How Facebook Advertising Works

Over three million businesses advertise on Facebook. Willingly putting money into a machine that yields, in most cases, varying results. Without understanding exactly how Facebook advertising works!

Due to a lack of time and knowledge, business owners can become confused with their social media endeavours. Questions we often hear are “what do Facebook do with your ads when you advertise with them? Or “how much do I need to spend to get a decent return on Facebook advertising?”

Here at This & That Media, we thought that whilst we self-educate ourselves every day as a growing social media agency, it would be handy to help you gain a better understanding of all things social media.

We think that if more people understood how these machines work. They would make more informed decisions that will help them utilise these powerful platforms. Because this is a mammoth of a topic, and we don’t want to fry your brain. Below is the first of two articles explaining how Facebook advertising works and how you can implement it to your business.

Facebook Ad Delivery

Ad Auctions

Ad auctions occur each time there is an opportunity to show an ad to someone. These are used to determine the best ad to show to a person at any given point in time. With Facebook’s huge user base (2.99 billion users to be exact) billions of auctions take place every day.

When you create an ad. You tell Facebook who to show your ads to (target audience). With so many other businesses on the platform and within your own industries, a single user can fall in multiple targets audiences (Male surf boarder and all surfers on the Sunshine Coast for example). This is who you compete against in the ad auctions.

How is the winner determined?

The winner of any Facebook Ad Auction is determined by three components.


The bid placed by advertisers is what the business or advertiser is willing to pay to achieve the desired business outcome.

These come under bid strategies. Which informs Facebook how to bid for you in your ad auctions. We will go into more depth about the certain strategies and their effects in the next article.

Estimated action rates

An estimate of whether a particular person engages with or converts from a particular ad. (Clickbait and engagement bait do not improve performance).

Ad Quality

Measured by feedback from people viewing or hiding the ad and assessments of low quality attributes in the ad (too much text, info withholding, sensationalised language and engagement bait).

How Facebook ranks your ad in Ad Auctions?

All those factors combined together measure ad relevance which culminates into a relevance score. Measured from one to ten (higher score = better result).

Your relevance score determines your cost per click and how frequently Facebook shows your ads. Relevant ads are great because they are subsidised in auctions, so they often cost less and see more results. Meaning an ad more relevant can win an auction against ads with higher bids. People want to see ads that are relevant to them so this is how Facebook provides feedback to advertisers.

Your ad has to be shown 500 times before it is assigned a relevance score. You can find out where to see it here.

Applying this knowledge

Don’t cut corners!

Understanding that ad quality is a factor that contributes to whether your ad performs well seems obvious. Yet there are many businesses who cut corners and penny pinch with content creation.

By no means do we encourage you to spend over the odds with content creation. Though, we recommend serious consideration towards executing it to the best of your ability. The ideas you have don’t have to be extravagant either, escape competition through authenticity.

Careful Design Consideration

Knowing the game-like nature of Facebook advertising should encourage you to plan out your social media goals and ads more diligently. Getting clear on who you’re targeting your ads at and the specific messaging your ads will portray to them. Focussing on being relevant to ensure a subsidised ad in each auction it competes in.

Clarify budget

Knowing that the more you invest in the content creation, the more likely your ads are subsidised should help you allocate your budget accordingly. If you don’t have a clear budget allocation for your advertising, it will be harder to understand your ROAS and cause confusion working with external parties like a videographer or social media manager for example.

Final word and call to action

Knowing this is only half of the equation to understanding how Facebook advertising works. However, having this information should help you have a more holistic approach to your business’s social media endeavours. It should also inform how you develop your creative strategy and goals that will yield great returns with the lowest cost.

If you are looking to get a clearer picture of your social media strategy find out how we can help sign-up to our FREE online 20-minute consultation here.

Life is about perspective and how you look at something… ultimately, you have to zoom out.

Whitney Wolfherd