Podcast Description
In this episode, I will go deeper into marketing in the Facebook world. It is important to understand how Facebook works and how they decide what to charge a marketer to distribute their marketing message on Facebook.
There’s an exact formula that Facebook uses to reward brands that produce great engaging content. Facebook calls it “auction” but it’s not a regular auction.
Podcast File
How Facebook Determines What to Charge an Advertiser?
Click here to download this Podcast>>
Podcast Transcription
Hello everybody, Manuel Suarez here. I’ve lost count of the episodes now but who cares right? I’m just going to be driving a lot of value and content here. I’m trying to name the episodes correctly so you can actually find exactly what you’re looking for and just simply listen to that content and take something from it and go and apply it. Because if I just talk and you guys don’t apply it, it’s just like a waste of your time and it’s not a good idea. I always recommend that wherever you get something just a little piece of value, just go out there and get it done. Put it into play. See what happens when you actually do some action. Towards the beginning of my training and of the marketing world, I used to do 50% of my time invested in training and the other 50% was invested in the actual implementation of that training.
Now, I probably do 10% of my time goes into training and then the other 90% is implementation because right now we have so many pieces in motion and 24 hrs are not enough on the day. But anyway, I want to thank you for listening. I want to thank you for making it a part of your day. Today is Tuesday, February 13th, 2018, the day before Valentine. That’s always something concerning. I know my wife doesn’t listen to the podcast but I have no idea what I’m going to get to her, we’re 12 years married now, February 25th, as years pass by the expectations, actually, believe it or not, are higher and higher because if you don’t give something that is of considerable value as compared to the last year, then, it could be interpreted as you don’t love her as much as you did last year. So, it’s a very dangerous thing. So, I have to go and do something special. That’s just the way it is. It’s stressful because every year, higher expectations, we got to do something more impactful and it’s fun at the same time. It is true because we do grow stronger every year. That’s the way it’s supposed to be. But anyway, it’s a little side spill. I know that you guys are not here to get lessons on marriage and relationships.
So anyway, thank you for listening to me. If you guys haven’t noticed that cause you haven’t heard the last couple of podcasts, I have completely rebranded my podcast and now it’s the Facebook Marketing Ninja and ever since doing that I’ve started getting a lot more attention which is something that my survey was actually done and confirmed. Now, it’s obvious that people want to hear more about that – Facebook, Messenger, Instagram Marketing. So, I’m going to keep on going deep into that subject. I’ve been getting a lot of questions. I changed my username. If you want to send me a message, it’s very very simple. You can go to m.me/themarketingninja but don’t pay attention to me if the link is wrong, I’m still getting familiar with it. You’re going to have a link if the website is wrong. The link that is going to be on this podcast is the correct one so you can just go and click on that link whether you’re on iTunes or Google Play Store or wherever. Just click on that link and go ahead and send me a message.
And also, another cool thing is that you can get subscribed to my messages in regards to my podcast and everything else that I have going on which you might be interested in because it’s all value, value, value for you guys. And again, I’m not a talker, I’m a doer. I just happen to talk a lot but I usually talk based on my activities in life and what’s going on. I don’t talk out of a dream. I actually usually implement and then I talk and I accomplish success and then I talk about it and then I show you guys how to do it and how to continue to hack these awesome opportunities and systems that we have in front of us which are like incredible and massive. I cannot use enough adjectives to explain to you guys how powerful the era that we live in is. People don’t understand and they still are ignoring it guys. And it’s incredible that they’re still ignoring this. How amazing it is for us to stop being employees and making other people rich but start making ourselves rich. This is a massive thing that’s going on. It’s a massive shift on this planet. It is the biggest shift in the history of humanity. Forget about everything else, forget about the industrial age, the inventional vehicles, the telephone invention. This is the world. The internet right now has changed dramatically everything. The outcome of your lives, the outcome of your businesses. The ones that are doing it right are actually going out there and penetrating the world in a year or 2 when it used to take 40 years to be able to do something like that. It’s not an exaggeration.
So anyway, today’s podcast rant aside, I want to talk to you guys about the Facebook auction system because on my seminars and on the Messenger, I’m getting a lot of questions about this – how does Facebook charge you for the ads that you’re running? How do they decide how much to charge you? Why do they decide they’re going to charge you ¢10 a view or why do they decide they’re going to charge you ¢1 per video view? Or why do you pay sometimes a dollar per click to your website? Or if I do something else, why do they actually charge me ¢5 per click to a website? So those are very important things that you need to understand. And I’m going to clarify how does the auction system on Facebook works. Because this is not a regular auction.
They call it a Facebook Advertising Auction. But like a traditional auction, it’s going to be something like, you go to this house that’s been foreclosed and then a bunch of banks are in there, other investors are in there, and everybody’s like saying, “$150,000”. And the next one is like, “$170,000” and then etc., it keeps going up until the last one says, “Okay, $280,000” and then nobody bids it up. So, it stays and it gets sold for $280,000. So it’s an auction-based exclusively on price. That is very dramatically different to how Facebook charges you per advertising. And I love it. Because the reality is that it motivates people, the system, the structure, the Facebook Ad structure, really motivates you to continuously create engaging content that is really being accepted by people.
