Short answer: every time Meta has a chance to show someone an ad, it runs an auction among the ads whose audience includes that person. The winner is the ad with the highest total value, which Meta describes as a combination of three factors: the advertiser’s bid, estimated action rates (how likely this person is to take the action you want) and ad quality. Because two of the three factors are about relevance, a more relevant ad can beat ads with higher bids.
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How does Meta decide which ad wins?
Meta’s official explanation is its Business Help Centre page, About ad auctions. In summary:
- An auction runs each time there is an opportunity to show an ad, and billions run every day.
- The ads eligible for that auction are the ones whose target audience includes the person.
- The winner is the ad with the highest total value, subject to a price floor that can affect whether an ad shows and what it pays.
- Total value is a combination of three major factors: bid, estimated action rates and ad quality.
Is there an official total value formula?
The current Meta help page describes a combination of bid, estimated action rates and ad quality; it does not give an equation or their weights. We could not verify the often-repeated expression, bid x estimated action rates + ad quality, in a current primary source. Use Meta’s three-factor explanation without treating that expression as the platform’s disclosed calculation.
What are estimated action rates?
In Meta’s words, they are an estimate of whether a particular person engages with or converts from a particular ad, that is, the probability that showing the ad leads to the outcome the advertiser wants. Two points follow:
- They are per person and per ad. Two ads in the same ad set can have very different estimated action rates for the same person.
- Bait doesn’t help. Meta notes that clickbait and engagement bait do not improve ad performance.
The outcome is the one you optimize for. If you optimize for installs, the estimate is about installs; if you optimize for a purchase, it is about purchases. Your conversion setup decides what “action” means, which is why getting app events right matters. See Meta Conversions API: the signal it sends for app campaigns.
What is ad quality?
Meta defines ad quality as a measure drawn from many sources, including feedback from people viewing or hiding the ad, and assessments of low-quality attributes such as withholding information, sensationalized language and engagement bait. It is not a score you can see directly.
What you can see are Meta’s ad relevance diagnostics, three rankings that compare your ad with ads competing for the same audience:
- Quality ranking: perceived quality.
- Engagement rate ranking: expected engagement rate.
- Conversion rate ranking: expected conversion rate, against ads with the same optimization goal.
Meta says these diagnostics are not inputs into the auction and aren’t shown for ads with fewer than 500 impressions. Use them to diagnose an ad, not as targets.
Why can a lower bid win?
Because Meta says estimated action rates and ad quality together measure relevance, and an ad that is more relevant to a person “could win an auction against ads with higher bids.” If your ad is far more likely to get this person to act, and people don’t hide or report it, it can win the impression at a lower bid than an ad people ignore.
Bid strategy still matters (see Meta ad bidding strategies for app installs), but you can’t buy your way past a weak ad for long.
What happens before the auction?
The auction is not the first step. Meta’s engineering team describes ad delivery as a multi-stage system: a retrieval stage picks candidate ads for each person, then ranking models predict value for people and advertisers. In its December 2024 post on Andromeda, its retrieval engine, Meta says retrieval processes three orders of magnitude more ads than the stages after it.
For an advertiser, that means your ads first have to be picked as a good candidate for a person before they can compete on total value. Ads that are genuinely different from each other give the system more distinct chances to match different people. That is why creative diversity matters; how to measure creative diversity in your Meta account shows how to check yours.
What does this mean for your ads?
Creative is the main lever. It drives two of the three factors: it changes how likely people are to act on your ad, and it decides whether they hide it. Your bid doesn’t change either of those.
What to do with that: – Make several genuinely different ads per creative direction, across angles, hooks and formats, and keep new directions coming. – Give Meta enough conversions to work with. Ideally about 30 a day per campaign; 10 a day is good; 1 or 2 a day is fine on a small budget, it just takes longer to read. You may see the claim that an ad set needs 50 conversions a week; that is really old guidance we would avoid. – Judge by cost per conversion over weeks, not days. Meta also shifts budget between ads and ad sets based on where it predicts the most results, which can look wrong in the report. See why Meta spends more budget on one ad.
Frequently asked questions
What are the three factors in Meta’s ad auction? The advertiser’s bid, estimated action rates (the probability that showing the ad to this person leads to the outcome you want) and ad quality. Meta says the ad with the highest total value, a combination of the three, wins.
Does the highest bidder win Meta’s ad auction? Not necessarily. Meta says estimated action rates and ad quality measure relevance, and a more relevant ad can win against ads with higher bids.
Is “bid x estimated action rates + ad quality” Meta’s official formula? Meta’s current help page describes a combination of three factors without an equation. We could not verify that expression in a current primary source, so do not present it as Meta’s disclosed calculation.
Are ad relevance diagnostics part of the auction? No. Meta says quality ranking, engagement rate ranking and conversion rate ranking are diagnostics based on past auction performance, not inputs into the auction.
