Did you know that whether you are using CPC (cost per click) and CPM (cost per impression), Facebook would test your ads in order to determine if they should still keep running them? Read on to find out the secret of how Facebook’s ads work.

How It Works

To describe it most bluntly, the ad network of Facebook functions as an auction where you are not allowed to see exactly what they are bidding against. The system operates like so: one will have to place a bid (amount of money one is willing to spend for ads) in order for their ads to be included in a display network of a certain demographic. What you have to remember is that only the ads that have a good performance are actually displayed. Performance is gauged by such factors as high CPM (meaning more money for FB).

Facebook Tests All New Ads

If you submit a brand new ad for display, Facebook will put it through testing first. Ads that have already been running with a couple thousand impressions or so have already been studied. Meaning Facebook can already predict what revenue returns these ads will achieve. So during the first thousand or so impressions, your ads are already being marked for screening.

Why does Facebook do this?

Facebook wants ads that will generate more money for them. This means that if your ads have high CPM, then Facebook is happy. If your ad is CPC yet it does nothing, then Facebook is not getting any money from you. It does not matter whether you choose CPM or CPC, your ad needs to be tested by Facebook.

So, if you get thousand and thousands of impressions but no one is clicking on your CPC ads, then your ads will slowly but surely get pushed away from display. Obviously, you are not desirable for Facebook’s revenue and your ad does not contribute anything to FB users. This is the reason why CPM is sometimes a more stable choice. Facebook is sure to get at least some money from your ads so it will display for a longer period.

What does Facebook do to ads that perform “too well”?

They flag them. If your ad is oddly beyond the norm in terms of performance (for example: your CPC is less than .03 dollars), then Facebook will flag you and a person will come to investigate on whether your ad is in violation of any of their service terms and agreements. Even if you do not violate anything and your ad is allowed to go on, your ads will not have as much display time or impressions anymore.

Key Takeaway: The House Always Wins

Keep in mind that you can’t just run ads that won’t win Facebook any revenue. The house always wins, as they say in gambling. And your blind auction ads should find that sweet spot where it reaches the so called “house cost per impression” which is basically the revenue Facebook might have gotten from other ads (on average) if they skipped yours and gave the space to others. This, however, can only be figured out if you are doing a handful of ad campaigns. Just keep an eye out and you’re sure to determine that median sweet spot.