A moment of you, sold in an auction
- Your feed loadsAdvertisers bid for the gapThe top bid's ad appears
When your feed loads, there is a gap between two videos where an ad can go. That gap is not sold in advance. It is sold in the instant the feed loads, to whichever advertiser offers the most for it. The whole sale takes less time than a blink.
- 2 centsAdvertiser A bids3 centsAdvertiser B bids1 centAdvertiser C bids
B wins the gap. People call this an auction, like selling a painting to the highest bidder. The difference is that it happens millions of times a second, run by computers, for gaps in millions of feeds. Each advertiser's computer has been told how much to bid, and for whom.
Three advertisers bid for the gap in your feed. Tap the one whose ad you will see.
Tap the part of the picture that answers it.
Advertiser Abids 2 centsAdvertiser Bbids 3 centsAdvertiser Cbids 1 centAdvertiser B
Right. The highest bid takes the gap. Three cents beats two and one, so B's ad is the one that loads.Advertiser A
Not yet. Two cents is second. In most of these auctions second gets nothing, though the winner often pays only a little more than the second bid.Advertiser C
Not yet. One cent is the lowest. C will get gaps in other feeds where nobody bids more, but not this one.- A person who just watched running videos12 dollars per thousand viewsAnyone at all4 dollars per thousand views
Made-up prices, real shape: a trainer brand's bids. Why bid more for one person than another? Because advertisers pay for people likely to buy. A trainer brand pays more to reach someone who just watched three running videos. A bank pays more for someone with a job. The app knows these things from what you have done on it, and tells the bidders.
Set how many advertisers want you, and how likely you look to buy. The price follows a made-up rule: more bidders and a likelier buyer both push it up.
Price for a thousand views of you1 dollarA typical feed price, for size8 dollars1 · Unlikely to buy1 advertiser bidding, and to them you look 'unlikely to buy'. About 1 dollar for a thousand views of you.
Price for a thousand views of you2 dollarsA typical feed price, for size8 dollars1 · Might buy1 advertiser bidding, and to them you look 'might buy'. About 2 dollars for a thousand views of you.
Price for a thousand views of you4 dollarsA typical feed price, for size8 dollars1 · Likely to buy1 advertiser bidding, and to them you look 'likely to buy'. About 4 dollars for a thousand views of you.
Price for a thousand views of you2 dollarsA typical feed price, for size8 dollars3 · Unlikely to buy3 advertisers bidding, and to them you look 'unlikely to buy'. About 2 dollars for a thousand views of you.
Price for a thousand views of you4 dollarsA typical feed price, for size8 dollars3 · Might buy3 advertisers bidding, and to them you look 'might buy'. About 4 dollars for a thousand views of you.
Price for a thousand views of you8 dollarsA typical feed price, for size8 dollars3 · Likely to buy3 advertisers bidding, and to them you look 'likely to buy'. About 8 dollars for a thousand views of you.
Price for a thousand views of you3 dollarsA typical feed price, for size8 dollars10 · Unlikely to buy10 advertisers bidding, and to them you look 'unlikely to buy'. About 3 dollars for a thousand views of you.
Price for a thousand views of you6 dollarsA typical feed price, for size8 dollars10 · Might buy10 advertisers bidding, and to them you look 'might buy'. About 6 dollars for a thousand views of you.
Price for a thousand views of you12 dollarsA typical feed price, for size8 dollars10 · Likely to buy10 advertisers bidding, and to them you look 'likely to buy'. About 12 dollars for a thousand views of you.
Price for a thousand views of you4 dollarsA typical feed price, for size8 dollars30 · Unlikely to buy30 advertisers bidding, and to them you look 'unlikely to buy'. About 4 dollars for a thousand views of you.
Price for a thousand views of you8 dollarsA typical feed price, for size8 dollars30 · Might buy30 advertisers bidding, and to them you look 'might buy'. About 8 dollars for a thousand views of you.
Price for a thousand views of you16 dollarsA typical feed price, for size8 dollars30 · Likely to buy30 advertisers bidding, and to them you look 'likely to buy'. About 16 dollars for a thousand views of you.
You look likely to buy, but only one advertiser is bidding. What happens to the price?
It falls to zero. One bidder pays nothing.
Not yet. One bidder still pays. The app sets a floor price, and above it a lone bidder pays a little more than nothing, never nothing.It goes to the top. Likely buyers are always dear.
Not yet. Looking likely raises what one bidder will pay, but there is nobody to outbid. The top of the grid needs both controls up.It stays low. A likely buyer with one bidder has nobody to bid against.
Right. One advertiser at 'likely' pays about 4 dollars; ten at 'might buy' pay 6. A price needs competition, and being valuable to one bidder is not competition.Move both controls.
- One viewabout a cent5 to 15 dollarsA thousand viewsBillions of views a daybillions a year
Real prices. On big social apps an advertiser pays something like 5 to 15 dollars for a thousand views of an ad. That is about a cent a view. A cent sounds like nothing. The app shows billions of views a day, and a cent a view adds up to billions a year.
- Top bid6 centsSecond bid4 cents
Two advertisers bid for a gap: 6 cents and 4 cents. In this auction the winner pays one cent more than the second bid. How much does the winner pay?
centsRight. Five cents, not six. Many of these auctions charge the winner just over the runner-up, so a bid is a ceiling, not a price. It is why advertisers bid what a view is really worth to them. Of every 100 dollars spent on advertising in the world today, how many go to online ads?
Pick one. Nothing is scored.
- Online70 of every 100 dollars · 70%
- TV, print, posters, radio30 of every 100 dollars · 30%
About 70.People guess low because posters and TV ads are the ones they notice. About 70 in every 100 advertising dollars are now spent online, and most of that goes to a handful of apps and one search engine. The auction is where the world's advertising money goes.- A bakeryPeople within a mile who watch baking videosThe auction
A small bakery wants its ad shown only to people within a mile who have watched baking videos. Under the auction, what happens?
The bakery pays the most of anyone, because it is being picky.
Not yet. Being picky lowers the count of gaps, not the price of each. Price comes from how many others bid for the same person, and few do.Few people match, so few auctions, and the bakery wins them cheaply because few others want exactly those people.
Right. A narrow target means few gaps to bid for and few rivals bidding for the same person. The bakery's ad reaches a few hundred people, for little.The app refuses. Ads go to everyone or no one.
Not yet. Choosing whom to reach is the whole point of the auction. The app makes its money by knowing who watched baking videos and selling that.
Lesson complete
Each time your feed loads, advertisers bid for the gap, and the price is what someone thinks you are worth.