Demystifying Ad Auctions for Social Media Campaigns

Auctions play a critical role for advertisers to purchase inventory on social media. Millions of these split-second bidding wars occur online every single day, but as crucial as they are they remain a mystery for many buyers. Today we’re dispelling the fog around social media auctions. Here’s a rundown of what auctions are and why they’re more important than you think.

What Are Auctions on Social Media?

When you hear auction the first thing that likely comes to mind is a swift talking person with a gavel. While rudimentary, this mental picture is quite helpful to understand the inner workings of them on social media platforms. The premise is similar, but instead of rare vases and paintings, the item being sold is inventory on a user’s feed.

In simple terms, an auction is a process used by platforms to pair advertisers ads with relevant audiences. They work hand in hand with algorithms to determine what a user sees, balancing ads with other recommended content. Auctions occur every time there’s a chance to show an ad to a user. Depending on the ad frequency of the platform, this could be every couple minutes (Youtube), or every few posts (Meta feeds). Auctions occur behind the scenes within milliseconds, which is why few users are aware of them and their role.

The Importance of Auctions

Much like purchasing wars in the physical world, auctions on social media have winners and losers. The winner’s ads are served first in line, reaching their intended audience quickly. Meanwhile the loser’s ads are cycled back in the larger pool and re-entered into the next opportunity. Since a user’s session on each platform is limited, measured in minutes or hours, there’s increased importance to have your ad shown first.

Let’s look at an example. Say you’re a fashion retailer running a sale during Cyber Monday, the busiest online sales day of the year. You have a great offer in market, but so too do your competitors. With only one day to entice your audience, it’s important to have your ads win as many auctions as possible. A person can’t click on your ad if they never see it. Repeated auction losses will limit your ability to reach your audience during a crucial time.  

For higher education marketing Clearing is an example of when auction wins become increasingly important. Students are making major decisions during a condensed period of time, which means reduced opportunities to get messages out to them. Winning more auctions provides greater chances to inform students of your USP.

What Impacts Cost in an Auction?

The cost to win an auction fluctuates, dependent on campaign objective, audience size, seasonality, the amount of bidders and other factors. As a basic rule, the more niche your audience, the more it will cost to reach them.

The best tool to understand the cost of an auction is the CPM; the platform’s cost to reach 1000 users. You can’t directly change the cost of auctions without adjusting targeting criteria or creative, but there are ways to increase the odds of winning them.

How to Win an Auction

A combination of factors determine which brand “wins” an ad auction. These include the overall campaign duration, your budget size, and creative quality. Campaign duration and overall budget are tied to the platform’s ability to pace spend accordingly. You’ll want to be realistic with your expectations, as campaigns need time to ramp up spend and find qualified audiences. Creative quality can include formats and messaging, but it’s more about the relevance of the ad or product to the target audience. These factors work in tandem with another important factor; how much you’re willing to bid.

Bids are values media buyers use to vie for their target audience. They represent how much an advertiser is willing to pay to have their ads shown. The higher the bid, the more likely a qualified user will be shown the ad.

Bids aren’t the end-all though. Smart media buyers will leverage their bids, along with their budgets and timelines to ensure efficient and effective bidding.

Importance of Optimisations

The last factor to consider when navigating auctions are optimisations. Failing to pay attention to performance in them can waste ad impressions on less qualified audiences, or prevent campaigns from spending in full. Savvy marketers will step in midway through campaigns to improve their auction performance odds.

While you wont be able to influence auctions in the milliseconds they occur, you can monitor performance over time and adjust accordingly. Steps such as increasing a bid or implementing a creative refresh can change improve your ads chance to deliver. It’s not an exact science, which is why it’s best to adopt a test & learn framework to these optimisations.

Getting Your Message Across

Auctions are far from the only thing determining the success of campaigns on social media, but their impact can’t be underestimated either. By noting their role and monitoring success, you give yourself the best chance to connect with your audiences.

Have more questions about the auction process and how to succeed in them? Reach out to an Adgen expert who will be happy to guide you on your way to winning more.