Do you know that there are more than 7 million active advertisers using Facebook ads to promote their products and services?
Have you ever wondered how Facebook decides which ads to show to whom and when ? What you can do to ensure that your ads are shown to the right people at the right time?
Well, Facebook uses the ad delivery system to determine which ad is shown to people and when, it also balances two major factors when showing ads to its users which includes:
- Creating value for advertisers by helping them reach and get results from people in their target audiences.
- Providing positive, relevant experiences for people who use Facebook Products.
To achieve this balance, they hold an auction to match the right ad to the right people at the right time; so that advertisers can reach people receptive to their ads; while users see something that interests them.
Facebook ads auction is different from the traditional auction we know about.
This is because the winning ad isn’t the ad with the highest monetary bid but the ad with the most value for people and advertisers.
Ads on Facebook compete with each other and the ad delivery system selects the ad that maximizes value for both advertisers and people as the winner.
The more relevant Facebook predicts an ad will be to your target audience, the less it should cost you as an advertiser to show it to them.
In this article, you will learn how the Facebook ad delivery system works and how it can affect your advertising campaign
Facebook ad delivery system
Facebook ad delivery system is made up of three components:
- Facebook Ad Auction.
- Pacing control.
- Advertiser control.
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The ad delivery system is driven by auction which is influenced by advertiser controls and a pacing system, they work together to maximizes value for both people and businesses.
Facebook ad auction
Facebook ad auction is the central part of its ad delivery system because it determines which ad is shown to a person at a given point in time.
When there’s an opportunity to show someone an ad, the ads that have that person as part of their target audience may compete in the auction.
For every opportunity to show someone an ad, Facebook holds an action to determine which ad to show. Unlike a traditional auction, the winner of the Facebook ad auction isn’t necessarily the highest bidder.
The winner is an advertiser with the ad that creates the most value for both people and advertisers.
A proper understanding of how the Facebook ad auction works can help you understand your ad performance
How does ad auction work?
When you create ads, you tell Facebook who you want to show your ad to by defining your target audience and a particular user can fall into your target audience or the target audience of other advertisers.
Therefore you must compete with other advertisers who want to show their ad to this particular person in an ad auction.
Facebook ad auction will determine the winner of the auction based on the total value and the ad with the highest total value becomes the winning ad.
When an ad has the highest total value, it means the ad is relevant to the people within your target audience.
For example
Imagine Christiana uses Facebook and thousands of advertisers want to show ads to people like her who are with the age range of 25-30, living in Lagos, Nigeria.
Facebook holds an auction to determine which ad from different advertiser to serve to Christiana.
The auction also considers how interesting and relevant the ad will be to Christiana and how likely she will take an action when she sees the ad.
Based on all these considerations, Facebook decides who the winner is and shows Christiana the winning ad in her news feed.
For instance
Knorr and Maggi, are two seasoning cubes that are competing in an ad auction.
They have the same campaign objective: traffic. They are also trying to reach the same audience: women, ages 30-50, living in Lagos and interested in cooking.
The same person could fall into the target audience of both advertisers. When there is an opportunity for Facebook to show someone within their target audience an ad, both advertisers’ ads are eligible to compete in the auction.
So, both Knorr and Maggi set up their ad with a certain bid and budget, Maggi had a higher bid and budget, but a lower user value, while Knorr has a lesser bid and budget but a higher user value, but both advertisers estimated action rates were the same.
Who won the ad auction?
Knorr will win the ad because it has a higher user value, which means that their ad is more relevant to the individual within the target audience.
How is a winning ad determined?
When advertisers compete in the ad auction, Facebook doesn’t determine the winning ad based on one factor or at random.
It uses an equation that considers several factors which include the bid you submitted during the setup, Facebook predictions of how people in your audience might react to your ad, and how relevant the ad is to people within your target audience.
The value that results from the equation is known as the “Total Value”, which determines the winning ad and the ad that will be shown to a given individual.
Equation for total value: [Advertiser Bid] [Estimated action rate] [User Value] = Total value.
- Bid: The amount an advertiser bids when they submitted their ad (The amount an advertiser is willing to pay to achieve their desired result).
- Estimated action rate: Prediction about how people in your target audience will react to your ad (How likely it is that showing your ad to a person will lead to your desired result).
- User Value: How relevant your ad will be to people within your target audience.
Whether or not your ad participates in any specific auction depends on the two other components of the delivery system, the performance optimization, and the advertiser controls.
Advertiser control
When structuring Facebook ads there are many factors to consider: what campaign objective to choose, what audience to reach, how much to spend, and what creative to use.
Fortunately, Facebook gives you the option to manually control all aspects of your campaign or rely more on machine learning to optimize for you.
Advertisers control is the selections you make when structuring your ad campaign to guide the Facebook auction and pacing system.
You can always change your selections to help improve your ad performance.
Campaign objective and delivery optimization
When creating a campaign on Facebook, the first thing you have to select is your objectives, which help you define your goals for your campaign.
You should always select the objective that aligns with your business goals.
The type of objective you select determines the type of optimization made available to you to choose from.
Audience
Facebook can automatically show your ad to people who are likely to find your ad relevant. However, you can choose who you want to see to see your ad.
There are three different types of audiences available that you can choose from:
Core Audiences: With the core audience option you can reach people based on the information they share in their profiles and the behavior they exhibit on the platform.
