The Facebook Ad Algorithm & Why Advertisers Should Care

Learn how the Facebook ad algorithm works, how it ranks and shows ads to users, why it’s important, and how to improve your ad strategy.

Some things should not remain mysteries. As a marketer who wants to boost your Facebook advertising strategy, you’ll want to understand how the Facebook ad algorithm works, how it ranks ads and shows them to users, and best practices for optimizing your Facebook ads.

With almost 3 billion active users a month and more commerce buyers on social media than ever, Facebook remains prime real estate for advertisers trying to reach prospective customers.

Number of Facebook users worldwide as of Q3 2022.
Almost 3 billion users on Facebook every month. Image source.

Add to these stats the best practice of including paid social in a paid media strategy to target consumers with relevant, personal messages directly, and you’ve got a host of reasons to lift the ad algorithm veil: Appealing to the Facebook algorithm is paramount to running successful ad campaigns. Read on to improve your ad’s chances of being seen by an interested customer (times several million) who is most likely to convert.

If you need serious help with your paid advertising, Search Discovery can help you leverages data to execute paid media strategies, including paid social. We work continuously to help you achieve your business objectives in the most efficient way possible.

Factors That Impact Ad Rank

How does Facebook determine which ads show to which users? Admittedly, it’s complicated.

Facebook places ads into an auction in which it standardizes three factors that influence the likeness of ads to be shown compared to other ads targeting similar audiences. The Facebook algorithm then combines the three factors into a total competitive advantage. Ads with the highest total value win and will be shown higher on the page to the target audience.

Factors that affect the Facebook algorithm auction total value score: advertiser bid, estimated auction rates, and user value.
Factors that influence Facebook ad rank.

1. Bidding

A brand’s bid is essentially the amount they’re willing to pay for someone to complete your desired business objective. For example, if your goal is to increase brand awareness, your bid might represent how much you are willing to spend to get an impression.

The amount you bid, unsurprisingly, affects how your Facebook ads stack up against competitors in the auction. Three categories of bidding strategies are available to marketers: spend-based, goal-based, and manual.

Spend-based bidding aims to use the entirety of your budget to get you the best results possible. There are two types of spend-based bidding:

  • Highest Volume: This strategy tries to earn the advertiser as many conversions as possible with the allocated budget. It works best when you want to maximize conversions and don’t have a specific goal for a particular metric like CPA or ROAS.
  • Highest Value: Focuses your budget on achieving conversions with the highest purchase value. You may want to use this option if you have conversion actions worth significantly more than others or if you want to maximize the value of conversions instead of their quantity.

Goal-based bidding lets you set a specific value or cost you wish to attain. Like spend-based bidding, there are two options for goal-based bidding. Consider using either of these options if you are measuring the success of your campaign on a specific metric.

  • Cos- Per-Result Goal: This bidding option lets you place an amount as the highest average cost-per-action you are willing to spend. Facebook will try to keep your CPA as close to your set amount as possible over the campaign’s life, although costs may exceed that amount.
  • ROAS Goal: Using a ROAS goal allows you to set a target average return on ad spend for your campaign, and Facebook will set your bids to achieve it. Similarly to the cost-per-result goal, your target ROAS is not guaranteed.

Manual bidding allows you to control how much you bid across different ad auctions.

  • Bid Cap: With this option, you set the maximum bid across auctions instead of Facebook dynamically bidding for you. This is meant for experienced advertisers who can calculate optimal bids based on conversion rates and marginal cost.

Tips for optimizing bidding options
In terms of maximizing performance, using spend-based bidding options like high volume is a best practice because it uses the algorithm to allocate your dollars for the best possible results while letting Facebook handle much of the manual work.

Goal-based bidding strategies are more effective at controlling costs if you are on a tight budget, and manual bidding gives more control to the advertiser. Still, you should have some experience to use these methods effectively.

Bids are not the sole determinant of ad rank. While choosing the right bidding strategy for your business is critical to campaign success, Facebook is also concerned with providing users with relevant content.

2. Estimated Action Rate

The estimated action rate—how likely your ad is to achieve your goal—is another factor affecting ad rank. This is Facebook’s best estimate of how well your ad will generate conversions, impressions, lead gen, or whatever else you set for your campaign objective. It’s determined by several indicators that predict whether users will take action after seeing your ad.

First, your ad’s relevance score, a measure that Facebook determines based on how users respond to and interact with your ad, can positively or negatively influence your estimated action rate.

This is a good time to mention the targeting options available on Facebook ads. Advertisers can select certain audiences to target with their ads based on user demographics, interests, location and more. Targeting is extremely important because if you’re showing ads to people who are not interested in your business, they won’t interact with your ad, driving down the relevance score. Facebook may then show users an ad that they will get better use out of.

