Hey everyone, and once again, welcome to WSQ Tech English channel, myself Umar Tashkeer. As in this particular video of Facebook series, we are basically going to talk about Facebook auction system. What is Facebook auction and how it actually works.
So we are basically going to talk about these two important things. What is Facebook ads auction and how it actually works. So let’s begin.
And first of all, let us understand the different data points, which basically provide some data to Facebook system, right? As we all know that Facebook system runs on data points and data points are like, there are different sources, which basically act as data points for Facebook and that data Facebook automated system, Facebook automated systems or Facebook algorithms used to run ads, right? So this is how it is going to work. This is how ad auction actually works. So first of all, we have to discuss about the different data points, which are there and which actually provide Facebook ad system some information, right? So Facebook collects information from different, different sources.
These sources can be at the advertiser and the first thing, these sources can also be at the advertiser and the second thing is these sources can also be at the user end, right? So whenever you are creating any profile on Facebook, the data, the information that you enter into your profile, like your date of birth, right, which basically determines your age. So whenever there is an advertiser who is basically targeting someone from the age group like 25 to 34, so because of your date of birth, Facebook knows about your age, right? So this is again a very important thing that basically constitute the data point or that provides the information to Facebook system and then your activities, your activities like what kind of pages you are following, what kind of groups you are into, what kind of status you are doing, what kind of activities you are doing, how you basically use Facebook. So all these activities also acts as data points for Facebook and these all activities are at user end, right? As we know that Facebook has different sources, right, of capturing data and these sources are called as data points.
So data from profiles, your activities, the pages that you like or follow, they again give signal to Facebook or they again acts as data points for Facebook, how you engage with the post. Suppose let’s take an example, if there is post which is related to sports and you are liking that post, which means that you have interest in sports. If there is any post which is based on news, you are liking, sharing that post, which means that you have high interest in news, right? So this is how Facebook captures the signal.
Now here Facebook will know that, okay, you have high interest in news when we compare it to the post. So this is, this is the basic thing. These things we should know that Facebook already has so many data points that Facebook is actually using to capture your information, right? From the advertiser side, how a campaign is performing, how a campaign is growing, right? How many conversions you got from a campaign? How many visitors you got from a campaign? These all information also acts as data points for Facebook and they also give some signal to Facebook that what kind of information is captured.
Then results from campaigns, data from pixels, so you have all these different data points which basically provides some sort of data to Facebook. Then we have Facebook other elements like Facebook pages, what kind of people are following Facebook pages. There are different information with regards to Facebook pages, there is different interactions on Facebook pages.
So they like Facebook pages, Facebook groups. There are different other sources also, third party applications which are there associated with Facebook. All these things basically acts as data points for Facebook.
Now let’s take a real situation as you can see over here on this digital panel. What we have, we have a person over here who is Mr. X and we have different activities of Mr. X, right? So Mr. X likes Facebook pages related to sports, right? He likes Facebook pages related to sports. He also likes Facebook page related to digital marketing.
He also comments or engages with different groups which are related to digital marketing. He also clicks on the ads, right? He also clicks on the ads which are related to digital marketing. Now from all these activities what we can conclude is this person Mr. X has some sort of interest in sports also and some sort of interest in digital marketing also, right? This is what we can conclude from this example, right? Now we also have different advertisers like us.
They have created their account on Facebook ads and now they are running ads, right? So there is advertiser number one, let’s assume this is advertiser number one, this is advertiser number two, this is advertiser number three and these all advertisers are running different ads. So the advertiser number one is running ads related to sports targeting users who are interested in sports. So this basically targeting maps to Mr. X or it is relevant to Mr. X, that is absolutely true, right? Coming on to the second advertiser’s case, he or she is running ads related to digital marketing and we have also concluded over here from these activities that Mr. X has interest in both sports also as well as national marketing also.
