Facebook Provides New Overview of How its Ad System Works

Trying to get your head around how Facebook advertising works, and how to get the best reach and results for your business?

With more organizations looking to online options to connect with consumers, a lot of people are trying to get a better understanding of the details of Facebook’s ad systems. To help with this, this week, Facebook published a new overview of how its ad system works as part of its “Good Questions, Real Answers” series.

Here’s an overview of the key points.

First off, Facebook notes that it uses two key factors to determine which ads to show users:

  • Audience targeting, which is selected by advertisers, and determines which people are eligible to see each ad
  • It’s ad auction process, which is based on a range of factors relating to bid price, individual user engagement and ad quality

​The first point is relatively straight-forward – as explained by Facebook:

“First, advertisers choose their target audience through our self-service tools. Audiences are created based on categories like age and gender, as well as actions people take on our apps such as liking a Facebook Page or clicking on an ad. Advertisers can also use information they have about their audience, like a list of emails or people who’ve visited their website, to build a custom audience or a lookalike audience.”

So you can use Facebook’s in-depth audience targeting tools, based on their profile and behavioral information related to Facebook usage and data, or you can upload your own audience information and look to either target them, or people with similar traits, via Facebook’s systems.

Lookalike Audiences can be a particularly powerful option in this respect. With Lookalikes, Facebook’s systems are able to match the profile data of your existing email or customer list against other profiles on Facebook, in order to find people who share the same interests and traits. The accuracy of lookalikes does depend on the amount of data you provide Facebook’s system, and will vary from audience to audience, but they can be a good way to reach people similar to those who’ve already shown interest in your products.

But here’s where Facebook ads get more complex.

After you’ve chosen your target audience, and submitted your ad, Facebook will then decide who actually sees your promotion by determining the best match for each individual user based on this calculation:

Each Facebook user has a range of ads that they could be shown each time they log on, based on the aforementioned targeting process. Based on the eligible ads, Facebook will then determine a ‘winner’ for each user based on:

  • Advertiser Bid – How much money you’re spending on your Facebook ads – the more you allocate, the more this will contribute to reach
  • Estimated Action Rate – Facebook estimates the likelihood that each user will take action on an ad, based on a range of factors relating to their individual behaviors
  • Ad Quality – Facebook measures this based on feedback from users (e.g. how many people report or hide your ad) and “assessments of low-quality attributes” (too much text in the ad’s image, sensationalized language, engagement bait). 

Of these three elements, you can control the first and last point – you determine how much you’re willing to spend and ad quality is based on a range of technical and objective factors, the latter being difficult to advise on in a general sense.

Estimated Action Rate is a more variable factor, which is largely out of your control – though not entirely.

As per Facebook:

“To find the estimated action rate, machine learning models predict a particular person’s likelihood of taking the advertiser’s desired action, based on the business objective the advertiser selects for their ad, like increasing visits to their website or driving purchases. To do this, our models consider that person’s behavior on and off Facebook, as well as other factors, such as the content of the ad, the time of day, and interactions between people and ads.”

So, you obviously can’t control what people do on or off Facebook. But you can provide Facebook with more context on such, as it relates to your business.

In determining user behavior, Facebook factors in:

  • Things a person does while using Facebook apps, like clicking on an ad or liking a post.
  • Things a person does outside of Facebook that businesses share with us via our Business Tools, like visiting a website, purchasing a product or installing an app.

The Business Tools that Facebook refers to here include the Facebook Pixel, which helps to provide more contextual data to Facebook based the actions that people take on your website:

When someone visits your website and takes an action (for example, buying something), the Facebook pixel is triggered and reports this action. When more and more conversions happen on your website, Facebook gets better at delivering your ads to people who are more likely to take certain actions”

So adding the Facebook Pixel to your website can help to improve your ad performance by ensuring that Facebook is able to target people who have visited your website, and/or those who have purchased from you in the past – or people who share similar traits to those who have. 

So while you can’t significantly influence the Estimated Action Rate stat, as it’s based on individual behavior, you can help better inform Facebook as to people who are more likely to take action by installing the Pixel on your site, which can subsequently improve ad performance.

In addition to these notes, Facebook also provides some extra pointers:

  • Ads with the highest bid don’t always win the auction. Ads with lower bids often win if our system predicts a person is more likely to respond to them, or finds that they’re higher quality. 
  • Facebook does not sell people’s data to advertisers or anyone else
  • Facebook does not use the content of people’s text messages or phones’ microphone to inform ads or to change what they see in News Feed

So Facebook’s not listening into your private conversations, no matter how much it might seem like it. There’s a range of explanations as to how it could be determining your interests around conversations you have, but Facebook has repeatedly noted, even under oath, that it does not do this.  

In summary, Facebook’s ad action utilizes a range of factors which are determined by Facebook’s systems, and many of them are difficult to influence. But there are certain ways in which you can improve the performance of your Facebook ads.

Good creative is really the key, ensuring you’re creating messages that resonate with your target audience, but these other factors will also help to improve reach and response.

You can read Facebook’s full ad system explainer here.

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