The highest bid wins...or does it really?

By — Star Republic
02.08.2021
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If you are involved in digital advertising, you probably know that Facebook's advertising delivery is based on an auction system. In short, this system determines which ad will appear in a user's feed. In a "regular auction", the winner is usually the one who places the highest bid - this is not the case with Facebook. If you are aware of the factors that determine who is the winner in this type of auctions, I am convinced that you will create a better foundation for successful campaigns. Are you curious to find out what these factors are? Continue reading!

2 winners, or maybe even 3?

Facebook's ads have two goals that aim to make two specific target groups winners. First and foremost, they want their advertisers to reach their set goals for the platform. Without advertisers, the platform's revenue would be modest as the majority (98%) comes from advertising revenue. The second objective is linked to the users of the platform. Facebook strives to deliver positive and relevant content for each unique user.

If we combine these two factors, it is quite easy to see that there is a third winner in addition to the advertisers and users - Facebook themselves.

How does the auction work?

When your ad ends up in Facebook's auction system, it will compete against other ads aimed at the same defined audience. Because the number of ad slots is limited, the winner will be chosen based on three factors that together make up a total value. The formula for this is as follows:

[Bid] x [Estimated activity rate] + [Ad quality] = Total value

So what determines if your ad will appear is completely based on the "total value" factor. This includes your bid, Facebook's estimate of how your target audience will react to your ad and how relevant the target audience will find it.

Ad Quality

If we take a closer look at [Ad Quality], it takes into account the relevance and quality of your ad for the specific audience. To get an indication of how well your ad is tailored to the user, you can use the metric "Quality Score" in your columns. However, Facebook itself states that the measured value does not directly affect the auction - but can be used as an indicator.

From Facebook's side, the value is based on data from how users reacted to historically published content on the platform, organically as well as paid. It is important to keep in mind that the measured value "repetition" is also included. If a person has seen the same content several times, the user value is reduced. What happens after a click is also included in the equation, ie how your website performs.

Bid

There are a number of different ways to operate when it comes to bidding strategies and the possibilities are many. Instead of writing a novel here, I encourage you to get in touch with us, we are happy to tell you more and maybe write an article about this area in the future.

Estimated activity frequency

Each ad has an optimization goal, usually a conversion that you want a person to perform, such as driving traffic to a website or generating reach. Estimated activity frequency shows how likely it is that someone will meet the goals you set.

The metric is based on what a person has previously done and the ad's previous performance.

5 tips on how to join the auction

  • Create landing pages that load quickly and with good quality content. Good quality means that the page is not filled with advertising, sexual material or other content that Facebook's advertising policy does not appreciate. This probably feels pretty obvious, but it is always important to keep in mind that what happens after a click is also valuable to include in the equation.
  • Place the correct bid. Automatic bidding usually works very well, but if you have a good understanding of what you can pay for a click / view / purchase, it can be smart to also A / B test what works best for you.
  • Customize your content according to the goal of the campaign. If, for example, your goal is to get a certain reach, then use content that can contribute to this. Maybe in the form of a video with something that attracts attention and creates a desire to share the content with friends.
  • Create engagement! Use texts and images that encourage you to take a certain action. This action should of course be based on the target group and where in the funnel the potential customer currently is. For example, if the target audience is unknown to your brand, you should not ask them to buy anything from you, on the contrary - offer them something of value and encourage a discussion instead of making a purchase in this first step. We would like to recommend you to read our article on this topic. It is important to point out that you should avoid attempts at creating "click baits". Facebook's AI will automatically detect this, leading to poorer results for the ad.
  • Think about the frequency! In a target group with cold traffic, you should not exceed 2-3 views, as you can be perceived as annoying. In a retargeting campaign, however, we can allow a slightly higher frequency as we know that the target group has shown an interest in the offer. Imagine that a completely unknown person repeats the same message to you several times, compared to your best friend doing it - who are you willing to listen to?

Ready to optimize your digital advertising?

Do not hesitate to contact us and we will be happy to help you.

 

Author

Petter Nilsson

Digital Marketing expert 

Star Republic

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