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.

1. Presented By:
Riley Seaburg
The Facebook
Ads Auction

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.

5. Facebook Ads
Auction Basics

6. Auction
Basics
Customer Profile
• Demographics
• Behavior
• Interests
Auction Factors
• Bid
• Relevance
• Liklihood of taking action
Ad Is Served

7. Science Of The
Ads Auction
Facebook adds a lot of nuance to
their auction process. Luckily they
have it documented.

8. Choosing The
Winning Ad
Ads compete with other ads in
the auction aimed at people
in the same target audience.

9. Facebook aims to optimize the
user experience by showing
each person content that they'll
find interesting and helpful.

10. Auction
determines which
ad is shown to and
how much the
winning
advertiser will pay

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.

12. User value
takes into
account
relevance and
ad quality.
The more relevant, the better
it performs

13. Important Note
Facebook uses user value,
not relevance score in
calculating Total Value.

14. Math Time!

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.

23. Post Click Experience
Facebook Watches Your Bounce Rate

24. Next Presentation
Campaign Budget Optimization

25. Get In Touch
HammersportMarketing.com