Today we will understand how Facebook auction works and how the price per impression, known to us as CPM, is formed.
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Facebook's ad auction is a process where advertisers compete to display ads in users' news feeds. People log into Facebook or Instagram and at that time the system determines which ads to show them based on a number of factors: target audience, ad budget, content quality and other metrics.
From our article you will find out how an ad auction of a popular traffic source actually works, what types of auctions there are, as well as the metrics a publisher can affect when working with Facebook traffic.
1. Bidders bid without knowing the other bidders' bids.
2. The highest bidder wins.
3. The winner pays an amount equal to their bid.
Example: imagine you are bidding in an auction for the first price to attract a customer to your website. You bid $10, another bidder bid $5, and a third bidder bid $8. You win since your bid is the highest. And as a result, you pay $10 for referring a customer.
This type of auction is of little use in marketing because the advertiser with the highest budget will be the monopolist in the auction.
1. Bidders bid without knowing each other's bids.
2. The highest bidder wins.
3. The winner pays an amount equal to the second highest bid.
Example: imagine you are bidding in an auction for the second highest bid for attracting a lead. You bid $5, another bidder bids $3, and a third bidder bids $4. You win the auction because your bid is the highest. However, you will pay $4, which is the second highest bid.
The point is that advertisers try to bid higher, so the advertising platform will make more money. But the advertiser does not know exactly which bid is the winning bid.
We can also conclude that if the advertising platform works on such an auction principle, then the bid depends on the quality of your audience. Roughly speaking, if you bid 1$, the advertising platform will give you a low-quality audience. If you bid 5$, you will give you a more quality audience.
There are cases when you need to bring as many people as possible for one offer, with minimal costs, for example, in the vertical dating. Then, offering a lower price, you can try to make a large volume and earn money.
If we are talking about a more expensive vertical, where the payout is many times or even hundreds of times higher, you need to look for a solvent client. In this case, you will not be able to make money on volume and, accordingly, you will have to bid higher to find the right and solvent audience.
How VSG auction works:
Do not be afraid to experiment, test different approaches and analyze traffic. Facebook provides powerful tools for ad optimization, and with the right approach you can achieve great results. In your PDL-Profit personal account you can connect the Facebook Pixel to our system, so you can better optimize your ads based on instant feedback on your traffic from advertisers.
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Facebook is one of the best traffic sources for payday loan providers. Hundreds of our publishers use this source, generating dozens and hundreds of conversions daily. PDL-Profit is a financial CPA network with bank, payday loan, crypto exchanges and insurance offers. Work with financial traffic and pay commission daily! We have 0 days commission, join!
Facebook's ad auction is a process where advertisers compete to display ads in users' news feeds. People log into Facebook or Instagram and at that time the system determines which ads to show them based on a number of factors: target audience, ad budget, content quality and other metrics.
From our article you will find out how an ad auction of a popular traffic source actually works, what types of auctions there are, as well as the metrics a publisher can affect when working with Facebook traffic.
First-Price Auction
A First-Price Auction is a type of auction in which the highest bidder pays exactly the amount of money he or she has bid. How it works:1. Bidders bid without knowing the other bidders' bids.
2. The highest bidder wins.
3. The winner pays an amount equal to their bid.
Example: imagine you are bidding in an auction for the first price to attract a customer to your website. You bid $10, another bidder bid $5, and a third bidder bid $8. You win since your bid is the highest. And as a result, you pay $10 for referring a customer.
This type of auction is of little use in marketing because the advertiser with the highest budget will be the monopolist in the auction.
Second Price Auction
A second-price auction is a type of auction where the highest bidder pays the bid amount offered by the second highest bidder. How it works:1. Bidders bid without knowing each other's bids.
2. The highest bidder wins.
3. The winner pays an amount equal to the second highest bid.
Example: imagine you are bidding in an auction for the second highest bid for attracting a lead. You bid $5, another bidder bids $3, and a third bidder bids $4. You win the auction because your bid is the highest. However, you will pay $4, which is the second highest bid.
The point is that advertisers try to bid higher, so the advertising platform will make more money. But the advertiser does not know exactly which bid is the winning bid.
We can also conclude that if the advertising platform works on such an auction principle, then the bid depends on the quality of your audience. Roughly speaking, if you bid 1$, the advertising platform will give you a low-quality audience. If you bid 5$, you will give you a more quality audience.
There are cases when you need to bring as many people as possible for one offer, with minimal costs, for example, in the vertical dating. Then, offering a lower price, you can try to make a large volume and earn money.
