The auction model for Meta Ads

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Now that you can estimate how well your target group can be reached with meta ads, let's get to the actual costs.

Like all other social media platforms, Meta is based on impression billing. This means that you effectively pay money for each delivery of your ads. Instagram calculates a so-called CPM, the cost afghanistan whatsapp phone number per thousand impressions (also known as CPM for print and TV advertising). This CPM (cost per mille) indicates how much money you pay on average for 1,000 deliveries.

Unlike traditional media such as print, however, there is no CPM set at the start for Meta Ads. This is because online advertising systems work on the basis of an auction model. You can basically imagine it like eBay. In the analogy, Meta is the auctioneer who auctions off his advertising space. The advertisers are the bidders for an advertising space or a display. Meta then awards the advertising space to the respective winners of the auction. This auction process is based on the Vickrey-Clarke-Groves mechanism, which was implemented by John Hegeman, Facebook's then chief economist. How does it work? Here is a diagram of how it works:

Auction model of Meta Ads graphically prepared
The total value of the auction is made up of the advertiser's added value and the user experience. This makes it clear that, unlike a product auction, it is not just about putting the most money on the table, but also the feedback of the users is included in the evaluation. In relation to the advertiser, the bidder actually places a bid (monetary value) for the advertisements. Nowadays, however, the advertiser no longer has to think about how much to bid for 1,000 impressions (CPM), because Meta's advertising system now uses automatic bids. This means: Based on the daily or runtime budget of your campaign, Meta automatically places bids that best suit the advertiser's goal. Using the response rate (expected click rate = eCTR), Meta determines in advance how likely it is that the advertiser's advertisement will be clicked. This is based on past campaign data, the competition, etc. The auction now starts and the advertisements are delivered. The user experience is then referred to as ad relevance by Meta. The more accurate the advertiser's ad is, the better it performs in the auction. The same applies the other way round: the advertiser can use high budgets (and incoming high automatic bids), but if the ad is not relevant to the target audience, the overall value in the auction is reduced via negative feedback.

What we want to show with this: Save some of your advertising budget for professional advertising creation. In recent years, thanks to Meta's advertising AI, it has become increasingly important to create effective ads. Those who enter the race with strong ads have to invest less overall. As a Meta Business Partner, we create effective ads every day. Feel free to contact us about this !

So let's summarize: Meta Ads are billed on a CPM basis. CPM = 1,000 impressions. The CPM fluctuates in the auction model depending on competitor bids and the relevance of the ad for the target group. The mix of a suitable budget and strong creatives has a significant impact on the cost of meta ads.