How Bidding Works?

How does bidding work?

  • Google and Facebook ads work by bidding a certain amount per day, per keyword, etc… 
  • On average, the more you’re willing to bid, the higher you will show in the results. 
  • This is where having a sophisticated digital marketing agency comes in because when you know what you’re doing, you can spend less and still show higher than the companies that are spending more. How?
    • For google:
      • The actual position of your ad is determined by your ad rank (Maximum Bid times Quality Score). The highest ad rank gets the 1st ad position. Your actual CPC will be determined by the ad rank of the next highest ad below you divided by your Quality Score.
      • The only exception of this rule is when you are the only bidder or the lowest bid in the Google Ads auction; then you pay your maximum bid per click! AdWords bidding heavily penalizes advertisers who bid with low quality scores. Conversely, those with high Quality Scores get higher ad ranks and lower CPC.
      • A helpful resource
    • For Facebook:
      • The three main factors that influence ad delivery and budgets include:
        • Your bid – This is the maximum amount that you will potentially pay to win a bid. Facebook’s system is designed to allow you to pay the lowest possible amount that still wins you the bid. E.g. If your highest-bidding competitor set their maximum bid to $1, and you set yours to $1.5, you’ll only need to pay $1.01 to win the bid, not the full $1.5 amount.
        • Relevance score – Your ad’s relevance score is determined by taking into account all the positive interactions that users have with your ad such as liking, commenting, or clicking on it versus all the negative interactions such as hiding the ad or ignoring it. Your ad’s relevance score is very important to Facebook. Having a high relevance score means that your ad will help people spend more time on Facebook.
        • Estimated action rates – a behind-the-scenes aspect of Facebook’s ad delivery algorithm. If the algorithm estimates that your ad will receive a high number of actions, it will give your ad priority against other ads.
        • A helpful resource for FB Ads – don’t worry about understanding this forwards and back. You don’t need to know every facet of FB ads. 
      • Facebook ad bidding can get very complicated. Don’t get into the weeds with clients on it. The general consensus is that you spend per day and with a good company understanding how it works, you can spend less per lead than if you were doing it on your own.