Social Currency
Once creative is commoditized, business strategy becomes your real performance lever on Meta (and probably everywhere else too).
This post is about the money-making aspect of the meta ads auction which, once grasped, highlights why knowing your true value is hugely significant in the context of profitable growth.
Let’s put aside all the definitions and labels one could use to describe Meta, particularly facebook and Instagram and focus on it purely as a business. It makes inventory available to advertisers so they can generate revenue from its huge database of users. It is an ads auction, in a media landscape now dominated by ads auctions.
The following is true today:
The decisioning of what you see on social media is almost entirely governed by machines, deliciously ironic as that may be, and the money-making component to this decision falls to the way the ads auction is orchestrated.
If you know about ads auctions, you might say you know a lot about a great deal…
Re-cap: Meta’s Ad Auction Prioritizes Engagement, Not Just Spend
I think it’s quite emotive when some people say that if a service is run for free then you are the product. If we keep things simple and focus on the business element of facebook and Instagram then the revenue tech businesses achieve are the result of invoices sent to other businesses.
In an interview recently I was asked how I might characterise the role of a business in terms of its responsibilities to content.
It was an interesting question, particularly I’ve re-set content settings on Instagram twice in the last month and, after doing so, have been struck by just how few posts have come from acquaintances, let alone friends. The truth is the vast majority of the posts I see today are from brands, media outlets or ‘creators’, in an increasing number of cases these creators will be working on behalf of brands, and I’m surely not alone in this.
The importance of creative in this puzzle is clear and herein lies a highly competitive industry with the likes of Smartly.io offering clients all the tools required to ensure that what people see is likely to achieve its objective. While creative output will differentiate what consumers use to choose between one advertiser over another, there is a component to visibility which users of these services won’t see: the auction.
So how does the auction work?
In simple terms…
Total Value=Bid×Estimated Action Rate+User Value
Where:
Estimated Action Rate = likelihood user will engage/convert
User Value = a proprietary metric estimating how much the ad benefits (or annoys) the user
This isn't just an auction for revenue; it's an auction for long-term engagement.
What we can’t know for sure is the weights which would be assigned to each of these criteria but I think it might look a bit like this:
| Component | Description | Relative Influence | Main Data/Criteria Used |
|---|---|---|---|
| Bid | The advertiser's declared amount they’re willing to pay per action (e.g. click, view, conversion). | 🟡 Medium |
- Advertiser-set bid - Optimization goal (e.g. CPC, CPM, CPA) - Budget constraints - Bidding strategy (manual vs. automatic) |
| Estimated Action Rate (EAR) | Predicts how likely the user is to take the advertiser's desired action (click, view, install, purchase, etc.). | 🔴 High |
- User behavior history (clicks, conversions, page views) - Ad format (video vs. image) - Creative performance history - Platform context (Feed, Reels, Stories) - Audience-targeting accuracy - Website/app engagement (via Meta Pixel/API) - Conversion event quality |
| User Value | Predicts whether the ad contributes positively or negatively to the user’s overall experience. | 🔴 High |
- User feedback on similar ads (hides, blocks, reports) - Ad repetition frequency - Creative quality scores (text/image ratio, clarity) - Predicted ad fatigue - Historical user interactions (likes, scrolls, dwell time) - Content-to-context fit (e.g. ad relevance in a specific placement) |
When Creative Is Level, Strategy Wins …
Creative & Financial Strategy Often Work in Silos:
There’s a gap between the ads auction and decision-makers within an organisation for price and margin contribution. This is typically not a consideration of marketing implementation, it is a decision made by finance and merchandising
The team which would fill that gap, marketing typically have a much greater focus on ‘brand’ and ‘creative’ focussing on those high influence levers within the ads auction.
When everyone has access to best practice everyone appears the same:
If we were to segment the UK marketing landscape by size and then industry, I’d suggest the market segments would contain rival companies who were much alike in terms of their resource allocation, their talent profile, their access to consultants and industry expertise. I’d say this trend would follow right the way down to the types of customer these businesses wish to attract and, importantly, how they try and attract them with their marketing messages.
Differentiate in the dark:
What may be more differentiated might be their financial health based on the company’s access to capital and historic trading posture.
In essence then, the creative output as far as an ad server is concerned is probably cancelled out to some extent by the activity of competitors, leaving the most highly differentiated lever somewhat overlooked.
‘Driving Conformity’ 54 SUV silhouettes from 54 car brands which basically look extremely similar when coloured white. Credit: Adrian Hanft
