It's appropriate to explain this complex formula in simpler terms. As we defined earlier, Meta Ads aims to show users the most relevant content possible. It's very important for the company to keep users on their platform because the more time they spend there, the higher its monetization.
If your ad budget is low compared to the competition and the likelihood of audience interest in the target action or interaction with the content is low, then the cost per result will be high. Conversely, if your content is as relevant as possible, the budget is sufficient, and the audience tends to perform target actions, then the conversion costs will be within acceptable values.
The platform calculates each of these indicators separately (except for the bid, which you can regulate yourself). Whether you win the auction or not depends on the aggregate Total Value indicator.
If you win the auction, Meta Ads will allow you to display your advertising message, and you have the opportunity to show your ad to the user who was competed for in the auction. However, if this user visits the platform again, they will be entered into a new auction.
Example of TV calculation (for illustrative understanding of how the algorithm works):
In this example, all advertisers have Total Value = 1.8, so the winner is determined by additional criteria such as display time or other internal Meta metrics.
Totalt Valueis a relative number used to determine the winner of an auction. It combines the bid (in dollars), the probability of action (in percentage/share) and the quality of the ad (in units), but is not measured in a specific physical unit.
How is the auction rate regulated?
If we are talking about setting a bid for a certain action in an auction (CPM, CPC, CPA), there are 2 types of possible bids: a target cost per result and a capped bid.
In the first case, you set Meta Ads the recommended amount of this bid, and within the daily or lifetime budget, Meta Ads can adjust the amount of this bid independently, sometimes giving results slightly more expensive or slightly cheaper than the specified amount (but trying to keep the average rate in line with the bid).
In the second case, you set a threshold bid, above which Meta Ads should absolutely not bring you conversions. If Meta does not find users ≤ this bid, you will not get a conversion.
La método de configuración de bidas se usada en más casas para empresas de escala, y no es recomendado para usar esta restricción a la livello hypothesífica.
If you do not set a bid, Meta Ads independently adjusts its size and strives to provide you with the highest number of conversions, in accordance with the budget and market conditions.
