How the Facebook Ad Auction Works

Billions of ad auctions take place every day to determine what Facebook ads people see. Do you understand how the Facebook ad auction works?

When the advertiser defines the audienceThis is the group of people who can potentially see your ads. You help influence this by adjusting age, gender, location, detailed targeting (interests and behaviors), custom audiences, and more. More they are targeting, there is no guarantee that anyone in that audience will see their ad. The advertiser must first win in the auctions.

Here’s what you need to know…

The Goal of the AuctionFacebook uses an ad auction to determine the best ad to show to a person at a given point in time. The winner of the auction is the ad with the highest total value, based on bid, estimated action rates, and ad quality. More

You can’t think of the Facebook ad auction as the stereotypical auction with a fast-talking auctioneer and the item on the auction block going to the highest bidder. That’s not really how this works.

The goal of the auction isn’t necessarily to award the ad with the highest bid a placementA placement is a location where your ad is shown. Examples include Facebook's mobile Feed, Messenger, Instagram feed, Audience Network, right-hand column, and more. More in a particular user’s feed. The hope is to accomplish two primary things:

Show a user an ad they are likely to care about and engage with
Provide results to the business paying for the ad

If only the highest bid mattered, users would be less likely to see the ads they care about — and advertisers would be less likely to get the actions they paid for. When done right, both users and advertisers benefit.

How it Works

So, it’s more complicated than having the highest bid. The winner of the ad auction is the ad with the highest total value. The total value is determined by three factors:

1. Bid: Okay, this still matters. The bid is how much the advertiser is willing to pay to get their desired action. This is sometimes set manually, but usually automatically.

2. Estimated Action Rates: This is an estimate of the probability that a person will engage with your ad. This could be based on what a user tends to engage with and the rate that people are engaging with your ad.

3. Ad Quality: This has less to do with the level of engagement and more to do with signals related to quality. This is derived from feedback of users who have seen it so far and automated assessments of the ad that include checks for violations like engagement bait.

How Do You Win the Auction?

Can you win an auction based primarily on having the highest bid? Well, technically. In that case, your ad may not get shown based on estimated action rates and ad quality alone. As a result, you can expect to spend more to get your ad shown. Will that be worth it?

The goal, of course, is to win these auctions in a balanced way. You want to spend the least while reaching the right people who are most likely to perform your desired action.

What’s the best way to do this? Effective creative that grabs attention and inspires engagement while playing within the rules. Ultimately, it’s a quality ad that will give you the biggest advantage with winning auctions while keeping your costs down.