One of the most important things for any Facebook marketer to know, is how the auction works.
Not only the equation that determines your bid and that’s how much you pay for any conversion, but also what is Facebook‘s business model and what are their needs? Ultimately we can use this to scale our Facebook ads with confidence and ease.
The Facebook Auction & Facebook Algorithm:
The actual math equation for how Facebook decides what to charge you for a conversion is very simple. Your bid, what you pay, equals your budget * estimated action rate * advertiser score.
What this means is anytime we want to spend more money it is likely that our costs will go up. This also means that when we make ads that people want to see our costs come down. It also means however, that what Facebook charges us is directly dependent on the quality of the business that we run.
We should never be shocked that when we raise our budgets our cost goes up, because we know the math equation on how much we have to pay. The common misconception here though is that this is actually the budget at the campaign level. Budget, in this equation, refers to how much money that ad hast to spend today.
The reason that spending more money raises cost also has to do with the estimated action rate. When we are asking our ads to reach more people that are of lower quality, and a lower estimated action rate, our efficiency will degrade over time.
The last piece of this is the Advertiser score. Two people of a positive experience with you a brand?
If you are brand is seen as a liability to the user experience of people on Facebook, then Facebook will make you pay more money to reach their users.
Put another way. If it is bad for Facebook‘s business, to have your ad be shown to user versus an ad of one of your competitors, Facebook might let you be the ad that wins that auction, however they will charge you more money for that privilege.
Book effectively give us a discount to good business partners, and charges people who are liability to their business model extra.
What is the estimated action rate?
Facebook is actively measuring how likely any specific user is to take an action that Facebook deems as desirable for that users experience on the platform.
Re-add will have a different estimated action rate for every user. Because Facebook wants people to have a positive experience on the platform, and because Facebook wants advertisers to be successful so that they will spend more money, ads are shown to users that have the highest estimated action rate for that ad first.
Estimated action rate is measured by actions that Facebook deems as having value, creating a “lean in” experience. Every single ad is actually just a webpage on Facebook’s website. Facebook is measuring the click through rate, the bounce rate, the stickiness, the bounce rate, and many other factors… To determine whether or not your constant give somebody a positive or negative experience on t
heir platforms.
How do you scale Facebook ads with confidence
Now that we know the Facebook auction equation, and we understand the impact of every variable in that formula, we can begin to focus on improving business results output and efficiency.
Scaling ads does not mean spending more money!
Scaling ads means having a higher volume of desirable outcome…
You can easily do this by improving your efficiency!
You can easily do this by improving downstream monetization!
You can easily do this without having to spend any additional money!
Having more than one ad reduces the amount of budget that anyone ad hast to spend, therefore having a wider variety of ads that are able to diversify your investments means that you are going to spend less money for a result on any one of those ads.
Creating ads that have a higher estimated action rate with your desired customer, will improve the efficiency of that ad, resulting in a higher volume of conversions for the same investment. This creates a more profitable opportunity, by increasing the total number of customer journeys created with your paid advertising.
If you can improve the quality of your business, by reducing page load times and improving customer service, your ad costs will go down.
When costs go down you make a higher margin…
You can invest that margin into growth
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