This is how Facebook decides what to charge you for a conversion.
Your bid (what you pay) equals your budget.
But, there are two more factors into play while deciding the cost of your ad.
These are:
- Estimated Action Rate.
- Relevance Score.
Here are 3 things to keep in mind:
- Facebook charges us directly depending on the quality of the business that we run.
- The cost of advertising will also likely go up, when we raise our budgets.
- The costs will come down, when we make ads that people want to see.
The reason that spending more raises the cost is because of the estimated action rate.
The estimated action rate is an estimate of whether a particular person engages with or converts from a particular ad.
In other words, the probability that showing an ad to a person leads to that desired outcome of the advertiser.
Each ad will have a different estimated action rate for each user, and for each impression.
When we are asking our ads to reach more people that are of lower quality, and a lower estimated action rate, our efficiency will degrade over time.
Relevance Score is measured at the ad level and it determines both how much you pay for a click and how often your ad is served to Facebook users.
If your ad isn’t terribly relevant to the audience you’re targeting, Facebook charges you a premium for serving it to them, and serves it somewhat infrequently, too.
Alternatively, if your ad is highly relevant to the audience you’re targeting, Facebook rewards you by charging you less and serving your ad more.
Facebook wants people to have a positive experience on the platform;
and Facebook also wants advertisers to be successful so that they will spend more money.
If it is bad for Facebook’s business to have your ad be shown to a user versus an ad of one of your competitors, you’ll be charged more money for that privilege.
If your brand is seen as a liability to the user experience of people on Facebook, then Facebook will make you pay more money to reach their users.
Let’s say in order to spend less on Facebook ads, you need to understand how the auction works.
So, how much do you spend on Facebook advertising on an average?
