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Learning Centre.

How Does The Facebook Ad Algorithm Work?


Ok, let’s talk about the Facebook algorithm and specifically, how it applies to ads.

And let’s kick off by dispelling a myth first up - Facebook doesn't rank the order of ads on their newsfeed purely by the cash bid of an advertiser.

Now, that did used to be the case, but it isn’t anymore and so the more you understand about what the algorithm uses as key ranking signals, the earlier your audience will see your ads in the newsfeed and therefore, the more chance they have of converting.


So Why Aren’t Facebook Ads Ranked By Cash Bid?

While it would make sense to please the biggest spenders spending by putting their ads at the top, Facebook’s ad algorithm actually uses other signals for ranking because their aim is for long-term growth and dominance and to achieve that, they have to have their most valuable asset at the core of their plans - the users.

If the number of active users on Facebook declines, it means fewer people to advertise to and fewer revenue from advertisers. And users will decline if they don’t like the experience.

So the short-term gains of optimising newsfeeds for the very best bidders is actually less important than the average user’s experience.

Of course, Facebook are still a business who’re trying to be as profitable as possible so naturally they are going to show ads from the best bidders to their users, but if the ad isn’t optimised to appeal to the Facebook ads algorithm, it'll appear lower on newsfeeds and selected placements.


The 3 Key Ranking Factors

The Facebook Ad Algorithm has 3 primary ranking factors.

  • Estimated Action Rate

  • User Value

  • Bid Strategy


Estimated Action Rate

When you create a FB ad, you need to pick a campaign objective (e.g. Engagement, Conversion, Video Views).

The ‘Estimated Action Rate’ is Facebook’s guess at the likelihood of your ad achieving its objective.  For instance, if you choose engagement, your estimated action rate is that the likelihood of your ad getting likes, comments and shares.

But Facebook’s estimate isn’t just a blind guess. They track how well your ads are performing and adjust your Estimated Action Rate as they run and they make these educated guesses by tracking:

  • Ad performance

  • The entire ad set

  • Campaign quality

  • Account history

  • Ad feedback


For an advertiser, the key metrics to look at regarding this are the Relevancy stats which are Facebook’s way of showing how well your target market are responding to your ads. If you've got a rubbish relevancy score, you either have a problem along with your targeting (audiences) or your ad content.

Facebook recently split the relevancy measure into three metrics:

  • Quality: Measured by feedback.

  • Engagement Rate: Measured by likes, comments, clicks and shares.

  • Conversion Rate: Measured by conversions.

All of those factors are ranked against other advertisers who have competed for the same audience.

The metric has also changed from the normal 1-10 score. It now ranks by averages: e.g. Below Average (bottom 10%), Average, Above Average, etc.

When you run ads, it’s crucial that you keep a detailed eye on these relevancy scores, especially the metric that’s most relevant to your campaign objective. If you have got an ad that's performing ‘below average’ for your required objective, it’s a sign that the Facebook ad algorithm won’t rank your ad high and it’s probably best to stop it and analyse what went wrong.

The relevancy scores provide you with an excellent opportunity to be told what works, to use that information to analyse performance and improve in future, but it’s only a reactionary tactic.

Another huge factor which will affect your Estimated Action Rate is feedback on your ad. Feedback is measured in terms of users hiding, reporting or unliking your page.

Negative feedback can be avoided by showing your ad to highly-targeted audiences and tightening your ad creative, so it speaks directly to these audiences.

An irrelevant ad shown to broad, poorly targeted audiences is going to be seen as spam and can receive a lot of negative feedback, which tells the Facebook ad algorithm that they ought to bump it down in their order.


User Value

Now, if you thought the sole thing that affected your rank within the Facebook ad algorithm was your ad, you’re wrong. As mentioned earlier, Facebook relies on user experience because the more users that return to the platform, the more cash they create through advertising revenue.

And so, they have to make their experience as valuable as possible and this includes the ads that they see. Interestingly, user value doesn’t track the experience of a user while on Facebook (that’s the Estimated Action Rate but rather, it measures the actions a user takes AFTER they click on your ad and if this scores poorly, it'll completely ruin your campaign.

Obviously, Facebook is unable to measure a user’s emotion, but they can track their behaviour by measuring:

  • Time on page

  • Back-clicks

  • Bounce rate

  • Conversions

  • Video views

Facebook measures User Value so as to avoid running misleading ads as these will negatively impact their reputation and user experience.

To avoid a poor user value score, you want to make sure that your landing pages match your ad as closely as possible and ensure you don’t use clickbait headlines. Another valuable tip is to take a look at to how to encourage movement around your website from your visitors.

Your ad and landing page are a journey and it’s important to realise that the beginning (your ad) will only be viewed in a positive light, if the user doesn’t have a negative experience further down the road (on your landing pages).

So make sure you undergo the complete ‘journey’ of your prospects and consider what you can do to boost their experience - make your pages as relevant to your ad as possible and ensure there aren't any irrelevant or hidden surprises.


Bidding Strategy and Limit

Having said all that, the cash bid that you place on your Facebook ads will still affect it’s ranking.

Basically, there are three ways to bid on Facebook ads:

  1. Lowest-Cost: this is usually the default bidding option and the one I recommend. Using this feature, you permit Facebook to spend your entire Budget (in your chosen time frame), for rock bottom cost per action and this allows their AI to prime your bids for the two other algorithm factors.

  2. Cost Cap: this feature places a hard and fast amount as your highest price per action. It’s often used if you’re unwilling to spend an excessive amount of per action from your Facebook ads, but it'll receive lower impressions and move you down the order, limiting your capabilities.

  3. Bid Cap: this is how you tell Facebook to never bid any more than a set amount (chosen by you). Again, it works well for reducing spend per action or impression, but it'll negatively affect your impressions, reach and ad rank within the algorithm.

If you want to appeal to the Facebook algorithm, it’s usually best to choose number one -  ‘Lowest-Cost’ – it’s the default for a reason.

By using this feature, you set a ‘Daily’ or ‘Lifetime’ Budget (I’ve always found that Daily is better) and permit Facebook to bid for you. this provides their AI the chance to bid higher for users who are more likely to interact together with your ad (and learn whilst doing this).



So, that’s how the Facebook ad algorithm works…hopefully I’ve covered all the bases.

Facebook is the world’s largest social network because they’re smart. The more users they have, the more cash they'll make in the long term, which means sacrificing the best cash bidders in favour of advertisers who improve their user’s experience.

Which is good for you.