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How Does Facebook Ad Bidding Work?

Did you know that a whopping 10 million businesses advertise on Facebook?

But sadly, many small business owners struggle to get results from their Facebook ads. Unknown to them, the key to success lies in understanding how Facebook ad bidding works.

Facebook uses an auction system to decide which ads to show to users. When you create an ad, you’re entering a bidding war against other advertisers who want to reach the same audience. The highest bidder usually wins, but it’s not always that simple.

In this article, we’ll break down the basics of Facebook ad bidding and share some tips to help you get the most bang for your buck.

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how does facebook ad bidding work
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The Basics of Facebook Ad Bidding

Facebook ad bidding is the process of setting a price you’re willing to pay for each action your ad generates, such as a click, view, or conversion.

You can choose from different bidding strategies based on your goals. For example, if you want to drive traffic to your website, you might choose the “link clicks” objective and bid per click.

Facebook will show your ad to users who are most likely to take your desired action based on their past behavior and interests.

The auction happens in real-time every time there’s an opportunity to show an ad to a user. And the winner is determined by three main factors: bid, ad quality, and estimated action rates.

Let’s take a closer look at each factor.

1. Bid

Your bid is the maximum amount you’re willing to pay for each action. You can set your bid manually or let Facebook choose the optimal bid for you.

If you’re just starting, it’s best to let Facebook automate your bids until you have enough data to make informed decisions.

Keep in mind that your actual cost per action may be lower than your bid, especially if your ad is highly relevant and engaging.

2. Ad Quality

Ad quality is a measure of how relevant and useful your ad is to your target audience. Facebook assigns each ad a relevance score from 1 to 10 based on user feedback and other factors.

Ads with higher relevance scores tend to perform better and cost less per action. That’s because Facebook wants to show users ads they’re likely to find valuable and interesting.

To improve your ad quality, make sure your ad copy, images, and targeting are all aligned with your audience’s needs and preferences.

3. Estimated Action Rates

Estimated action rates are Facebook’s predictions of how likely a user is to take your desired action based on their past behavior and the ad’s historical performance.

Facebook uses machine learning algorithms to calculate these rates for each ad and user in real-time. And ads with higher estimated action rates are more likely to win the auction and get shown.

To boost your estimated action rates, you need to create ads that are highly relevant, engaging, and optimised for your chosen objective.

Tips for Winning Facebook Ad Auctions

Now that you understand the basics of Facebook ad bidding let’s dive into some tips to help you win more auctions and get better results from your ads.

1. Set the Right Budget

Your budget is the total amount you’re willing to spend on your ad campaign. And it plays a big role in determining how many auctions you can participate in and how much you can bid per action.

If your budget is too low, you may not be able to compete with other advertisers or reach enough people to achieve your goals.

On the other hand, if your budget is too high, you may end up overspending on low-quality clicks or actions.

The key is to find the right balance based on your goals, audience size, and competition level.

2. Choose the Right Objective

Your ad objective is the specific action you want people to take when they see your ad, such as visiting your website, watching a video, or making a purchase.

Choosing the right objective is crucial because it determines which bidding options and optimisation strategies are available to you.

For example, if you choose the “conversions” objective, Facebook will automatically optimise your ad delivery to reach people who are most likely to convert based on their past behavior and your pixel data.

But if you choose the “reach” objective, Facebook will optimise for showing your ad to as many people as possible within your target audience.

Make sure to align your objective with your business goals and create separate ad sets for each objective if needed.

3. Use Automatic Placements

Ad placements are the different places where your ad can appear on Facebook and its partner networks, such as Instagram, Messenger, and the Audience Network.

You can choose to run your ads on specific placements or let Facebook automatically select the best placements for you based on your objective and audience.

In most cases, it’s best to use automatic placements because it gives Facebook more flexibility to optimise your ad delivery and find the cheapest opportunities to show your ad.

But if you have a specific reason to exclude certain placements, such as low-quality traffic or mismatched content, you can do so in your ad set settings.

4. Optimise for the Right Events

If you’re using the conversions objective, you need to choose which events to optimise for, such as purchases, leads, or registrations.

Choosing the right events is important because it tells Facebook which actions are most valuable to your business and helps the algorithm find more people who are likely to take those actions.

But if your pixel isn’t tracking enough events, you may not have enough data to optimise for them. In that case, you can optimise for a higher-funnel event, such as “add to cart” or “view content,” until you have more data to work with.

You can also use value optimisation to assign different values to different events based on their impact on your bottom line.

5. Test Different Audiences and Ad Formats

No matter how well you optimise your ad settings, you won’t get the best results unless you’re targeting the right audience with the right message and creative.

That’s why it’s important to test different audience segments, ad formats, and creative variations to see what works best for your business.

You can use Facebook’s split testing feature to run controlled experiments and compare the performance of different ad elements, such as images, headlines, and call-to-actions.

And you can use Facebook’s Lookalike Audiences to find new people who are similar to your best customers and most likely to convert.

6. Invest in High-Quality Creative

Your ad creative is the first thing people see when your ad shows up in their feed. And it can make or break your campaign’s success.

Investing in high-quality images, videos, and copy can help you stand out from the competition and grab people’s attention.

But it’s not just about making your ads look pretty. Your creative also needs to be relevant to your audience, aligned with your brand, and optimised for your objective.

For example, if you’re running a video ad, you need to make sure your video is short, engaging, and has a clear call-to-action within the first few seconds.

And if you’re running a carousel ad, you need to make sure each card tells a cohesive story and leads people to take your desired action.

7. Monitor and Adjust Your Bids

Once your ad is up and running, it’s important to monitor its performance and adjust your bids as needed to stay competitive and efficient.

You can use Facebook’s automated rules to automatically adjust your bids based on your ad’s performance and spend.

For example, you can set a rule to increase your bid by 10% if your ad’s cost per result is below a certain threshold or decrease your bid by 20% if your ad’s frequency is above a certain level.

You can also use Facebook’s campaign budget optimisation (CBO) to automatically allocate your budget across ad sets based on their performance and potential.

CBO can help you get the most results for your budget by shifting more money to the ad sets that are performing well and less money to the ones that aren’t.

Conclusion

Facebook ad bidding can seem complicated at first, but it’s really just a matter of understanding how the auction works and optimising your ads for the best results.

By setting the right budget, choosing the right objective, using automatic placements, optimising for the right events, testing different audiences and ad formats, investing in high-quality creative, and monitoring and adjusting your bids, you can win more auctions and get better results from your Facebook ads.

Keep in mind that it’s not just about having the highest bid, but also about having the most relevant and engaging ad that aligns with your audience’s needs and preferences.

So focus on creating value for your audience first, and the rest will follow.

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