What Can We Learn From How The Meta Ads Auction Works?

Bexley Terrell Written on October 19th, 2022, Last updated on October 10th, 2023

Have you ever tried to scale your budgets on Meta Ads only for your customer acquisition cost to skyrocket? If you answered no, you are either extremely lucky or lying.

If your business runs Meta Ads, chances are you have had trouble scaling budgets efficiently at some point, but why?

It’s almost always through a lack of alignment between your business, your customers and the platform’s objectives. Align these three and you can expect more efficient ad spend and better conversion rates.

This will allow for more scalable and reliable results. Within this post, we will be focussing on a factor that assists and requires greater alignment on all three objectives.

Unravelling how the Meta Auction works allow us to understand how they determine the cost you pay and allows the advertiser to allocate resource towards the areas that truly move the needle.

Spoiler alert: it’s not a secret Lookalike stack or magic interest group. 

Deciphering The Equation

First, let’s look at the equation; we’ll worry about what it all means later.

Bid = Budget / Estimated Action Rate + Advertiser Score.


Bid – This is the CPM or Cost per 1,000 impressions you are paying to serve ads.

Budget – The amount of money you are paying for your campaign. Daily or within a date range.

Estimated Action Rate – This is the rate at which Meta believes users will interact with your ad in a positive way. (Hereafter referred to as eAR because I think it’s funny. )

Advertiser Score – How highly do Meta rate you as an advertiser? This is based on how people experience your website, your products and your ads.


Why Does The Meta Auction work like this?

Once you’ve decyphered what all this means, one thing is clear:

How the customer experiences your products and ads directly impacts what you pay. 

The user experience is so interwoven into the auction because that’s how Facebook makes their money. 

Like it or not, Facebook and Instagram do an excellent job of capturing and holding their users’ attention.

They do this by providing a positive experience to their audience again and again and again. 

Their commodity is their audience. Meta must look after their audience first and foremost because there wouldn’t be any ad inventory to sell if it didn’t. 

By showing your ads to their audience, they are taking a risk. What if the user doesn’t like seeing your ads? What if they swipe up, close the app and never visit again because the ads they saw ruined their experience?

So What Can We Do?

So we know that the CPM is directly impacted by how users experience our ads and products. What can we do?

Well, we are playing in Meta’s court. They make the rules, and fighting them will lead to less efficient ad spend. The kicker is the answer is obvious, and we, along with every other agency and Facebook ads professional worth their salt, have been banging on about for years. Make better ads. 

Make better ads. Make ads that add value to the user experience. Make ads that call out your audience, demonstrate their problem, and offer solutions.

How Do You Improve the Estimated Action Rate? 

To improve your eAR you need to make ads that people enjoy, capture attention and want to interact with. 

That’s not to say they should be Clickbait. There are tonnes of Meta ads policies they use to crack down on clickbait; It’s clear they don’t want us to bait clicks, likes and comments.

What it means is, don’t make ads. We’ve all seen that heavily branded, horribly cropped, TV ad that has been repurposed and thrown onto Instagram without a single thought about the use case or the desired action. 

Make content that you would consume as you look through your Instagram reels, something that captures attention and provides value.

We don’t get to see eAR as a metric in the platform. This is calculated in the back end and not shared with the advertiser. 

We do get indicators through Quality Ranking, Engagement Rate Ranking and Conversion Rate Ranking columns. But these aren’t gospel and don’t always demonstrate successful ads. 

There isn’t a magic formula that works across every account. Every ad you post is an experiment. Look at the amount of engagement you are getting. Look at your hook and hold rates. What is your audience enjoying?

Over time you can provide a better experience to people that see your ads and improve your eAR. 

How Do You Improve Your Advertiser Score?

If you didn’t like the last answer, you won’t like this one. Your advertiser score is calculated in the back end of the platform too. To effect it, you need to focus on your ad creative, your landing page, your product and overall user experience. 

Occasionally, Meta polls users that have taken your desired action (e.g. purchase or submitted a lead) and asks them what they think about you. They do this because the product, delivery and customer service experience are the only variables they can’t analyse on-platform or with the pixel.

They analyse your interaction and conversion rates along with hundreds of indicators that we can’t see to determine how strong the on-platform and website experience is.

The benefit here is that these are all things businesses should be doing anyway to make larger improvements to your site.

The Key Takeaways

  • The user experience directly impacts the CPMs you pay.
  • Creative is the biggest lever you have to improve performance
  • Don’t ignore your website, delivery and product experience.
  • There is no magic bullet; success and scale are built from continuous incremental improvements.
  • You need to strike a balance between delivering business objectives and user experience.
  • You need to have a robust and data-driven creative testing methodology to succeed with Meta Ads.

Reach out to our team today if you need help with Meta Ads, and get a free proposal!

Bexley Terrell Hey, Bexley here 👋 When I’m not running up that hill, scaling paid media campaigns, I’m often found watching live music or binge-watching How I Met Your Mother for the five hundredth time.

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