Facebook calculates ad relevance based on another set of factors: quality ranking, engagement rate ranking, and conversion rate ranking.

The Facebook algorithm ranks ad relevance based on quality ranking, engagement rate ranking, and conversion rate ranking. They offer a diagnostic report to help you optimize your ads' relevance.
The factors that impact ad relevance and Facebook’s ad diagnostic report. Image source.

Quality ranking is Facebook’s estimation of how well an ad is received by the people seeing it, compared to other ads competing for the same audience. Facebook provides a list of attributes that denote low ad quality. They are:

  • Negative user feedback, such as hiding or reporting an ad
  • Withholding information in order to entice people to click
  • Exaggerated headlines and sensational language 
  • Inauthentic, unoriginal, or spammy content, including engagement bait
  • Unexpected or misleading landing page experiences

Engagement rate ranking measures how engaging your ad is compared to other ads seen by the same audience. It is calculated by adding the total number of comments, shares, reactions, and clicks on your ad and dividing it by the number of followers you have.

The engagement rate ranking gives you a better idea of how your audience feels about your ad, which can provide useful insights toward developing your ad content.

Lastly, conversion rate ranking scores how often your advertisement gets the target audience to complete your desired conversion compared to competitors. It is the likelihood that a user fulfills your optimization goal after seeing your ad, ranked against the scores for other companies.

Tips for boosting engagement rate ranking
Connecting with people who comment or engage with your brand on Facebook is a great way to raise your ad rank. Responding to these users shows Facebook that you are well-suited to your audience’s needs, meaning Facebook will be more likely to show them your ads over competitors. 

This active engagement, called ‘community management,’ can boost your estimated action rate. Although it’s not a paid effort, maintaining relationships with your online audience shows Facebook and its users that you are a reputable business.

Another way to improve your estimated action rate is to improve your ad copy and creative. By making an ad that people want to engage with, you are increasing the likelihood that Facebook will show it because Facebook wants to retain users by offering content they’ll find useful. 

Also, consider narrowing your target audience. You want to be sure you are showing your ad to consumers interested in your business that are likely to take the desired action, so having a highly targeted audience can help improve ad quality.  

3. User Value

User value indicates whether your audience has a positive or negative experience with your advertisements, and it works hand-in-hand with estimated action rate. It measures user experience and behavior after interacting with your ad.

Like the estimated action rate, user value is affected by factors like ad relevance and post-click experience. 

Here are some metrics Facebook employs to measure the user value of an ad:

  • CTR (click-through rate)
  • Text to Image ratio
  • Back-clicks
  • Time spent on site
  • Ad relevancy score
  • Landing page experience/speed
  • Conversion rate 
  • User feedback

Tips to boost your User Value

If you fail to optimize your ads to deliver on these metrics, your performance will suffer. But that also means it’s possible to improve both user value and estimated action rate simultaneously.

If you want a healthy user value score, your landing page and ad must match. This means the language of your ad copy should be the same as your website—they should use the same keywords and even match right down to the color scheme.

People want to avoid clicking on a Facebook ad and being taken to a completely irrelevant site. They won’t buy from you if they can’t see the value you provide right away. Don’t use clickbait in your ad copy, and don’t try to mislead your audience by making claims you can’t back up. Be honest about what your business has to offer.

Why is the ad algorithm important for marketers?

So why should you care about ad rank? Is it really that important for your ad to rank high?

Well, yes, it is.

Securing a place at the top of the page matters a lot. Ads that are literally on top—the first or second images that a user sees—capture people’s limited attention spans. A high ranking means more people will see your ad, hopefully making your brand top-of-mind for consumers when they are ready to purchase.

Ads that appeal to Facebook’s algorithm result in better performance and have a higher chance of converting than ones that don’t.

Low ad rank means that your competitors may have better placements in the feed, so by the time your target customer sees your ad, they might already be convinced to convert to another brand.

If you’re not playing by Facebook’s rules, then Facebook will show your competitor who is, ultimately impacting your bottom line. With all the competition in the digital marketing space, pleasing the algorithm is more important than ever. 

How to optimize your ads

Follow the tips outlined above, and pay attention to the triad of factors that influence the algorithm.

Also, keep in mind the context you’re advertising within: consumers demand (and regulators enforce!) privacy considerations that are changing the technology landscape, including Facebook advertising.

And brands are watching spending. It’s never been a better time to refine your strategy and build capacity with a partner to stretch the value of and fully leverage the tools and team that can help you compete and win. 

If you lack confidence in your company’s paid media strategies aand don’t know where to start, we’re here to help. Contact us today to get answers and to make the ad algorithm work for you.

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