Do you know how Facebook chooses when your ad is shown and the factors that play into your ad’s success in its Ad Auction? To ensure that a) Facebook monetizes its website and b) keeps its users happy by delivering ad content they want to see, Facebook puts all advertisement through its Ad Auction. In the Facebook Ad Auction, the “value” of your ad is compared to the “value” of the other ads vying for space on Facebook and its associated ad space. This algorithm relies on many variables, and not just who has the biggest budget.

Knowing the variables that Facebook considers when deciding who wins in the ad auction and who loses is important if you want your advertisements to be competitive. Click To TweetUnderstanding the following ad auction formula, and how you can positively impact those variables, is key to running successful ads through Facebook Business Manager:

Total Value = [Advertiser Bid X Estimated Action Rates] + User Value

What’s Your Type? The first part of Facebook’s ad value equation is Advertiser Bid. From campaign to campaign a bid strategy may need to change based on your budget’s need for efficiency vs. predictability. Some campaigns may need an emphasis on a stricter budget, while others may prefer an emphasis on the number of results over budget or time efficiency. Facebook provides advertisers the following three bid types to choose from, with each bid type offering a mix of efficiency and predictability.

  • Target Cost – This bid type focuses on helping you predict what the ad’s total spend will be but will not always provide you with the smallest cost per result.
  • Lowest Cost – The Lowest Cost bid will allow you to spend less time maintaining your bid but could incur higher costs as your ad goes through the most cost-effective results.
  • Lowest Cost with Bid Cap – Choosing this bid type will help you minimize your cost per result but may not get you to your desired budget spend.

Action Rate

Your ad’s Estimated Action Rate is a value that Facebook assigns to your ad based on how likely people are to engage with your ad. Since Facebook doesn’t give advertisers access to their ad’s Estimated Action Rate, following current best practices that encourage users to take your desired action will help improve this score. One of these best practices is running conversion campaigns when possible.

Conversion campaigns use Facebook Pixel data to help your ad acquire online conversions. From site visits to completing transactions, conversion campaigns will deliver your ad to users who are likely to make the conversion you intended them to. Facebook uses Pixel to track these conversions, and you will hurt your ad’s Total Value if you don’t have a Pixel placed on your website. To learn more about Facebook Pixel, click here.

ABC’s of User Value

So, if part of the auction emphasizes the consumer experience, how can you as an advertiser improve the value that users take away from your ad?  Evaluating your Audience, Budget Strategy and Creative is a good place to start.

  • Audience – Make sure that your ad is set up to reach people who want to see your ad. Facebook provides multiple targeting options that allow you to zero in on your target audience and deliver your message to those who matter the most. Using the Lookalike Audience, Custom Audience and behavior-based targeting are targeting practices that can help improve your ad’s User Value.
  • Budget Strategy – Facebook has a set standard of best practices to follow when placing ads. One of these best practices is to use Campaign Budget Optimization. Choosing this budget strategy when setting up your ad will distribute your budget to your highest performing ad sets, helping to cut unnecessary ad spend and increase your ad’s User Value.
  • Creative – Don’t bore your audience with the same static creative. You don’t like seeing the same ad repeatedly, and neither does your audience. If you don’t have a lot of room in the budget for flashy creative, don’t worry. Take your existing creative to Facebook’s Creative Hub and easily create high quality, dynamic creative using their ad templates.

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