How you score in Facebook’s bid auction—and to no small degree how your ads perform—is determined by three factors. The first is your bid, which you set. The second is your estimated action rate—which is a value Facebook calculates based on what it knows about the audience and you as an advertiser. Finally, Facebook assesses the relevance and quality of the content. Expressed as an equation, it would look like this:
Bid x Estimated action rate + Content relevance = Bid value
Facebook does this calculation every time an impression is available. It is one of the reasons Facebook has become so spectacularly popular and effective for advertisers: It optimizes the advertiser’s value by optimizing the user’s experience.
Why care about bid value?
Facebook has become a massive platform because it connects users to content that people want to consume. Newsfeed content keeps users incredibly engaged and retained, and as a result, Facebook’s attention metrics are second to none. Of course, ads are displayed in the Newsfeed, so to the highest degree possible, Facebook ensures each ad a user sees is as impactful, engaging, and entertaining as it can be. This is an important thing to appreciate as an advertiser: You don’t necessarily want your ad to look like an ad. People flock to Facebook for news, entertainment connection, community–the things that they feel passionate about. As a platform, Facebook is not interested in just selling space and pushing brands. In their vision, ads must be just as engaging as anything else.
So how does that affect your advertising spend? If your ad is not relevant to a certain audience, they’re going to penalize you in the bid value calculation. On the other hand, if people are clicking on and sharing your ad, Facebook gives you a leg up in the auction.
How to improve your bid value
First, make sure you are optimizing your bid for the audience you want. Facebook tries its hardest to deliver clicks under your budget, which is why you have to be very thoughtful when you set a cost-per-click goal. This might seem counter intuitive, but lowest cost per click might not be the right metric. Some people click on lots of ads but never buy anything. Facebook knows who those people are. It also knows who tends to buy after they click. That’s why we suggest optimizing for conversion event further down funnel. Note that a conversion does not have to be an e-commerce checkout. It could be opening a coupon, visiting a certain page on your site, spending a certain amount of time reading your content or several other measurable actions.
Another thing advertisers can do is ensure their ad is highly relevant to its audience. This may sound obvious, but many advertisers make assumptions about what should be interesting and engaging for a certain audience. We know empirically—because we’ve tested and tested ads that “should” be good—that assumptions can be wrong. We recommend testing every ad to know how it works with different audiences. When you run ads that perform well, you know your audience finds them relevant. The effort of testing will be rewarded when you get a discount on your ad pricing. You’ll be competing against advertisers who don’t test, and when you do that, your business will benefit.
Want to know more about how Social Fulcrum can quickly and accurately test your messaging for greater relevance? Get in touch.