If we are talking about a more expensive vertical, where the payout is many times or even hundreds of times higher, you need to look for a solvent client. In this case, you will not be able to make money on volume and, accordingly, you will have to bid higher to find the right and solvent audience.
VSG Auction
VSG stands for Value Score System, which is the value scoring system used in Facebook auctions. Facebook does not use a "first price" or "second price" auction in its purest form. Instead, it uses a VSG auction that takes into account not only advertisers' bids, but also other factors that affect the value of the ad to the user.How VSG auction works:
- Advertiser bid. As in other auctions, the advertiser's bid is an important factor. The advertiser specifies how much they are willing to pay for a click, impression, or other user action.
- Ad Quality Score. Facebook evaluates the quality of ads based on several parameters:
- Relevance: how relevant the ad is to the user's interests.
- Engagement: how likely a user is to click on, comment on, or share an ad.
- Conversion rate: how likely the user is to make a purchase or other targeted action after viewing the ad.
- Bid and Quality Score. Facebook combines the advertiser's bid and ad quality score to determine the "overall value" of the ad.
- Auction Winner. The ad with the highest overall value wins. That is, if the above ad is liked by Facebook users, they will willingly click on it – it's likely that Facebook itself will give you a higher quality audience for less money, because the platform benefits from users seeing quality ads.
- The price paid by the winner. The winner pays a price high enough to outperform the second most valuable ad. This means that the winner doesn't always pay the maximum bid they've listed.
What advertising metrics should you be keeping an eye on
There are many different metrics on advertising platforms to evaluate the quality of traffic, but the main ones a publisher should know are the following:- CPM "Cost Per Mille" or "Cost Per Millenium" - the price per thousand impressions. You should try to minimize this number;
- CTR ("click-through rate") - conversion from impressions to clicks. Here, on the contrary, every publisher strives to increase this indicator;
- CR (conversion rate) - conversion from a click to a target action: the higher the percentage, the better;
- RR (Retention rate) - user retention or return rate. This is a percentage that shows how your users feel about your product. If they like it, they will come back and keep using it;
- ARPU (average revenue per user) - average revenue per user. For example, if 10 users bought a total of 250 dollars worth of goods from you, ARPU will be 25 dollars per user.
How you can improve your metrics
It is important not only to know the metrics, but also to impact their change in time. Since these actions affect the budget spent and the cost of attracting a client. So, for example, changing the banner, you can get a higher CTR: users will be more willing to click on your ad, Facebook will show your ad to more people. As a consequence, more conversions for a smaller advertising budget. Now let's understand what you can do to improve your metrics:- Banner: you can increase CTR if you make a good banner that will attract the attention of users. Therefore, it is advisable to launch an advertising campaign with several banners at once to identify the most relevant to your audience.
- Target audience, targeting: optimizing CPM, CTR and CR. This is where you should work on customizing your audience: gender, age, detailed targeting with interests and geo.
- Landing: influencing CR. If you want to influence the conversion rate on a website, you need to work on its design, interface and its usability.
- Bidding: affects CPM, CTR and CR. You need to work on bids. Turn off expensive adsets and scale cheaper ones.
Conclusion
Facebook ad auction* is not just a bidding battle between those who are willing to pay more or less. It's a complex system that takes many factors together to show the most relevant and highest quality ads to users. Everything matters: text, banner, audience, how much you are willing to spend on advertising and how much other advertisers pay to show their ads to the same audience.Do not be afraid to experiment, test different approaches and analyze traffic. Facebook provides powerful tools for ad optimization, and with the right approach you can achieve great results. In your PDL-Profit personal account you can connect the Facebook Pixel to our system, so you can better optimize your ads based on instant feedback on your traffic from advertisers.
If you want to earn money in affiliate marketing — get in touch with PDL-Profit — a CPA network specializing in banks, loans and cryptoe xchanges offers:
300+ Pay Day Loan offers — USA, India, Philippines, Africa, Latin America, Asia, Europe. Instant 0-day payments! Withdraw your profits as early as minutes after it shows up in your affiliate dashboard. (Minimum threshold $50.) Bonus payout bumps for big traffic volumes, +5% to your profit for 1 month (Payments via PayPal, Payoneer, Tether, Webmoney, Visa, Mastercard etc.)You’ll get access to these CR-boosting tools:
SMS-Sender service: Lets you send 4000 free SMS messages per month to potential leads. Just enter the number and the text message and hit send! Showcase builder: Can increase your CR by up to 30%! We have full history on each borrower, and will customize the offers we show to each person. Smartlink: Increases CR by up to 150%! Our intelligent algorithm will analyze every user, and show him the most relevant offers with the best chance of conversion. API Integration3k satisfied affiliates are already working with us! Ready to join us?
