Facebook Ad Score and Ranking
Cost Per Click (CPC) shows on average, how effective your ad is and your cost to acquire a lead. The CPC depends on a variety of factors like audience size, niche, advertising goals, and industry. The average CPC for different industries varies dramatically and depends on the competition in that market and the overall bidding value each of the advertisers to name a few factors. For larger industries like automotive and electronics, the potential targeting audience is large and manufacturers can spend more per click then a smaller clothing brand, naturally resulting in a larger cost per acquisition.
Facebook Ads are based on a bidding system like an auction. If a lot of people are targeting the same audience the CPM (Cost per 1000 impressions) will increase due to increased competition. However, the bidding system is different than a traditional auction because the winner isn’t the advertiser with the highest monetary bid, but the ad that creates the most overall value for both the marketer and the facebook user. This is to prevent low-quality ads to flood the user experience which would have a negative effect on retention, leading to lower revenue over time.
Facebook gives an overall ad score to each potential ad that it uses to rank ads, then selected what ads to show to the targeting audience. The general equation is :
Ad Score = Advertiser Bid + Estimated Action Rates + User Value.
Advertiser Bid is the bidding strategy or bid amount the marketer has selected for the ad. Estimated Action Rates is a Facebook calculated value for the likelihood that the ad has of producing the desired result. User Value takes into consideration the user experience on the platform, which is determined by a low-cost per impression and interactions on the ad. Ads with a higher score (similar to page rank) will be shown more frequently than other ads bidding in the same space
Knowing the basis for the ranking system it’s clear that successful advertisers bid their value (max they are willing to pay), create compelling ads relative to the target audience, and narrow the audience further using keywords to minimize competition and increase the effectiveness of targeted Ad copy.
Sources
https://www.facebook.com/business/news/relevance-score