So if anyone is running ads related to digital marketing, there is high probability that this ad will show to Mr. X also, right? So here the chances of showing ads to Mr. X by advertiser number two are also high, right? Then we talk about advertiser number who is again running ads related to digital marketing and his or her ad can also show to Mr. X because, because of these all different activities which Mr. X is doing. So now what we can conclude from this particular discussion is, if there are three advertisers of three different domains, like there is advertiser number one who is running ads related to sports targeting users who are interested in sports, this is advertiser number one and if we have advertiser number two who is running ads based on digital marketing and if we have advertiser number three who is again running ads based on digital marketing. So what we can say is there are high chances that Mr. X can come in all the targeting.
Now the point is Mr. X is sprawling his feet and the point is which particular ad is going to show up in it. Will it be related to this sports thing? Will it be from advertiser number one? Will it be related to this digital marketing thing which is from advertiser three or will it be from advertiser number three? Now this is what is determined by ad auction. In this particular case, we have high number of advertisers and there is a person who has interest in all these things.
Now whose ad will be shown in his feed? Now this is what is needed to be determined by ad auction. So here comes the ad auction. The space is limited, right? Space is limited and it is not only limited to these three advertisers.
This is what we have taken in this particular example only, but there will be like thousands and thousands of advertisers who will be fighting together to show their ads to Mr. X, right? Because Mr. X has now limited space. So if he is coming on Facebook for one minute, he will be scrawling his feed for one minute. There will be like hundreds of advertisers who will be fighting to show their ads into his feed, right? Now here comes the Facebook automation or here comes the Facebook automated ad auction system which will decide that whose ad is going to show in his feed, right? So this is again driven by algorithm and it is driven by some of the like very important matrices and if you can see billions of auctions take place every day, every second, right? So whenever there is an impression, there was some auction before that, right? You have to, you have to understand these things without any auction, no ad can get any impression.
If you are seeing any ad which means that it is coming from auction, right? Without auction, you cannot see any ad, right? So taking previous example into consideration where we are saying that, okay, there is a person, Mr. X who is falling into the advertising criteria of different advertisers. Now whose impression will show into his feed, right? It is determined by total value because the winner of auction is determined by total value. All these three participants, all these three competitors, advertisers will participate into an auction and the winner of auction is determined by the total value.
Now how we actually calculate the total value? Total value is constituted by three main things which is like bidding, the amount that you are willing to pay, this is the first thing that basically decide how much total value you will get. Estimated action rate is basically what probability is there that people will engage with your ad, right? So if Facebook is able to calculate or Facebook is able to figure out that, okay, there is high probability that if this ad is shown, if this ad is shown to Mr. X, he will click on this, right? If this ad is shown to Mr. X, he will click on this. So if there is high probability in case of advertiser 3, when we compare it with advertiser number 2, right, if there is high probability that, okay, if the ad of advertiser number 3 is shown to Mr. X and Facebook calculate that, okay, he is more likely to click on advertiser number 3’s ad, the estimated action rate or the score which we get over here will be high for advertiser 3. So estimated action rate is calculated on the probability that whose action is going to be most valuable or whose action is most relevant, right? Whose ad is perfect, so whose ad or targeting is perfect with regards to Mr. X, right? And that person will get higher estimated rate.
Ad quality basically means that you are creative, what kind of headlines you are using, are you following Facebook policies or not? So all these things comes under ad quality. Together, estimated action rates and ad quality together formulate ad relevancy. So ad relevancy and bidding decide total value.
So higher the total value, it is very simple, the advertiser having higher total value will win the auction and their ad will appear into Mr. X’s feed, right? So there will be total value for advertiser number 1 also, there will be total value for advertiser number 2 also, and there will be total value for advertiser number 3 also and all these calculations which we defined over here, it will be decided that what will be total value for 1, 2 and 3 respectively and very simple, higher the total value, that person’s ad will show into Mr. X’s feed, right? So this is the basic behind ad auction which happens within Facebook advertising system and these ad auctions are automated, without ad auction, no impression can happen, right? So that’s it, I believe you got to know the basics behind ad auction, how it actually works and what are the different data points, how actually Facebook captures different data and use these data to calculate the probability of showing your ad or calculate relevancy of your ad to the Facebook user. So that’s it, that’s it for this specific video, till the next video, till then, goodbye.
