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How Does Facebook Bidding Work? Detailed Guide with Steps & Strategies

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Facebook Bidding has been the foundation of Facebook advertising for years. When it comes to selling ad space, Facebook employs a bidding mechanism.

Every ad space, from Facebook’s News Feed to Instagram’s Stories, has a competitive advantage.

Digital Marketers need to smartly optimize the allocated budgets to make the most of the advertising.

Along with Facebook bidding, there are many other components to Facebook Advertising. Read this blog if you wish to know more in detail – Facebook Advertising & if you’re someone who needs a mentor for personal learning and teaching, sign up for this Online Facebook Ads Course

And for all our avid readers, here’s what Facebook bidding means. 

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What is Facebook Bidding?

A bid is an amount you’re willing to spend per click to acquire the result you want from your target demographic. 

Advertisers compete for the right to post their adverts on the Facebook or Instagram platforms by bidding a specific amount of money against other advertisers in a competition.

Many people believe that if you bid the highest, your ad will be chosen and placed in the available Facebook or Instagram ad space. But that is not always true and it is just one of the deciding factors. 

There are three factors that will influence whether or not your ad is published: those are your bid amount, relevancy score, and estimated action rates.

Now, How Does Facebook Bidding Exactly Work?

Facebook Bidding - how does facebook bidding work

Assume that Facebook only has 3 available spots to display ads and there are 4 advertisers bidding. The real system is much more complicated than this; this is a hyper-simplification:

  1. Local Advertiser A bids INR 4

     

  2. Startup Advertiser B bids INR 8
  3. Brand Advertiser C bids INR 12
  4. Company Advertiser D bids INR 20

In this example, advertiser A will likely be left out and will receive low to zero impressions. 

Advertisers B and C will get a good amount of impressions at a price somewhere between INR 8 and INR 12. 

Advertiser D will probably get the most impressions at a price just slightly above those of B & C around INR 8-12.

Facebook Bidding

So you must be wondering why Adverister D isn’t paying INR 20?

Well although, Facebook uses an auction model, wherein the highest bid wins the auction. You pay less than what you actually bid and only pay the amount closer to the second-highest bid.

Here, advertiser D won’t pay INR 20 but will pay more than INR 12 and less than INR 20. This auction system allows the optimal strategy i.e. Each advertiser is to bid their true value for conversion. A conversion can be generating leads, making the purchase or anything.

If you bid less on Facebook, you will miss out on chances. If you bid higher, you’ll receive conversions that aren’t profitable. 

As a result, in order to maximise your Facebook bidding, you need to tweak your bid from time to time in order to reach your target demographic.

Now that we know how bidding works, we’ll walk you through the steps of setting an effective bid.

Let’s take a look at the steps to undertake Facebook bidding.

8 Steps to Conduct Facebook Bidding 

The first 3 steps have to be complied with in order to reach the bidding stage. Let’s look at them first. 

1. Choose a Goal

Before you start any type of ad campaign, you need to choose an objective. Objectives are divided into three categories:

  • Awareness
  • Consideration
  • Conversion

Facebook Bidding - choose a goal

2. Define Your Audience

You need to decide what audience you want to reach. You can use a saved audience or create a new one. A few things to consider when selecting your audience are demographics, Income Level, and more.

You can learn more about targeting your audience on Facebook over here.

Facebook Bidding - define your audience

3. Determine Your Budget

Before you go ahead with bidding, you need to decide how much money you want to spend for your campaign. You can set daily budget targets or even opt for a lifetime budget and shut the ad as and when required.

For instance, if you choose a lifetime budget of INR 200 and the ad will run for 20 days, you’ll probably spend about INR 10/day. While if you choose a daily budget of INR 200, Facebook won’t spend more than INR 200 per day till the due date of your ad campaign.

Facebook Bidding - determine your budget

Once you have met the above 3 requirements, now starts the actual bidding process. 

4. Delivery Options

Facebook provides three delivery options.

  • Link Clicks

According to Facebook, link clicks are a recommended choice. It’s effective because the ad is directed at those who are likely to be interested in what your company has to offer or who have already visited your website.

  • Impressions

Ads will be targeted to a huge number of individuals using impressions. These advertisements may also be sent to the same person on a regular basis. It may either help the individual by reminding them or making them aware, or it might bother them.

  • Daily Unique Reach

Ads will only be targeted to your audience once a day if you choose this option. When compared to the impressions option, it is more cost-effective and less obtrusive to your audience.

It is crucial to understand the difference between these three as all three categories cater to a different set of delivery. 

5. Set Your Bid Amount

Bidding on Facebook is variable. It changes as per the target audience. If you change the demographics of the ad set, the bid amount shall change.

