Facebook's ad bidding is based onVickrey-Clarke-Groves(VCG) auction model, the auction value should represent the real value of the auction participants. Essentially, true value means the maximum amount they are willing to pay. Therefore, in theory, the profits of each bidding participant are maximized in the case of a single bid or unlimited budget. Auction participants cannot benefit from bids above or below their true value, as higher bids may result in payments exceeding real value, while lower bids may result in missed profitable opportunities.

Facebook's ad delivery system is built inBudget usage adjustmentsTaking budget constraints into account, the real value bid used in advertising auctions is fundamentally modified. When the budget for an ad set limits delivery, the bid is adjusted in the auction so that advertisers only bid on impressions with the highest estimated value-to-price ratio.

So, in theory, advertisers on Facebook maximize profits by making bids equal to real value and budget equals real budget constraints. But this only applies if the advertiser has only one ad set.

The challenge with having multiple ad sets is that some are more profitable than others. In this case, oursForecast budget allocationsThe Predictive Budget Allocation feature is useful for automatically managing budget constraints between ad sets, whether in a single or multiple campaigns, so that we can get a budget from a less profitable ad set and transfer it to the ad set with the highest return on ad spend (ROAS) (and the ad set that the budget limits).

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As mentioned above, budget usage adjustments use budget constraints to adjust real-value bids in ad auctions. However, there are many other things that affect the true value used in ad bidding.

Since the launch of the oCPM (Optimize Thousand Display Fees) bid in 2012, Facebook has been working to make better use of past transformations and large amounts of user data. This helps Facebook's Spot Optimization feature deliver ads to the right people to achieve the goal of optimizing your ad sets. Depending on user characteristics, past behavior, and similarity of recently converted users, you can determine which specific Facebook users are causing the ad to show higher bids.

Because Facebook's ad delivery optimization leverages a lot of proprietary user data, advertisers are best placed to bid at real valueGive the oCPM bidding algorithm enough spaceto adjust your bid strategy. Lower bids mean that you miss the people who are most likely to click or buy.