Second Price Auctions in Twitter Ads
With the recent news of Elon Musk purchasing twitter, some advertisers have been fleeing the platform. This prompted me to look into how the pricing of advertisements work on twitter as we covered this in Chapter 15. An auction is the process that Twitter uses to determine which ads to serve to users, based on the advertiser’s bids and the quality of the ad. In the context of Twitter Ads, a bid is the maximum amount that you’re willing to pay for a Twitter ad impression or engagement.
Twitter Ads uses a second-price auction model, which means that you’ll never pay more than one cent more than the next highest bidder. However, you may pay less than your maximum bid if your ad is not the most competitive in the auction. The auction process begins when a user sees a Twitter ad impression and ends when the user either engages with the ad or views it for a certain period of time. Engagements include clicks on the ad, Retweets, replies, follows, and likes.
Twitter uses a variety of factors to determine which ads to serve in each auction, including the advertiser’s bid, the quality of the ad, and the user’s engagement history with similar ads. Twitter also offers ad targeting options that allow advertisers to target their ads to specific users based on factors such as location, gender, interests, and keywords.
In general, the higher your bid, the more likely your ad is to be served in an auction. However, Twitter also takes into account the quality of your ad, so even if you have a lower bid, your ad may still be served if it is high quality. Engagement rates are also a factor in determining whether your ad will be served. If your ad has a high engagement rate, it is more likely to be served than an ad with a low engagement rate.
Advertisers can choose to bid on a cost-per-engagement (CPE) basis, or a cost-per-thousand-impressions (CPM) basis. CPE bidding means that you’re charged based on the number of engagements that your ad receives. CPM bidding means that you’re charged based on the number of ad impressions.
https://business.twitter.com/en/help/troubleshooting/bidding-and-auctions-faqs.html
https://www.businessinsider.com/elon-musk-name-shame-advertisers-who-pull-budget-2022-11