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Facebook Bidding Wars

Facebook Ads Bidding 101: Everything You Need to Know (…supported by data)

The world of advertising is rapidly changing as online services continue to grow. Companies like Facebook, Google and Snapchat are all leveraging their respective real estate on the web along with their impressive numbers of users to attract advertisers to their site. While all of these web services have large amounts of users, Facebook having over a 1 Billion and  Snapchat having over 100 million daily active users, the digital real estate stays constant and thus increases in value as the user count grows. In order to fill these spaces, these tech companies conduct bidding wars to determine which advertisers will be able to advertise on their space. In this specific case study, we will be looking at Facebook.

Facebook has several different kinds products that are offered as “prizes” of bidding wars which can be boiled down to CPC, CPM, oCPM, CPA. Each refers to a different type of advertising that the buyer would be paying for and different type of payment method. With each method comes a new strategy. The CPM bidding, which is bidding for a set amount of impressions on the advertisement is the most standard bidding. As are most bidding types run by Facebook, it is reflective of the “Ascending Bid” type that we studied in lecture. In the “Ascending Bid” type, the dominant strategy is to stay in until the value is reached, and then drop. If the buyer is paying below the value then it is a good deal, but once it goes over then the buyer is not getting their money’s worth. However, what is different here from the traditional strategy is that it is hard to determine the value. While the buyer gets a set amount of impressions with the buy, there is no telling how strong of an impression the advertisement will have. It will likely vary case to case and make assessing a value extremely hard.

These bidding wars are extremely interesting because they put a spin on the traditional strategies that come with “Ascending Bids” or “Descending Bids”. While the daily active users creates a high value, there is still a risk since the advertisement don’t have a set impact. It definitely makes it harder for the bidders to decide which bids are worth their money.

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