How the Facebook Algorithm and auction system works

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Francesco Noli

Founder Adsvanced Performance Agency - Advertising Expert

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How the Facebook Algorithm and auction system works

When you do advertising through Facebook, Instagram or TikTok, you do it by buying each individual user’s ad space literally at auction.

That’s right, at auction.

Each user has different interests and consequently, there are multiple companies competing on each individual user. For example, I like racing so the algorithm always proposes simulators to me, I love sunglasses so I get Persol ads a lot, I have an agency and follow personal freelance clients, Facebook knows this and proposes ads for software or online tools.

In short, the algorithm knows us inside out, and our ad space is bounded by the time a user spends on the platform and the type of use they make of it. Meta based on your history can predict how much and when you will spend time on the platform and also knows your buying habits or preferences. In this way he is able to give an ideal cost to each ad space and decide which advertisers to have participate in each user’s auction.

Auctions are very complex and occur instantaneously.

What are the cards at our disposal to win auctions?

There are three factors that make up our value when we participate in an auction:

  • The offer set by the advertiser, which can be manual or automatic. Then we can manually decide how much to bid for each individual auction (advanced), or let the algorithm choose for itself (recommended)
  • The estimate regarding the likelihood that the user will make the requested conversion once the advertisement is viewed. This estimate is based on our history so the better our listings are over time the better chance we have of launching successful campaigns.
  • Value to the user, which is the quality of your ad and relevance to the user viewing the ad.

Of these three components we control two: auction bidding with budget, daily or total, and value to the user with our listings.

So to win auctions we must: have enough budget, especially relative to the market we are positioning ourselves in, and beautiful, useful and relevant creatives with the target audience we are addressing.

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