How the Meta Ad Auction Works
The Meta ad auction isn't just about who bids the most. It's a complex system weighing three critical elements that determine which ads get shown and at what cost. Jon breaks down how the auction really works and why obsessing over bids is missing the point entirely.
If you're an advertiser who wants to be a master of your craft, you need to know how everything works. While so much has changed about Meta advertising over the years, the ad auction has been at its core from the beginning.
It's important to separate the ad auction from other elements. We're not talking about ad optimization, where you choose a performance goal and Meta finds the people most likely to perform that action. We're also not talking about Meta Andromeda, which is what everyone is talking about right now but very few advertisers understand. Andromeda is a new retrieval engine that attempts to find a pool of ads to show to someone.
Those two elements are important, and you could argue that they are enhancements on top of the auction system. They make the auction infinitely more effective. Think of it this way: optimization and Andromeda decide which ads get into the auction, and the auction decides which ad is shown.
When you have hundreds, thousands, or even millions of ads that are eligible to be shown to a single person, the auction determines which ad wins. To understand Meta's ad auction, you need to break it down into three important elements.
The Bid
When you think of an auction, you think of an auctioneer and bidders. In that traditional example, the item goes to the highest bid.
Bids are part of Meta advertising too, but it's happening in the background. Bidding is dynamic, and Meta bids what is necessary to help you win the auctions and get your ads shown. That doesn’t mean Meta will overbid. Other elements impact what that bid needs to be.
There is a manual element, but it was more relevant in the old days. If you want more control now, you can set minimum or maximum bids or use cost per result goals to help guide Meta. But the Meta ad auction isn’t a traditional auction. The highest bidder isn’t always the winner.
If it were, advertisers with terrible ads and the most money would dominate. That would ruin the user experience, and ads would become more expensive than they’re worth. At the same time, being the lowest bidder doesn’t work either, since you’ll get only the lowest quality impressions.
Estimated Action Rates
Meta estimates the likelihood that a given person will perform the action you want. If you’re optimizing for purchases, Meta will look at signals like past purchases, add-to-carts, or time spent on product pages to predict how likely this person is to buy.
Let’s say two ads are competing to be shown to the same person. One ad bids twice as much as the other, but the lower-bid ad has a much higher estimated action rate. Meta is more likely to favor the ad that is more likely to get the action.
Ad Quality
This is determined by user feedback and automated processes. Low-quality ads are those that withhold information, use sensationalized language, rely on clickbait, or use engagement bait tactics.
While user feedback is part of it, Meta doesn’t rely only on unfair reports. Automated systems flag patterns in ads and landing pages before they cause problems. If people click and bounce immediately, that’s a signal too.
These three elements work together to impact your ad costs: bid, estimated action rates, and ad quality.
If you consistently create low-quality ads that fail to attract the right actions, you’ll need to spend more. Meta may also punish advertisers who repeatedly create bad ads by forcing them to pay more to get shown.
The Bottom of the Glass
Winning the ad auction is more than simply having the highest bid. In fact, you don’t want to be the highest bidder in most cases. You also don’t want to be the lowest bidder.
Most advertisers shouldn’t even worry much about bids. Let Meta handle them dynamically for you. Your focus should be on creating quality ads that provide a strong user experience and inspire action from your ideal audience.
If you do that, Meta doesn’t need to bid as much to get your ad shown. The better your ad, the more Meta will favor you, even over higher bids.
So don’t obsess over manipulating bids. Obsess over making ads people actually want to respond to. That’s how you win the auction, keep costs down, and run profitable campaigns.