How does bidding for Facebook ads work?
Before we get into the details, you first need to understand the basics of how Facebook ad bidding, delivery, and ad auctions work. There are around 2.9 billion users on Facebook (yes, billion) and around 10 million advertisers. If you think about this from Facebook's perspective, there's only a finite number of ads they can show to a finite number of people. So how does Facebook decide who sees what ad and when? Through the Facebook ad auction. You can think of Facebook ads like a giant auction house. You're competing with other advertisers for the most coveted prize of them all—to get your ad seen and engaged with. And each action is a precious resource.
There are a few different actions you can bid on with Facebook ads: CPM bidding. When using CPM (or cost per mile) bidding, you're dictating the amount you want to bid for 1,000 impressions. CPC bidding. With CPC bidding, you're defining how much you want to bid for each click on your ad. Conversion bidding. In the case of conversion bidding, you enter in the amount that a particular conversion is worth to you. Just like a normal auction house, the person who has the highest bid typically wins the sale. However, even if your bid is twice that of your opponents, Facebook will only charge you for how much it takes to win that bid. For example, let's say you're competing against an advertiser for a click action. You've set your bid to $10, while the other advertiser has set their bid to $3. Since your bid is higher, you’ll win the bid. However, you'll only have to pay $3.01 since that's the lowest amount it will take to win the bid. Read more about it at madgicx.com.