How Advertising Works

How Facebook Delivers Your Ads 👩🏻‍💼

Leslie is a 29-year-old woman who lives in Washington D.C. The first thing she does each morning is open Facebook to see what's new with her friends and family.

Thousands of advertisers want to show ads to people like Leslie at the moment she starts looking at her News Feed – that is, people who are female, 29, living in Washington D.C., etc.

Facebook holds auctions that take into account each of these advertisers’ bids for an opportunity to serve an ad impression to someone like Leslie. Facebook also considers how interesting and relevant they think Leslie will find each of these advertisers’ ads, as well as how likely it is that she'll act (i.e., clicking or making a purchase) after seeing the ad.

Based on all of these considerations, Facebook determines which advertiser will win this auction.

Finally, Facebook shows Leslie the winning ad in her News Feed.

How the Ad Auction Works ⚖️

The Facebook ad auction is designed to maximize advertiser value while optimizing the consumer experience for audiences on Facebook and Instagram.

Facebook will try to show your ads evenly throughout the day so that the people most valuable to you in your target audience are more likely to see them.

Generally, the more relevant an ad is to a person, the less it should cost for the advertiser to show the ad to that person.

An auction occurs when there’s an opportunity to show someone an ad, leading advertisers to compete for this opportunity.

To find the most relevant ad to show someone, Facebook ranks each ad targeting every individual. The winning ad maximizes value for both the advertiser and this person.

So, Who Wins? 🏆

The winning ad is the one with the highest Total Value in the auction. Total Value is a numeric value calculated using several factors, including the bid you submitted when you set up your ad, predictions about how the people in your audience will react to your ad, and how relevant they'll find your ad.

User value takes into account relevance and ad quality. The more relevant your ad is to your audience, the more likely it will be competitive in ad auctions and perform better.

The Formula

TheFormula.png
Key Takeaways:
  • Facebook holds an auction for every advertising opportunity that takes into account each ad's total value to the user.
  • Set a reasonable budget for your campaign to ensure that you bid appropriately and win enough advertising opportunities.
  • Create high-quality ads that are relevant to your target audience in order to be most competitive in the ad auction.

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