How does Facebook Bidding work?

Advertising on Facebook has been on the basis of bidding i.e. Facebook Bidding since years. Facebook utilizes auction method for selling their advertisement slots. Right from News Feed on Facebook to Instagram stories, every ad slot has a competitive edge. Digital Marketers need to smartly optimize the allocated budgets to make the most of the advertising.

Before knowing more about Bidding for Facebook Ads, make sure you get a detailed insight about Facebook Advertising.

You ought to fulfill these 3 pre-requisites before moving ahead with bidding on Facebook.

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

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. Learn more about targeting your audience on Facebook over here.

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 life time 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.

After the pre-requisites are fulfilled, you should know more about delivery options and the budget for the same.

4. Delivery Options:

Facebook provides three delivery options.

– Link Clicks
– Impressions
– Daily Unique Reach

It is crucial to understand the difference between these three as all three categories cater to a different set of delivery. Know more about it over here.

Finally,

5. 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 is less number of competitors for the same.

Bid amount for this age group suggested INR 12.

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 for 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. By this way, you can decrease costs.

If you bid too low, you can be out of the range and your ad won’t appear anywhere.

Keep checking the bid amount frequently and update it time to time.

How Bidding Works

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:

Local Advertiser A bid INR 4

Start up Advertiser B bid INR 8

Brand Advertiser C bid INR 12

Company Advertiser D bid 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 more impressions at a price just slightly above those of B & C around INR 8-12.

Advertiser D shall not pay INR 20, not at all.

Why Advertiser D won’t pay INR 20?

Facebook uses an auction model, wherein the highest bid wins the auction. However, you pay less than what you bid. You 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 a conversion. A conversion can be generating leads, making the purchase or anything.

On Facebook, if you bid less, you lose opportunities. If you bid more, you end up getting non-profitable conversions. Hence, to optimize your Facebook bidding, you should actually optimise your bid from time to time to reach your target audience.

Learning:

• Set your bids
• Be within the range
• Review it time to time
• Test bids in different ad sets

Conclusion:

Your Ads are shown on Facebook on the following grounds:

1. Ads which creates value for advertisers by helping them reach and get results from people in their target audiences
2. Ads which provides positive, relevant experiences for people using Facebook, Instagram or Audience Network.

Master the art of Facebook Advertising and increase your online presence.