Custom Audiences: With the custom audience option, you can reconnect with people who have engaged with your business both online and offline
Lookalike audiences: With the lookalike audience option, you can reach new people whose interests are similar to those of your best customers.
Budget
Budget is the maximum amount of money you want to spend to show people your ads.
It helps control your overall spend for an ad set or campaign. You can run ads on Facebook, Instagram, and Audience Network with your budget.
You can set up budgets for your campaigns with campaign budget optimization (CBO) or for each individual ad set.
Campaign budget optimization: This option is available at the campaign level. With CBO, you can set up one central campaign budget to optimize across 3 ad sets and continuously distribute the budget to the top-performing ad sets.
Bid and bid strategy
Bid is one of the three components Facebook uses to determine the winning ad, it is the amount you are willing to pay to achieve your desired result from someone within your target audience.
Just like budget helps control your overall spend for an ad set or campaign, a bid strategy helps control your cost per result
Facebook bid strategies help you align your business outcomes with what you care about the most. Depending on your business goals, the right bid strategy helps you achieve the right results for your ad campaigns.
Placements
Placements are where you want your ads to appear.
There are a variety of ad placements available on Facebook which include, Facebook, Instagram, Audience Network, and Messenger.
You can choose either to let Facebook place your ads (automatic placements) or choose where you would like your ad to appear
(manual placement).
- Automatic placements: This placement option enables Facebook to deliver your ads to all available placements and finds the best results across them.
- Manual placements: This placement option lets you choose the platforms and placements where you want your ads to appear.
Creative and ad format
The creative elements you use in your ads and the formats of your ads impact the performance of your ad.
Facebook lets you use a combination of text, images, and video to capture the attention of your target audience and tell the story of your business.
There are also six different ad formats you can choose from to improve your campaign results which include: a single image, single video, carousel, slideshow, collections, instant experience.
Pacing system
There are billions of opportunities to show ads on Facebook every day. Without pacing, Facebook could spend your entire budget in a few days on expensive results, because the system wouldn’t take into account the possibility that cheaper results might become available later.
Pacing is how Facebook makes sure your budget is spent evenly over the duration of your campaign. Without pacing your budget might be spent too early.
While auction determines which ad to show a particular person, pacing determines how to spend budget across many ad opportunities.
Pacing adjusts the bid and which auction an ad participates in based on how much budget and time are left for an ad set. This helps the ad delivery system get the most out of the budget.
Pacing grants Facebook the Flexibility to help you get the best available results for your goals by adjusting the two aspects that make up the pacing system which include:
- Bid pacing: This is the aspect of pacing where the delivery system adjusts your bid or which auction to enter based on how much budget and time are left for your ad set.
- Budget pacing:Budget pacing involves the delivery system potentially increasing the budget when there’s an opportunity to garner numerous optimization events aligned with your bid strategy. Conversely, the system might decrease the budget if there are few available optimization events with costs aligned with your bid strategy.
Facebook ad delivery optimization process
Ad delivery optimization is a part of machine learning systems at Facebook which works to determine what outcome an advertiser is trying to accomplish based on the objective.
To understand ad delivery optimization it is important to understand how machine learning works.
Facebook system uses machine learning which is a type of artificial intelligence to create the highest value experience for both advertisers and users.
This experience is created based on the information from Facebook and the information advertisers provide.
The Facebook ad delivery system is based on signals.
Advertisers choose their target audience, provide information (custom audience or pixel/SDK/Offline signals), select optimization preferences, and set the bid—all of which send signals for effective ad delivery.
The system identifies connections between the signals and estimates the best delivery opportunities for the advertiser’s ads.
Machine learning happens when someone takes an action on the ad and when people don’t take the desired action after receiving the ad, the system learns from that too.
Facebook uses machine learning to determine where, when and who to show an ad, in order to minimize the cost per optimization event. The system identifies patterns and learns from signals to match ads to the right people and increase the relevance of the ad.
Learning phase for ad delivery
When Facebook starts delivering your ad, they don’t have enough information to deliver your ad as stable as possible
When your ad starts to run, the delivery system starts to learn more about the people, places to show your ad, and what works well.
As your ad appears more frequently, the delivery system gathers additional insights into the conditions that contribute to its optimal performance. Over time, the performance of the ad improves and the system optimizes to deliver at the lowest cost.
The learning phase is the period during which the delivery system is still acquiring substantial insights about an ad.
The learning phase is the period when the delivery system still has a lot to learn about an ad set. During the learning phase, the delivery system is exploring the best way to deliver your ad, so performance is less stable and cost per result is usually high.
During the learning phase, the ad is still optimizing its delivery, resulting in less stability and potentially higher costs for ad sets.
The learning phase usually occurs when you create a new ad or ad set or make a significant edit to an existing one
Every time the Facebook Ads delivery system displays an ad, it acquires insights into the optimal audience and locations for showcasing that ad. The more the ad is showcased, the more proficient the delivery system becomes in fine-tuning its performance.
Also, the delivery column reads “Learning” when an ad set is in the learning phase.
While the delivery system never stops learning about the best way to deliver an ad set, ad sets exit the learning phase as soon as the performance stabilizes, usually after 50 optimization events.
Conclusion
In this article, I have explained how the Facebook ad delivery system works and how it affects your ad campaign.
For more detailed practical steps on how the Facebook ad delivery system works and how to optimize your ad campaign for better results; register for our 90% practical digital marketing course
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