This document summarizes Facebook's ad auction system. It explains that the auction does not simply go to the highest bidder, but rather aims to optimize the user experience by showing ads that will be most relevant and valuable to each user. The "total value" of an ad, determined by various factors like the bid, estimated click-through rate, and predicted user relevance, determines the winning ads. The goal is to maximize value for both advertisers and users by ensuring the most engaging ads are shown at the lowest possible cost.
2. Learning Objectives
• What the ad auction is and what it does with
advertising.
• Basics of the ad auction and how it works.
3. NOT A
TRADITIONAL
AUCTION
• ADS THAT THE SYSTEM
DETERMINES WILL CREATE THE
MOST TOTAL VALUE WILL WIN THE
AUCTION.
• ALL ADS ON FACEBOOK
COMPETE AGAINST EACH
OTHER
• HIGHEST BIDDER DOESN'T
WIN
• ADS THAT CREATE THE MOST VALUE
WIN.
4. Bottom Line
THE MORE RELEVANT THEY PREDICT AN AD
WILL BE TO A PERSON, THE LESS IT
SHOULD COST FOR YOU, THE ADVERTISER,
TO SHOW YOUR AD TO THAT PERSON.
11. What is Total
Value?
Total Value is a numeric value calculated using several
factors, including the bid submitted at ad set up,
Facebook's predictions about how the people in the
audience will react to the ad, and how relevant they
think the audience will find your ad.
15. (Advertiser Bid) x (Estimated Action Rate) + (User Value)
= Total Value
TOTAL VALUE FORMULA
16. Breaking
Down The
Formula
Advertiser Bid
You tell Facebook your cost goals
with your bid strategy and they bid
for you to help you meet that goal.
Estimated action rate
How likely a given person is going
to take action, based on the
previous actions by the person
you're trying to reach and your ad's
historical performance data.
Ad Quality
Measures overall quality and
specific relevance. Negative
feedback can decrease its total
value. A history of interest in what
you're advertising, can increase its
total value.
17. Spending too fast: bid
is reduced.
Budget &
Delivery
FACEBOOK USES PACING TO KEEP
DELIVERY CONSITENT THROUGHOUT THE
DAY
Spending just right:
keep bid where it is.
Spending too slowly:
bid is increased.
18. If you know your audience well, your ads will
likely have solid targeting and relevant
content, which then leads to a high user value.
Ads with a higher user value can potentially
get more delivery and have lower costs.
19. How Facebook
determines user value.
Two types of value signals
• How people interact with organic content
• How people interact with paid content
20. How People Interact With Paid
Content
Ad Quality Panel Post-click experience
Predicted Engagement Repetition
21. Ad Quality Panel
Evaluation by a representative
sample of Facebook users who
judge ads in their News Feed
primarily on whether or not they
want to see the ad.
22. Predicted Engagement
Before they run an ad, Facebook
predicts how people may respond
to an ad through actions like
clicks, shares, likes, and video
views.