The Ins and Outs of Facebook Ad Bidding

Facebook ad bidding

Facebook Ad Bidding Mechanics

According to Facebook, billions of ad auctions occur in their advertising network every day. These ad auctions are triggered every time a Facebook user fits an ad’s target audience. And since this is an auction, ads – advertisers rather, need to go through the Facebook ad bidding process to get the coveted advertising spot. But what really goes on with each Facebook ad bidding?

The Facebook Ad Bidding Setup Phase

Facebook has two main goals in ad delivery.

  1. To create value for advertisers
  2. To provide quality and positive experience for Facebook, Instagram, and/or Audience Network users

Budget and Schedule

In order to achieve the most value out of ads, you must look closer into the setup phase of Facebook ad bidding. At this phase, you can customize ad budget and schedule. You can either set a daily budget or a lifetime budget.

Setting a daily budget means that you are telling Facebook that this is the amount you are willing to spend each day. Facebook will optimize this amount so that you can have the maximum number of results as much as possible. But there are also days where Facebook can overspend up to 25% over your daily budget. This is during peak days where there are great opportunities for showing your ad.

A lifetime budget, on the other hand, is a set amount you are willing to spend for the duration of the ad campaign. The amount you optimize for isn’t the amount that you’ll need to pay for (learn how Facebook charges advertisers near the end of this post).

Optimization and Delivery

Next will be the optimization of the ad delivery. This ties in with the advertising objectives or ad campaign goal you selected during ad creation. For every advertising objective, you are given different optimization and bidding options that will facilitate the achievement of your desired conversion result.

Advertising Objectives and Optimization Options:

Awareness

You can reach an audience that is more likely to take an interest in your ads and brand.

  • Brand awareness
  • Reach
  • Impressions

Consideration

Traffic

Increase web visits or app engagement and downloads.

  • Impressions
  • Daily unique reach
  • Link clicks

Engagement

Increase post or Facebook page engagement. Engagement can include performing a specific task (post engagement, page likes, offer claims, even responses, etc.)

  • Impressions
  • Post engagement
  • Daily unique reach

Lead generation

Collect and generate lead information from prospective customers.

  • Leads
  • Link clicks

App Installs

Lead people to an app download link or a deep link that leads to an app event/content.

  • App installs
  • App events
  • Link clicks
  • Video Views

Video Views

Promote branding videos to further raise brand awareness.

  • Video views
  • Daily unique reach

Conversions

The conversions bidding option is excellent to bid on if your main goal is to increase sales indirectly or directly through a purchase. You can track and measure different conversion events within your website, Facebook, and mobile app.

  • Conversions
  • Impressions
  • Link clicks
  • Daily unique reach

But if you are still in doubt about the different ad delivery optimization options, you can always conduct an A/B test using two variations of an ad set.

Automatic vs Manual Bidding

Facebook configures automatic bids on an auction-by-auction basis. Facebook basically makes the most out of the ad budget so that the ad can have the most number of results. This method of bidding is advisable if you just want to promote brand awareness or have an insight on audience demographic. Facebook also advises this method for beginners.

Manual or custom bid, on the other hand, gives you the capability to optimize ad delivery. Manual bidding lets you get the most (or even maximize) the value of an ad. You can manually enter a bid based on a range of suggested bids.

The choice between automatic and manual bidding is important since the bidding process influences key performance factors including but not limited to:

  • The number of people that will see the ad
  • The number of times a person sees the ad
  • The cost of each ad delivery

Selecting the Optimum Bid

After selecting the manual bid, Facebook offers a pre-set suggested bid. This bid, (which is often at the midpoint of the bid range) is just a suggestion. You can always change it to bid higher. Bidding lower than this amount is not advisable, though. The suggested bid is just enough for the delivery of the results you want.

Also, besides the suggested bid, there is the bid range. This is the range of bids you need to compete with in order to win the auction. Set your bid within this range.

Bids for Conversions

Ad sets that are optimized for conversions have an option to manually input a maximum and average bid. If you select to input an average bid, a method called “pacing” is used to optimize the bid. Pacing prevents the premature exhaustion of the ad budget at the start of the day. It utilizes an algorithm that learns the optimum bid to spend over time. An average bid is optimal if you intend to make the most number of conversions. Setting a maximum bid, on the other hand, optimizes the delivery efficiency, maximizing your profits. You basically spend little to nothing on each conversion.

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Bids for Reach

An option for “frequency capping” is available on ad delivery for reach. Frequency capping prevents ad fatigue and audience decay. These two issues can happen if the same people keep on seeing the same ad in a short span of time. The interest and engagement on the app decreases, increasing the advertising costs.

It is advised to optimize an ad’s delivery for Reach only when you are targeting or retargeting a niche audience. Also, cap the ad’s frequency to no more than 4 days.

Facebook Ad Bidding Winner Selection

There are three main factors in the selection of a Facebook ad auction winner:

  1. Advertiser bid – the amount of the bid shows how interested you are in getting the ad spot.
  2. Ad quality and relevance – this can be based on an ad’s performance history, mainly audience feedback score (negative or positive) and relevance score.
  3. Estimated action rates – the basis for these estimates are a pool of people that would likely take the necessary conversion action. For example, an ad on action cameras is optimized for purchase conversion. Facebook then calculates the estimated number of eligible people that would likely purchase action cameras based on their previous actions.

There is a connection between these three factors. The accuracy of the action rate estimates depends on how high your bid budget is. If your bid isn’t high enough, then there won’t be enough data for estimation since the budget will only allow a limited number of results per day. Also, the ad’s quality and relevance influence the number of people that are eligible to view the ad. The estimated rate of people that will likely to convert decreases if several of these people has a negative feedback about the ad (or similar ads).

Winning then becomes a matter of having the highest total value. The factors are standardized in order to account for the ad’s optimization goals and then summed up into a total value. But it doesn’t just stop with winning the ad auction. A balanced approach to the ad bid and quality still lead to efficient ad delivery.

How Much Will Facebook Charge You?

Charging occurs whenever there is conversion. That is, the result you optimize the ad for. You only pay for the minimum amount necessary to win the auction and display your ad at each result. This basically means that charges for ad delivery are often less than the amount of your bid.

Ad cost though varies according to conversion type and other factors. Competition is one of the main factors affecting Facebook ad’s cost. Facebook ad bidding strategies are another factor. AdExpresso is of the opinion that Impression or Cost per Mille (CPM) bidding is the most unpredictable bidding strategy. You can basically spend loads of money without achieving any concrete results. But still, you can’t discount the importance of brand awareness campaigns.

Link clicks or Cost per Click (CPC) bidding offers the huge potential for profits. But still, the ads’ relevance score and click-through rate (CTR) affects (even halts) the efficiency of ad delivery. The basic formula is that high CTR = low CPC.

Conversions, on the other hand, vary according to campaign objectives. But with manual bidding, you are in control of the amount to pay for each conversion. Costs can still ride up though if Facebook fails to gather enough results from your website and optimize the ad’s delivery. The common cause for this issue is the failure to integrate Facebook Pixel on the site.

Mustapha Ajermou
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