ad is not resonating with your audience, you’ll have to pay a lot more to achieve your objective. This is why it’s so important to test multiple ad variations and monitor ad performance. Once you’ve collected enough data, you can make a clear decision on which ads to kill and which to invest more into. Over time you’ll start to find what works, and your stellar ad performance will be rewarded with reduced rates.

Don’t be disheartened if your campaigns aren’t delivering the result you hoped for right away. It usually takes time and a fair bit of trial and error to find the sweet spot with your ads. Once you do though, you will find your campaigns go from strength-to-strength. So hang in there!

Takeaway

When you start creating Facebook Ads, make sure you keep in mind how the auction works, to ensure they get results. Try to understand why ads perform well and you will rise above everyone else who is just guessing. Remember: quality is an essential part of a successful ad. No matter how much money you spend on an ad, if it’s spammy or irrelevant it won’t reach enough people.

If you need help with Facebook Ads, don’t hesitate to contact our friendly team of experts and you won’t have to worry about ad performance anymore!