So in case you didn’t know, in order to do advertising on Facebook, you do not need to agree to a long-term contract. You do not need to agree to $10,000 in ads over the next month or $100,000 over the next year or $2,000 a month. Nothing! And I mean nothing. And people don’t understand this either because they’re used to magazine agreements for a year, news paper contracts, the usual television engagements that you are guaranteeing the station that you are going to pay so much in ads over the next 6 months. All of that stuff is out the window with Facebook Advertising. You don’t have to agree to a single thing. It’s just a different thing because you can have $10 in your pocket, put them into your bank account and run ads on Facebook. If you have a credit card, a debit card, a bank account, a Paypal account, you can run ads on Facebook. It’s as simple as that. The minimum budget for a lot of the campaigns is $2 per day. So if you go to Starbucks and you get an americano coffee or you get a regular coffee, you are going to pay more than that. So you can literally maybe reach a thousand people in a day with your message for a dollar.
That’s it, for a couple of dollars. Because right now it’s still so affordable to do Facebook Advertising that you don’t have to spend a lot of money to actually create your impact and just grow your brand, whatever it is. It’s not an exaggeration. So, how does this ad structure work? It is important for you to understand this because the more that you understand it, the easier it is to actually accomplish results using the Facebook platform. When you understand something, it makes it clear and then you go after it. When you don’t understand something, you get lost and then you stop doing it because you don’t get it and you’re confused. So let me explain to you how does this formula works.
There is an exact formula on the auction and it’s composed of 3 factors. Number 1 is what Facebook calls the Advertiser Bid. So what does that mean? How much is the advertiser? You, your brand, your account is willing to pay for every single one of the actions that you’re looking for. Those actions can be many of them. It could be a video view, it could be a website click, it could be a conversion on your website, it could be an engagement – meaning somebody commenting, sharing, liking – it could be a phone call, it can be a visit, it can be a lead generation like generate a lead with a phone number and email, ect., it could be a lot of different thing – a purchase, etc. So, how much are you willing to pay as an advertiser for that auction? Now, just so you know, there are many different campaign objectives that you can do which you got to learn along the way. It’s a long process and it’s not complicated. All you’ve got to do is put some energy towards learning them every single day. So that’s the first step of the formula. Right?
Let’s say for example that I am going to do a video view campaign. I want to put a video out there and I want my brand to be recognized. And I want people to start engaging with it and start looking at that, and when they think about, like for example I have a kitchen brand, when they think about kitchen supplies they think about my brand first. So that’s called branding, right? So maybe I have a video views campaign and I create a cool little video that talks about my brand, my story, my origin story, whatever it is, right? And then based on that I actually put the video out there and I say to Facebook a couple of things. I can say to them, “Hey Facebook, I’m going to let you decide how much you’re going to charge me for a review.” And that’s called an Auto Bid because Facebook gets to determine how much they’re going to charge you. And that’s based on competition, that’s based on supply and demand, that’s based on a bunch of different factors, right? An Auto Bid.
Or you can say to Facebook, “Look Facebook, you know, I’m going to do something manually here. I want to pay ¢1 for every video view. So, if you don’t want to charge me ¢1 then don’t even display my ads. If you want to charge me ¢2 forget about it, okay? So all I’m willing to do is pay ¢1 – a penny for every person that sees my ad.” Okay, so in that case, Facebook might decrease your reach because maybe they feel like, “Oh wait a second”. They come back and they say, “Look Manuel, I can’t charge you that because we have a lot of demand and when you’re not willing to pay me ¢2, these guys are willing to pay me more than ¢2. So I’m not going to give you preference over them.” Okay cool. Fine. So that way I can control how much I’m paying for every video view based on what I’m doing. The same thing for a lead. I’m trying to get coupons for my Amazon brand distributed. Right? I can say to Facebook, “Look, I’m not willing to pay more than ¢50 per lead.” So now what they do is they distribute your content around trying to find people that are going to convert and they’re going to charge you ¢50 or less. So, it might decrease your volume, I don’t know, it’s all about testing, but, you will only pay that price. So that’s manual bidding, okay? So, the bid is the first factor.
But, the other thing that you have to understand which is the awesome thing about how Facebook Advertising building works is that now, they have something else that goes into that formula and this is Estimated Action Rate. What does that mean? That means that they’re going to charge you not only based on your bid but also based on how much they estimate people are going to react to it. So for example out of 1,000 impressions maybe 50 of them are going to watch for 3 seconds or more. So based on their algorithm they create an estimated action rate. So based on that, they actually charge you also on the formula the actual cost on the impression, on the actual auction that you’re doing. So that goes into the equation. And now, once this starts rolling, right? This goes out there. And now you have your estimated action rate. You have how much are you willing to pay for every single impression, for every single action that you’re looking for? And now, you start adding in a factor that gets involved through time and that is the experience.