Bidding on Facebook is variable. It changes as per the target audience. If you change the demographics of the ad set, the bid amount shall change

For example, if a bunch of advertisers are targeting an age group of 18-21 in Mumbai and Navi-Mumbai. The bid amount shall vary if there are fewer competitors for the same.

Facebook Bidding - setting a bid amount

The bid amount for this age group suggested INR 12.

Facebook Bidding - set a bid amount

If we select a different target audience or go deeper, the amount shall change.

Bids are based on our objectives. That means, bids are based on the ‘call to action’ you want your users to take. While bidding on Facebook, you can optimise around the goal. You can test between impression and clicks and see what suits your business model.

While bidding, Facebook will give you a bid range. Facebook will want you to bid between that ranges. For example, if your objective is to generate link clicks, you can set INR 10 as the maximum for a link click. Generally, you will pay lower than that.

However, you can bid higher to make sure your ad is seen more. The ads shall appear at the delivery options which you have selected. You can also bid lower if the click is worth less than the amount Facebook suggests.

You may save money with this method. If you bid too low, you may fall outside of the range, and your ad will not display. Check the bid amount on a regular basis and change it as needed.

6. Schedule Your Ad

You may have your ad run all the time or arrange it to just appear at particular hours. (Keep in mind that if you set a lifetime budget, you can only schedule your ad at specific times of the day.)

For example, in all time zones, you can schedule your ad to run from 9 a.m. to 3 p.m. local time.

facebook bidding - ad schedule

Consider scheduling your ad to run at specific times if you know when your ideal prospect is on Facebook.

7. Choose the Delivery Type

Choose whether you want your ad to be delivered in a normal or expedited manner. Most of the time, advertisers want to stick to the standard option.

If you want your ad to be sent as fast and as often as possible, choose accelerated. For instance, if you have a nighttime webinar and want the ad to start as soon as feasible, choose accelerated.

8. Analyze the Information

To see your ad’s reports, go to the main Ads Manager. The default setting is to display the optimum results for your ad.

Review and assess the success of your ad campaigns after each one. Make future ad adjustments based on the information you’ve gathered.

Now that we’ve covered the steps, let’s look at various bidding tactics. As we all know, to get the most bang for your buck, you’ll need an effective and efficient ad plan.

Interesting Read: What is Facebook Pixel Code and How To Use It? A Step-By-Step Beginners Guide

5 Facebook Bidding Strategies You Must Know

1. The Lowest Cost (Auto-Bid)

This method allows Facebook to control all aspects of bidding. It’s popular among newcomers because there’s no need to completely comprehend the complexities of bidding systems and alternatives

This bidding approach will employ the entirety of your money and will be focused on obtaining the most cost-effective possibilities. This is your best choice for a Facebook bidding strategy unless you have very precise budget targets in mind.

2. Highest Value

The goal of the highest value bidding strategy is to maximise the return on ad expenditure. If you’re not sure what your minimum ROAS (Returns on ad spent) or bid amount should be, this is a good option.

This bidding technique is controlled by Facebook for a more hands-off approach, and it will most likely use your whole budget. Again, this bidding method will only work if conversion values are specified that are explicit and precise.

3. Value Optimization

This bidding approach necessitates consistent conversion value communication between Facebook and your website or other platforms.

The value optimization approach should be used when your conversion values are apparent and getting a return on ad spend is your primary goal. Many marketers may set lofty ROAS goals, but if you set your sights too high, you’ll end up underdelivering while using this bidding strategy.

4. Cost Cap

You may set a cost limitation to keep your overall costs within a certain range. Rather than having to change your bids manually, Facebook will do so for you to optimise volume within your goal CPA or CPI.

5. Bid Cap

Because bid cap bidding strategies are managed by the advertiser rather than Facebook, they need a more hands-on approach than auto-bid tactics.

This approach needs you to specify a certain bid that you wish to target, and it will then execute your advertisements to maximise the volume at that bid.

In essence, you are in charge of your bid in each individual auction.

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That concludes our Facebook Bidding blog. Although it appears to be complicated, it is simple to grasp if you concentrate and try out new strategies.

However, if you want assistance, IIDE offers customised and tailored corporate training based on your preferences and needs. This will assist us in assisting you in achieving your objectives.

If you want to learn more about digital marketing and improve your abilities, our online digital marketing course is a great place to start. It is taught by seasoned industry professionals over the course of three months.

if you have any doubts, feel free to contact us at admissions@iide.co so that we can help you understand what we have to offer.

Thank you for taking the time to read our blog, we really appreciate it.

if you feel we have missed out on anything be sure to let us know in the comment section down below.

Founder and CEO at IIDE

He is a passionate public speaker and teacher for over 10 years. He has trained over 60,000+ students and 25+ corporates in Digital Marketing via online and offline channels. He is a Harvard alumnus specialising in E-commerce......[Read full bio]

Karan Shah

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