And this is the most important factor because they call it relevance and quality. What does that mean exactly? It means that the reception of the people on the other end is going to determine how cheap or how expensive your ad is going to be. What does it mean? That if you’re ad is well received, if people are commenting, if they are engaging, if they are sharing your content, your video, your picture, your carousel ad, your carousel videos, or whatever it is that you’re putting out there, then Facebook looks at that as something very positive because Facebook’s main thing is protecting UE – User Experience. So, if they actually get to protect the user experience, people stick around on the Facebook platform and they keep on engaging. And now they can sell them more ads. If you as a marketer, as an advertiser, you ruin the user experience, then Facebook is going to charge you more because they want you to run out of money as fast as possible because you are ruining the user experience and they make less money if you ruin the user experience.
Now, that makes a lot of sense right? Why? Because Facebook’s job is to keep people on the platform. They’re all about keeping people in there. They want to avoid people jumping to Youtube, going to email, going to other platforms that are not owned by them. So if you as a marketer do a good job of producing an engaging content, things that people are interested in, that they actually like enjoy, that they engage with, if you as a marketer do that then they reward you for that. And they actually start lowering your cost even more. So price is a big indicator of how much people like your content, your message, your ad, your product. It’s also an indicator of how good your target audience is. When your price starts going up too high, chances are two things: your content sucks, nobody likes it, and you need to adjust it, or; your content can be fantastic but your target audience is wrong. Because if you’re promoting Rogue Hair Growth Formula to men that have a head full of hair, you’re going to lose every penny of it, and people are going to hate it. So Facebook is going to charge you a lot of money for displaying those ads.
So just to give you a simple analogy of how that works because by doing that you are ruining the user experience. So when you’re trying to fix an ad you need to fix and pay attention to two things and only do one change at a time. Change the creative, the ad, the video, the image, or whatever it is that you’re using to display your message, the copy, the call to actions, etc., and see the results. If it still doesn’t lower the cost, you need to change the target audience and test out different strategies when it comes to audience. And you can use a free tool that Facebook gives you access to which is called Audience Insights which is on the Ads Manager, when you do a drop down menu on the top left, you’re going to see an option that says Audience Insights, and there you can start getting familiar with who your people are.
So, that’s something that you need to fix because your user experience is going to determine how cheap or how expensive your ads are. Cost is a factor that tells you how good your message is being accepted by your public. So very very important to understand that. When I look at that, for example, to give you guys a particular example so you can think with it, when I look at my campaigns that I have going on which at any given day I have hundreds of campaigns over 25 different accounts, to give you an idea, if I was paying for a whole week ¢5 a video view, that’s a lot of money because to tell you right now it’s so cheap that you know, you can actually pay ¢1 or less. But to give you an example, right?
And now, today, suddenly, I start paying ¢8. For me, that is a red flag. It’s a wake up call. It’s an alert. Get in there and change it. Adjust it. Fix it. Find some new audience. Get the creative done. You know, like expand the audience. Test out new ad sets, meaning new people, new target. So for me that’s important because you’ve got to understand that price increases usually means that there’s ad fatigue, meaning that your ad is being shown over and over to the same people, you have the wrong audience, like this people that are your audience are not really accepting your message well, it’s time to change the creative and make it better. One of the main indicator that I use to judge a campaign is how much am I paying per my actions as compared to what I was paying before and what I consider to be the right cost of my particular activities.
I hope that helps you guys a little bit. It’s important to understand that. Again, I’m going to go over how the auction works one more time just to summarize. Advertiser bid times estimated action rates, meaning, what does Facebook estimate that is going to be their action rate from the impressions that they get out there plus the relevance and quality of the message. Okay? That is how your Facebook Auction works on Messenger, on Instagram, and on Facebook. Yes, I said Messenger cause I don’t know if you guys are looking at that or use Messenger but right now Facebook recently started rolling out ads on Messenger and they are awesome. So, when people start saying that Facebook is running out of real estate to be able to advertise, they figure out new ways to put their messages out there. There’s something else that you guys might not know about which is called Audience Network in which Facebook actually goes into other platforms and other Apps and puts their ads in there. Okay? With the same targeting potentials that we have with the Facebook News Feed Platform.
Okay. So, really exciting stuff. If you understand that, you know that what you are going to do is produce content that has the right audience on it that is relevant for them, that they like it and that you have a bid, right? Facebook is going to work with you to give you the most results at the lowest cost. Always keep in mind something guys. Facebook wants you to be successful. They’re not out to get your money. Their mindset and Mark Zuckerberg’s creation of this whole ad product is to be able to give you the most results so you can spread the word to others about how you’re being successful, number 1.
And number 2, so you can grow your business and give them more money. So they are partners. They are not trying to make you get broke. They are trying to help you be successful so then, in turn, you can actually bring more people in and give them more money. So, lots of success. Again guys, if you want to reach out to me you can send me a direct message. I’m going to have the link down below and ask me any questions and other things that you want to learn about or that you’re struggling with, I’m definitely going to cover those things definitely in the future – m.me/themarketingninja. Okay guys, so I hope that you have an awesome day and an awesome rest of the week and I will see you next time.
